EN.SA. Srl v Agenzia delle Entrate – Direzione Regionale Lombardia Ufficio Contenzioso.
Date: 2019-05-08
19


Although, formally, the referring court has limited its questions to the interpretation of the ‘EU law principles on VAT laid down by the Court of Justice’, specifically mentioning the principles of proportionality and of neutrality, that fact does not preclude the Court from providing the referring court with all the elements of interpretation of EU law that may be of assistance in adjudicating in the case pending before it, whether or not the referring court has referred to them in the wording of its questions. In that regard, it is for the Court of Justice to extract from all the information provided by the referring court, in particular from the grounds for the order for reference, the points of that law which require interpretation, having regard to the subject matter of the dispute in the main proceedings (see, to that effect, judgments of 4 October 2018, L.E.G.O., C‑242/17, EU:C:2018:804, paragraph 43; of 7 February 2019, Escribano Vindel, C‑49/18, EU:C:2019:106, paragraph 32, and of 12 February 2019, TC, C‑492/18 PPU, EU:C:2019:108, paragraph 37).
23


It follows from that article that a taxable person may deduct the VAT charged on goods and services which he uses for the purposes of his taxed transactions. In other words, the right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the output transactions that gave rise to the right to deduct (see, to that effect, judgment of 6 September 2012, Portugal Telecom, C‑496/11, EU:C:2012:557, paragraph 36).
24


However, when the purchase of goods or services is fictitious, it cannot be connected in any way to the taxable person’s output transactions. As a result, when there is no actual delivery of goods or performance of services, no right to deduct can arise (judgment of 27 June 2018, SGI and Valériane, C‑459/17 and C‑460/17, EU:C:2018:501, paragraph 36).
26


Second, the obligation on any person who enters VAT on an invoice to pay that tax is expressly set out in Article 203 of the VAT Directive. In that regard, the Court has stated that the VAT indicated on an invoice is payable by the issuer of the invoice even in the absence of an actual taxable transaction (see, to that effect, judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 38).
30


It is true that the VAT deduction system, as provided for in Article 167 et seq. of the VAT Directive, seeks to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities, so long as these are subject to VAT. As a result, the common system of VAT ensures complete neutrality of taxation of all economic activities, provided that they are themselves subject in principle to VAT (see, to that effect, judgments of 29 October 2009, NCC Construction Danmark, C‑174/08, EU:C:2009:669, paragraph 27, and of 22 December 2010, RBS Deutschland Holdings, C‑277/09, EU:C:2010:810, paragraph 38).
31


However, the prevention of possible tax evasion, avoidance and abuse is also an objective recognised and encouraged by the VAT Directive (judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 46). The risk of loss of tax revenue is, however, not, in principle, completely eliminated as long as the recipient of an invoice incorrectly showing VAT might still use it for the purposes of obtaining a deduction of that tax (judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 31).
32


From that point of view, the obligation set out in Article 203 of the VAT Directive seeks to eliminate the risk of loss of tax revenue which the right of deduction might entail (judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 32).
33


However, in accordance with the principle of proportionality, that obligation must not go beyond what is necessary to achieve that objective and, in particular, must not have an excessive adverse effect on the principle of VAT neutrality. In a situation such as that at issue in the main proceedings, in which the fictitious nature of the transactions precludes deductibility of the tax, compliance with the principle of VAT neutrality is ensured by the possibility, to be provided for by the Member States, of correcting any tax improperly invoiced in the case where the issuer of the invoice shows that he acted in good faith or where he has, in sufficient time, wholly eliminated the risk of any loss of tax revenue (judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 43).
38


Under Article 273 of the VAT Directive, the Member States may adopt measures to ensure the correct collection of VAT and to prevent evasion. In particular, in the absence of provisions of EU law on that matter, the Member States have the power to choose the sanctions which seem to them to be appropriate in the event that conditions laid down by EU legislation for the exercise of the right to deduct VAT are not observed (see, to that effect, judgments of 15 September 2016, Senatex, C‑518/14, EU:C:2016:691, paragraph 41, and of 26 April 2017, Farkas, C‑564/15, EU:C:2017:302, paragraph 59 and the case-law cited).
39


They must, however, exercise that power in compliance with EU law and its principles, inter alia the principles of proportionality and of VAT neutrality (see, to that effect, judgment of 26 April 2017, Farkas, C‑564/15, EU:C:2017:302, paragraph 59 and the case-law cited). Thus, the penalties must not go beyond what is necessary to attain the objectives referred to in Article 273 of the VAT Directive and must not undermine the neutrality of that tax (see, to that effect, judgment of 9 July 2015, Salomie and Oltean, C‑183/14, EU:C:2015:454, paragraph 62).
40


In the first place, in order to assess whether a penalty is consistent with the principle of proportionality, account must be taken of, inter alia, the nature and the degree of seriousness of the infringement which that penalty seeks to sanction, and of the means of establishing the amount of that penalty (judgment of 26 April 2017, Farkas, C‑564/15, EU:C:2017:302, paragraph 60 and the case-law cited).