Ecotrade SpA v Agenzia delle Entrate - Ufficio di Genova 3.
Date: 2008-05-08
37. It should be recalled in that regard that, according to settled case-law, it is for the Court of Justice to provide the national court with all the elements of interpretation of Community law which may be of assistance in adjudicating on the case pending before it, whether or not that court has specifically referred to them in its questions (see, in particular, Case C‑315/92 Verband Sozialer Wettbewerb , ‘Clinique’  [1994] ECR I‑317, paragraph 7; Case C‑87/97 Consorzio per la tutela del formaggio Gorgonzola  [1999] ECR I‑1301, paragraph 16; Case C‑456/02 Trojani  [2004] ECR I‑7573, paragraph 38; and Case C‑452/03 RAL (Channel Islands) and Others [2005] ECR I‑3947, paragraph 25).
39. It must be pointed out at the outset that a taxable person liable for VAT as the recipient of goods or services is able to rely on the right to deduct contained in Article 17(2)(a) of the Sixth Directive (see Case C‑90/02 Bockemühl  [2004] ECR I‑3303, paragraph 37). According to consistent case-law, the right to deduct laid down in Article 17 forms an integral part of the VAT mechanism and in principle cannot be limited (see Joined Cases C‑110/98 to C‑147/98 Gabalfrisa and Others  [2000] ECR I‑1577, paragraph 43, and Bockemühl , paragraph 38).
40. It is also settled case-law that the right to deduct must be exercised immediately in respect of all the taxes charged on transactions relating to inputs (see, in particular, Case 50/87 Commission  v France  [1988] ECR 4797, paragraphs 15 to 17; Case C‑37/95 Ghent Coal Terminal  [1998] ECR I‑1, paragraph 15; Gabalfrisa and Others , paragraph 43; and Bockemühl , paragraph 38).
41. As it is clear from the wording of Article 18(2) of the Sixth Directive, the right to deduct must be exercised in principle ‘during the same period’ as that in which it arose.
42. A taxable person may nevertheless be authorised to make a deduction, pursuant to Article 18(3) of the Sixth Directive, even if he did not exercise his right during the period in which the right arose. However, in that case, the right to deduct is coupled with certain conditions and procedures determined by the Member States.
43. It follows that the Member States may require the right to deduct to be exercised either during the period in which it arose or over a longer period, subject to compliance with certain conditions and procedures determined by their national legislation.
44. Furthermore, the possibility of exercising the right to deduct without any temporal limit would be contrary to the principle of legal certainty, which requires the tax position of the taxable person, having regard to his rights and obligations vis-à-vis the tax authority, not to be open to challenge indefinitely.
46. It must be added that a limitation period the expiry of which has the effect of penalising a taxable person who has not been sufficiently diligent and has failed to claim deduction of input tax by making him forfeit his right to deduct cannot be regarded as incompatible with the regime established by the Sixth Directive, in so far as, first, that limitation period applies in the same way to analogous rights in tax matters founded on domestic law and to those founded on Community law (principle of equivalence) and, second, that it does not render virtually impossible or excessively difficult the exercise of the right to deduct (principle of effectiveness) (see, Case C‑327/00 Santex  [2003] ECR I‑1877, paragraph 55, and Case C‑241/06 Lämmerzahl  [2007] ECR I‑8415, paragraph 52).
47. As regards the principle of equivalence, it does not appear from the file, nor has it been argued before the Court, that the limitation period provided for in Article 19(1) of the DPR No 633/72 does not comply with that principle.
48. With respect to the principle of effectiveness, it should be pointed out that a two-year time-limit, such as that at issue in the main proceedings, cannot, in itself, render the exercise of the right to deduct virtually impossible or excessively difficult, since Article 18(2) of the Sixth Directive allows Member States to require that the taxable person exercise his right to deduct during the same period as that in which it arose.
49. It is also appropriate to examine whether that conclusion is not invalidated by the fact that, under the national legislation, the tax authority has a longer period in which to demand recovery of the VAT due than that accorded to taxable persons to claim deduction of VAT.
50. In that regard, it should be pointed out that the tax authority does not have the information necessary to determine the amount of the tax chargeable and the deductions to be made until it receives the taxable person’s tax return. In the case of an inaccurate return, or where it turns out to be incomplete, it is therefore only from that time that the authorities can reassess the tax return and, where necessary, recover unpaid tax (see, to that effect, Case C‑85/97 SFI [1998] ECR I‑7447, paragraph 32).
51. Thus the position of the tax authority cannot be compared with that of a taxable person ( SFI , paragraph 32). As the Court has already held, the fact that a limitation period begins to run as regards the tax authority at a date subsequent to the date from which the limitation period applicable to the right to deduct of a taxable person begins to run is not such as to infringe the principle of equality (see, to that effect, SFI , paragraph 33).
52. Therefore, a limitation period, such as that the issue in the main proceedings does not render impossible or excessively difficult the exercise of the right to deduct merely because the tax authority has a longer period in which to recover unpaid VAT than that accorded to the taxable person for the exercise of such a right.
53. That conclusion remains valid where, as in the cases in the main proceedings, the reverse charge procedure applies. Article 18(2) and (3) of the Sixth Directive is also applicable to such a procedure. That follows unequivocally from the wording of those provisions, both of which refer expressly to Article 18(1)(d), which covers the case of the reverse charge procedure.
54. In light of the foregoing, the answer to the national court must be that Articles 17, 18(2) and (3) and 21(1)(b) of the Sixth Directive do not preclude national legislation which lays down a limitation period for the exercise of the right to deduct, such as that at issue in the main proceedings, provided that the principles of equivalence and effectiveness are respected. The principle of effectiveness is not infringed merely because the tax authority has a longer period in which to recover unpaid VAT than the period granted to taxable persons for the exercise of their right to deduct.
The reassessment and recovery practice
63. Since the reverse charge procedure was indisputably applicable to the cases in the main proceedings, the principle of fiscal neutrality requires deduction of input tax to be allowed if the substantive requirements are satisfied, even if the taxable person has failed to comply with some of the formal requirements (see, by way of analogy, Case C‑146/05 Collée  [2007] ECR I‑7861, paragraph 31).
64. Therefore, where the tax authority has the information necessary to establish that the taxable person is, as the recipient of the supply of services in question, liable to VAT, it cannot, in relation to the right of that taxable person to deduct that tax, impose additional conditions which may have the effect of rendering that right ineffective for practical purposes (see Bockemühl , paragraph 51).
65. The same is true of Article 22(7) and (8) of the Sixth Directive, pursuant to which the Member States are to take the necessary measures to ensure that taxable persons comply with their obligations relating to declaration and payment or impose other obligations which they deem necessary for the correct collection of the tax and for the prevention of evasion.
66. Although those provisions allow Member States to take certain measures, they must not however go further than is necessary to attain the objectives mentioned in the preceding paragraph. Such measures may not therefore be used in such a way that they would have the effect of systematically undermining the right to deduct VAT, which is a fundamental principle of the common system of VAT established by the relevant Community legislation (see Joined Cases C‑286/94, C‑340/95, C‑401/95 and C‑47/96 Molenheide and Others [1997] ECR I‑7281, paragraph 47, and Gabalfrisa and Others , paragraph 52).
67. A reassessment and recovery practice, such as that at issue in the main proceedings, which penalises non-compliance on the part of the taxable person with the obligations relating to accounts and tax returns by a denial of the right to deduct, clearly goes further than is necessary to attain the objective of ensuring the correct application of such obligations within the meaning of Article 22(7) of the Sixth Directive, since Community law does not prevent Member States from imposing, where necessary, a fine or a financial penalty proportionate to the seriousness of the offence in order to sanction a failure to comply with those obligations.
68. That practice also goes further than is necessary for the correct collection of the tax and for the prevention of evasion within the meaning of Article 22(8) of the Sixth Directive, since it may even lead to the loss of the right to deduct if the reassessment of the tax return by the tax authorities is made after the expiry of the limitation period available to the taxable person in which to make the deduction (see, by analogy, Gabalfrisa and Others , paragraphs 53 and 54).
69. Nor can such a reassessment and recovery practice be justified under Article 17(6) and (7) of the Sixth Directive. Those two provisions are not applicable to a situation such as that at issue in the cases in the main proceedings, since they govern the existence of the right to deduct itself and not the procedure for exercising it. Moreover, Article 17(6) applies only to expenditure which is not strictly business expenditure, such as luxuries, amusements or entertainment, whereas it is common ground that no such expenditure is involved in the cases in the main proceedings. As to the possibility open to the Member States under Article 17(7), it need merely be pointed out that they cannot avail themselves of it unless they have first used the consultation procedure provided for in Article 29 (see, to that effect, Case C‑409/99 Metropol and Stadler  [2002] ECR I‑81, paragraphs 61 to 63, and Case C‑228/05 Stradasfalti  [2006] ECR I‑8391, paragraph 29), which, according to the file, is not the case in the Italian Republic.
71. In any event, the good faith of a taxable person is relevant for the answer to be given to the national court only in so far as there is, on account of the conduct of that taxable person, a risk of a loss of tax revenues for the Member State concerned (see, to that effect, Collée , paragraphs 35 and 36). However, a failure to comply with accounting obligations, such as that at issue in the main proceedings, cannot be regarded as giving rise to a risk of loss of tax revenues, since, as stated in paragraph 56 of this judgment, in the context of the application of the reverse charge procedure, no tax is due in principle to the Exchequer. For those reasons, such a failure also cannot be treated as a transaction designed to evade tax or as a misuse of Community rules, since it was not intended to obtain a tax advantage to which there was no entitlement (see, to that effect, Collée , paragraph 39).