Mednis SIA v Valsts ieņēmumu dienests.
Date: 2012-10-18
23. In that connection, it should be noted that the freedom which the Member States enjoy, under the actual terms of Article 183 of Directive 2006/112, for the purposes of determining the conditions for the refund of excess VAT does not mean that no control may be exercised over those conditions in the light of EU law (see, to that effect, Case C-274/10 Commission  v Hungary  [2011] ECR I-7289, paragraphs 39 and 40 and the case-law cited).
24. Those conditions cannot undermine the principle of fiscal neutrality by making the taxable person bear the burden of the VAT in whole or in part. In particular, such conditions must enable the taxable person, in appropriate circumstances, to recover the entirety of the credit arising from that excess VAT. This implies that the refund must be made within a reasonable period of time by a payment in liquid funds or equivalent means and that, in any event, the method of refund adopted must not entail any financial risk for the taxable person (see, inter alia, Case C-78/00 Commission  v Italy  [2001] ECR I-8195, paragraphs 33 and 34; Case C-25/07 Sosnowska [2008] ECR I-5129, paragraph 17; Case C-107/10 Enel Maritsa Iztok 3 [2011] ECR I-3873, paragraph 33; and Commission  v Hungary , paragraph 45).
25. Admittedly, the deferral of the refund of excess VAT over several tax periods following that in which the excess arose is not necessarily irreconcilable with the first paragraph of Article 183 of Directive 2006/112 (see, to that effect, Enel Maritsa Iztok  3, paragraph 49, and Commission  v Hungary , paragraph 55).
27. That period, during which the taxable persons have to bear the financial burden of the VAT, at least to the extent of the part of the excess VAT over the percentage specified in Article 285, cannot be regarded as reasonable (see, to that effect, Sosnowska , paragraphs 20 and 27, and Enel Maritsa Iztok 3 , paragraph 55). Consequently, it is inconsistent with the principle of fiscal neutrality, referred to in paragraph 24 above.
31. In that respect, it is admittedly true that the Member States have a legitimate interest in taking appropriate steps to protect their financial interests and that the prevention of tax evasion, avoidance and abuse is an objective recognised and encouraged by Directive 2006/112 (see, to that effect, Sosnowska , paragraph 22 and the case-law cited, and Joined Cases C-80/11 and C-142/11 Mahagében and David  [2012] ECR, paragraph 41).
32. Nevertheless, Member States must, in accordance with the principle of proportionality, employ the means which, whilst enabling them to attain that objective effectively, are the least detrimental to the objectives and principles laid down by EU legislation, such as the fundamental principle of the right to deduct VAT (see Sosnowska , paragraph 23, and Case C-284/11 EMS-Bulgaria Transport  [2012] ECR, paragraph 69).
33. In the present case, the referring court – which alone has jurisdiction both to in terpret the national law and to find and assess the facts in the case before it and, in particular, the way in which that law is applied by the tax authority (see, to that effect, Case C-594/10 van Laarhoven  [2012], paragraph 36, and Case C-618/10 Banco Español de Crédito  [2012] ECR, paragraph 76) – states that the VID applies Article 285 of Decree No 933 in a general and preventative manner, purely on the basis of the arithmetical finding that the excess VAT at issue is over the percentage specified in that provision, without undertaking any specific analysis of the circumstances, in the course of which the taxable person concerned would have a chance to demonstrate that there was no risk of tax evasion or avoidance.
36. Clearly, that preventative and generalised application of Article 285 of Decree No 933 is inconsistent with the principle of proportionality, set out in the case-law referred to in paragraph 32 above (see, to that effect, Sosnowska , paragraphs 24 to 26).
37. The possibility that the legitimate objective of preventing tax evasion or avoidance might justify such an application is further undermined by the fact that the tax authority may, under Article 12(11¹) of the Law on VAT, defer the refund of such an excess, inter alia, where a decision is adopted to start an inquiry into the tax paid by the taxable person in respect of transactions whose examination requires further information or where the person concerned cannot provide documentary proof that his request for a tax rate of zero percent is justified (see, by analogy, Sosnowska , paragraph 28).
41. In that connection, it should be borne in mind that the interpretation which, in the exercise of the jurisdiction conferred on it by Article 267 TFEU, the Court gives to a rule of EU law clarifies and defines the meaning and scope of that rule as it must be or ought to have been understood and applied from the time of its entry into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships which arose and were established before the judgment ruling on the request for interpretation, provided that in other respects the conditions for bringing a dispute relating to the application of that rule before the competent courts are satisfied (see, inter alia, Joined Cases C-338/11 to C-347/11 Santander Asset Management SGIIC and Others  [2012] ECR, paragraph 58 and the case-law cited).
42. It is only quite exceptionally that the Court may, in application of the general principle of legal certainty inherent in the EU legal order, be moved to restrict for any person concerned the opportunity of relying on a provision which it has interpreted with a view to calling into question legal relationships established in good faith. Two essential criteria must be fulfilled before such a limitation can be imposed: those concerned must have acted in good faith and there must be a risk of serious difficulties (see, inter alia, Santander Asset Management SGIIC and Others , paragraph 59).
43. More specifically, the Court has taken that step only in quite specific circumstances, where there was a risk of serious economic repercussions owing in particular to the large number of legal relationships entered into in good faith on the basis of rules considered to be validly in force and where it appeared that individuals and national authorities had been led to adopt practices which did not comply with EU law by reason of objective, significant uncertainty regarding the implications of EU provisions, to which the conduct of other Member States or the European Commission may even have contributed (see, inter alia, Santander Asset Management SGIIC and Others , paragraph 60).
44. It is also settled case-law that the financial consequences which might ensue for a Member State from a preliminary ruling do not in themselves justify limiting the temporal effects of the ruling (see, inter alia, Santander Asset Management SGIIC and Others , paragraph 62).
46. Secondly, it cannot be considered that the Latvian tax authority was, as purported, prompted by an objective and significant uncertainty regarding the implications of Article 183 of Directive 2006/112 to adopt in good faith, for the purposes of applying Article 285 of Decree No 933, practices which did not comply with EU law. It follows from case-law already established before that decree that, in accordance with the principle of fiscal neutrality, which is a fundamental principle of the common system of VAT, the national conditions for the refund of excess VAT, as referred to in Article 183 of Directive 2006/112, must enable the taxable person, in appropriate circumstances and within a reasonable period, to recover the entirety of the credit arising from that excess, without entailing any financial risk for that taxable person (see, to that effect, Commission  v Italy , paragraphs 33 and 34).