1 This request for a preliminary ruling concerns the interpretation of Articles 47 and 54 of the Charter of Fundamental Rights of the European Union (‘the Charter’), the principles of legal certainty, proportionality and the protection of legitimate expectations, and Article 2(3) and Article 31 of Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article [50(2)(g) TFEU] on the annual accounts of certain types of companies (OJ 1978 L 222, p. 11), as amended by Directive 2003/51/EC of the European Parliament and of the Council of 18 June 2003 (OJ 2003 L 178, p. 16) (‘the Fourth Directive’).
2 The request has been made in proceedings between Marcas MC Szolgáltató Zrt. (‘Marcas’) and the Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (Appeals Directorate of the National Tax and Customs Authority, Hungary) (‘the tax authority’) concerning the decision by which the latter found that Marcas had made a tax underpayment and ordered it to pay default interest and a tax penalty.
3 Article 2 of the Fourth Directive reads as follows: ‘1. The annual accounts shall comprise the balance sheet, the profit and loss account and the notes on the accounts. These documents shall constitute a composite whole. … 2. They shall be drawn up clearly and in accordance with the provisions of this Directive. 3. The annual accounts shall give a true and fair view of the company’s assets, liabilities, financial position and profit or loss. … 5. Where in exceptional cases the application of a provision of this Directive is incompatible with the obligation laid down in paragraph 3, that provision must be departed from in order to give a true and fair view within the meaning of paragraph 3. Any such departure must be disclosed in the notes on the accounts together with an explanation of the reasons for it and a statement of its effect on the assets, liabilities, financial position and profit or loss. The Member States may define the exceptional cases in question and lay down the relevant special rules. …’
4 Under Article 31 of that directive, which is part of Section 7 thereof, entitled ‘Valuation rules’: ‘1. The Member States shall ensure that the items shown in the annual accounts are valued in accordance with the following general principles: (a) the company must be presumed to be carrying on its business as a going concern; (b) the methods of valuation must be applied consistently from one financial year to another; (c) valuation must be made on a prudent basis, and in particular: (aa) only profits made at the balance sheet date may be included, (bb) account must be taken of all liabilities arising in the course of the financial year concerned or of a previous one, even if such liabilities become apparent only between the date of the balance sheet and the date on which it is drawn up, (cc) account must be taken of all depreciation, whether the result of the financial year is a loss or a profit; (d) account must be taken of income and charges relating to the financial year, irrespective of the date of receipt or payment of such income or charges; (e) the components of asset and liability items must be valued separately; (f) the opening balance sheet for each financial year must correspond to the closing balance sheet for the preceding financial year. … 2. Departures from these general principles shall be permitted in exceptional cases. Any such departures must be disclosed in the notes on the accounts and the reasons for them given together with an assessment of their effect on the assets, liabilities, financial position and profit or loss.’
5 Article 1(5) of a társasági adóról és az osztalékadóról szóló 1996. évi LXXXI. törvény (Law No LXXXI of 1996 on corporation tax and dividend tax), in the version thereof applicable to the dispute in the main proceedings (‘the Law on corporation tax and dividend tax’), states: ‘This Law shall be interpreted having regard to and in accordance with the provisions of the Law on accounting. Departures from the provisions of the Law on accounting intended to ensure compliance with the principle that a true and fair image is given may not give rise to changes in tax liabilities.’
6 Article 7(1)(s) of the Law on corporation tax and dividend tax provides: ‘The result before tax shall be reduced: by 50% of the income recorded as pre-tax profit for the financial year in respect of royalties received, subject to the provisions of paragraph 14.’
7 Articles 15 and 16 of a számvitelről szóló 2000. évi C. törvény (Law C of 2000 on accounting) (Magyar Közlöny 2000/95. (IX. 21.); ‘the Law on accounting’) set out the basic principles to be observed by taxpayers when drawing up and keeping accounts. Those principles are as follows: - the going-concern principle (Article 15(1)); - the principle of completeness (Article 15(2)); - the principle of sincerity (Article 15(3)); - the principle of clarity (Article 15(4)); - the principle of consistent accounting methods (Article 15(5)); - the principle of the intangibility of the opening balance sheet (Article 15(6)); - the principle of the independence of financial years (Article 15(7)); - the principle of prudence (Article 15(8)); - the no-netting principle (Article 15(9)); - the principle of historical costs (Article 16(1)); - the principle that income and expenditure are booked to the financial year (Article 16(2)); - the principle of reality over appearance (Article 16(3)); - the materiality principle (Article 16(4)); and - the accrual-based accounting principle (Article 16(5)).
8 Article 15(2) of the Law on accounting provides: ‘Undertakings shall keep accounts covering all events that have an effect on assets and liabilities and on the profit or loss of the financial year, including, on the one hand, events pertaining to the financial year that occurred after the balance sheet date but of which they were aware before the balance sheet was drawn up and, on the other hand, events pertaining to the financial year triggered by events of the financial year ending on the balance sheet date that have not yet occurred at that date but of which they were aware before the balance sheet was drawn up (principle of completeness).’
9 Article 15(7) of the Law on accounting reads as follows: ‘In determining the profit or loss of a financial year, only recognised income resulting from activities carried out over the period in question and the costs (charges) corresponding to that income shall be taken into account, regardless of financial settlement. The revenue and costs shall relate to the period in which they arose for economic purposes (principle of the independence of financial years).’
10 Under Article 44(1) and (2) of az adózás rendjéről szóló 2003. évi XCII. törvény (Law No XCII of 2003 establishing the Code of Tax Procedure) (Magyar Közlöny 2003/131. (XI. 14.); ‘the former Code of Tax Procedure’): ‘(1) The documents, books and records provided for in legislation, including electronic data and information recorded on digital media, shall be presented and maintained so as to allow the tax base, the amount of tax, exemptions, benefits and the basis and amount of subsidies to be assessed and inspected, and to assess and verify whether tax has been paid or a subsidy applied in that regard. (2) Unless otherwise provided for in legislation, the books and records shall be kept in such a manner that: (a) the entries contained therein are substantiated by the documents provided for in this Law and in the legislation on the system of accounting documentation and other legislation; (b) they include, in respect of each tax and subsidy, a continuous and complete account of all the data on the basis of which the tax or subsidy was assessed as well as references to the relevant supporting documentation; (c) they indicate the basis for the tax or the subsidy declared for the relevant period; (d) they permit checks to determine whether tax has been paid or whether a subsidy has been applied in that regard and allow the supporting documentation to be examined.’
11 Article 49(1) of the former Code of Tax Procedure states: ‘A taxpayer may revise the taxes assessed or in respect of which there was no assessment, the tax base of a tax … and the amount of subsidies by means of a tax adjustment declaration. If, before an inspection procedure by the tax authority begins, a taxpayer discovers that the tax base, the tax or the amount of a subsidy has not been assessed in line with legislation, or that his return incorrectly states the tax base or the amount of the tax or subsidy, on account of a miscalculation or clerical error, he may correct his return by lodging a tax adjustment declaration.’
12 Article 87(1) and (2) of the former Code of Tax Procedure provides: ‘(1) The inspection objectives of the tax authority shall be achieved by audits: (a) to conduct a posteriori checks on returns (including a simplified audit), (b) to monitor the redemption of government guarantees, (c) to establish fulfilment of certain tax obligations, (d) to gather data or determine the authenticity of certain economic events, (e) to monitor compliance with obligations related to levies, (f) to re-audit previously audited tax periods, (g) to establish the occurrence of events upon which an advance tax ruling is based. (2) A tax period shall be deemed to have been closed by audit further to the audit provided for in point (a) of paragraph 1.’
13 Article 165 of the former Code of Tax Procedure provides: ‘(1) In the event of late payment of tax or if assistance is received before the relevant eligibility date, default interest shall be payable, respectively, from the due date or until the eligibility date. … … (3) Where circumstances meriting special consideration arise, the tax authority may, in the decision establishing the tax underpayment, of its own motion or upon request, defer the date upon which default interest begins to accrue to a date after, respectively, the due date of the tax or the date of receipt of the budgetary assistance. Default interest accrued on underpayments may be imposed from the date on which they initially fell due to the date of the audit report, but for no more than three years. The base of the default interest imposed on underpayments cannot be reduced by any overpayment existing as at the due date held by the same tax authority in respect of another tax.’
14 Article 170(1) and (2) of the former Code of Tax Procedure reads as follows: ‘1. Tax underpayments shall be subject to payment of a tax penalty. Unless otherwise provided for in this Law, the tax penalty shall amount to 50% of the unpaid tax. … 2. The tax difference established as being owed by the taxpayer, when a tax adjustment declaration has been lodged, shall be regarded as a tax underpayment only if that difference has not been paid prior to the due date or a subsidy applied in that regard. An overpayment as at the initial due date can be taken into account with a view to discharging the tax payment obligation only if that overpayment also exists on the date on which the inspection begins.’
15 Under Article 171(1) of the former Code of Tax Procedure: ‘The rate of the penalty may be reduced, or the penalty itself remitted, either ex officio or upon request, under circumstances meriting consideration as special and on the basis of which it may be concluded that the taxable person … acted with due care in the particular situation. The reduction in the penalty shall be determined taking into account all the circumstances of the situation, in particular the amount of the tax arrears, the background to those arrears and the seriousness and frequency of the taxable person’s unlawful conduct (action or omission).’
16 In 2006 Marcas acquired a trade mark which it licensed, by contracts concluded between 2011 and 2013, to affiliated companies in return for payment of a royalty amounting to 2% of the net sales made by those companies under that trade mark. The settlement and invoicing arrangements for the royalty were as follows: Marcas issued quarterly invoices for the current quarter based on estimated sales figures for that quarter, with the amount collected being increased or reduced in those invoices by the difference established between the estimated sales and the actual sales of the previous quarter. The invoices for the current quarter were paid within 30 days of being issued and the actual sales figures of that quarter were communicated within 30 days following the payment deadline, so that they could be taken into account in the following quarter’s invoices.
17 In respect of the period from January 2010 to December 2013, the tax authority conducted an inspection, pursuant to a letter setting out its terms dated 11 March 2014, into Marcas’ compliance with some of its tax obligations which, according to the inspection report, related exclusively to transactions related to the royalties. On completion of that inspection, that authority concluded that the documents, books and records were maintained in accordance with the provisions of Article 44(1) and (2) of the former Code of Tax Procedure.
18 The tax authority conducted an a posteriori inspection, pursuant to a letter setting out its terms dated 18 September 2014, of Marcas’ returns for the 2013 financial year covering all types of taxes, levies and subsidies.
19 In its decision of 4 April 2016, the tax authority found that Marcas kept its books and records in accordance with the provisions of the Law on accounting, but that the accounting method for the income from royalties in 2013 was incompatible with the principles of completeness and the independence of financial years referred to in Article 15(2) and (7) of that law because, in the first quarter of 2013, Marcas had entered into its accounts an amount of EUR 961 273.09 netted against the royalties related to the fourth quarter of 2012 and only in the first quarter of 2014 had it posted an amount of EUR 57 376.17 in respect of the royalties related to the fourth quarter of 2013.
20 Since the settlement for the year 2012 and that for the fourth quarter of 2013 were known to Marcas before the dates on which the balance sheets were drawn up, the tax authority found that, in 2013, Marcas had recorded income in an amount of EUR 1018 649.26 lower that its actual income. Accordingly, that authority took the view that, pursuant to Article 15(2) and (7), Article 32(1) and Article 44(1) of the Law on accounting, Marcas’ pre-tax profit for the 2013 financial year had to be increased, which, in the light of Article 7(1)(s) of the Law on corporation tax and dividend tax, entailed an increase in the basis of assessment for Marcas’ corporation tax in the amount of 151223000 forint (HUF) (approximately EUR 423424), with the result that Marcas had to be found to owe a difference in taxation of HUF 28732000 (approximately EUR 80450).
21 In accordance with Article 170(1) and (2) of the former Code of Tax Procedure, the tax authority found there to be a tax underpayment of an amount equal to the difference in taxation and, therefore, imposed on Marcas a tax penalty of HUF 14366000 (approximately EUR 40225), corresponding to 50% of that amount. Pursuant to Article 165(1) and (3) of the former Code of Tax Procedure, that authority also ordered Marcas to pay default interest in the amount of HUF 1281000 (approximately EUR 3587).
22 Further to the decision of 4 April 2016, Marcas lodged a tax adjustment declaration concerning its tax debt for the 2011 and 2012 financial years, which gave rise to a liability to corporation tax EUR 961 273.09 lower as compared with the amount declared for the 2012 financial year. Marcas did not request that that amount be refunded or transferred to another current account and left it in its tax account as an overpayment.
23 Acting on a complaint, the tax authority varied that decision and reduced the amount of the tax penalty imposed on Marcas to 10% of the amount of the tax underpayment.
24 Marcas brought an action against that variation decision before the Fővárosi Törvényszék (Budapest High Court, Hungary), the referring court.
25 That court annulled that decision and ordered the tax authority to adopt a new decision.
26 By its decision of 22 August 2018, the tax authority noted that the reason for the tax underpayment was not intentional conduct on the part of Marcas but rather a misinterpretation of the law. In that same decision, the tax authority, first, varied the decision of 4 April 2016, reducing the amount of the tax penalty to HUF 2873000 (approximately EUR 8044), that is to say 10% of the amount of the tax underpayment, and fixing the default interest at HUF 88000 (approximately EUR 246), and, second, upheld that decision as to the remainder.
27 In its application before the referring court, Marcas pleads infringement of the principles of legal certainty, a fair trial and the protection of legitimate expectations, and also contests the legal basis of the tax underpayment, the penalty and the default interest. In Marcas’ view, the tax authority arbitrarily extracted from amongst the basic principles set out in Article 15 of the Law on accounting two principles, namely the principles of completeness and the independence of financial years, with which the method applied by Marcas did not comply, and inferred from them the incriminating findings, even though that method did comply with the other basic principles referred to in Article 15 of that law. Marcas observes that, before the due date, it paid the corporation tax deemed to constitute a tax underpayment, then revised the amount of that tax in a tax adjustment declaration giving rise to an overpayment for the year 2012 and leaving that amount in its tax account but that, nevertheless, the tax authority found there to be a tax underpayment. Marcas also states that it was not its intention to evade taxation. In Marcas’ opinion, the tax authority breached the principle of protection of legitimate expectations because Marcas could not reasonably have been expected, in the light of the findings of previous inspections, to change its method of accounting for transactions in the absence of any statement made to that effect.
28 The tax authority contends that all the accounting principles contained in the Law on accounting must, in principle, be observed. It states that the purpose of its initial inspection was merely to determine that the accounts were presented and maintained in accordance with the provisions of Article 44(1) and (2) of the former Code of Tax Procedure.
29 The referring court acknowledges that the dispute brought before it concerns the determination of the corporation tax payable by Marcas in respect of the 2013 financial year, even though that type of tax is not harmonised at European Union level and the rules on administrative tax procedure remain within the competence of the Member States. It does, however, point out that directives have been adopted in the field of corporation tax and that decisions of the Court have also contributed to similarly worded provisions being introduced into the company law of Member States in relation to the issues raised in the context of that dispute.
30 That court considers that, having regard to the significant differences between its case-law and that of the Kúria (Supreme Court, Hungary), the question concerning the interpretation of the law posed by the application of the principle of protection of legitimate expectations has an impact on the outcome of the dispute and is therefore relevant. In addition, it considers that that question cannot be settled without a request for a preliminary ruling and interpretation by the Court of Justice.
31 It is in that context that the Fővárosi Törvényszék (Budapest High Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: ‘(1) Is a practice adopted by a Member State’s tax authority pursuant to which, in the context of an ex-post check on a taxpayer’s return - where no breach of any specific accounting principle or substantive rule of law on the part of the taxpayer was detected in respect of the tax under inspection, and there was no change in the amount of tax due as compared with the amount stated in the returns for the years during which the economic activity took place - the tax authority finds, without giving reasons, that the taxpayer is liable for additional tax purely on the grounds that, in preparing the return, he did not have regard to [certain] principles in the Member State’s Law on Accounting as required by the tax authority, but instead used his discretion to base the return on other principles which he considered applicable to accounts for his economic activity, compatible with the right to a fair trial, recognised as a general principle of law in Article 47 of the [Charter] and with the general principles of legal certainty, proportionality and protection of legitimate expectations? (2) In the light of the right to a fair trial established in Article 47 of the Charter and the general principles of legal certainty, proportionality and protection of legitimate expectations enshrined as general principles of EU law, can Article 2(3) and Article 31 of [the Fourth Directive] be interpreted as meaning that, in the case of an economic activity which relates to several financial years, if the tax authority replaces the accounting principles chosen by the taxpayer with other accounting principles and, as a result, makes a change to an accounting entry which also affects the returns for adjacent years, the tax authority must extend its inspection to cover the other financial years to which the economic activity relates and which are therefore also affected by the findings in respect of the period under inspection? When carrying out an ex-post check on the taxpayer’s return for a particular year, must the tax authority take into account the entries that were amended in a supplementary declaration for the year prior to the year under examination, which resulted in an overpayment by the taxpayer due to the fact that he paid tax before the date on which it became due; or is a declaration by the tax authority that the taxpayer has a tax debt, in spite of the existence of an overpayment, compatible with the aforesaid principles and with the prohibition of abuse of rights in Article 54 of the Charter? (3) Is it proportionate to sanction the choice of a potentially incorrect accounting method by declaring the existence of a difference in the amount of tax due, which is classed as a debt, having regard to the fact that this also entails the imposition of a fine - even if only for 10% of the amount - and a late payment surcharge, if the tax in dispute was paid before it was due and has throughout the entire proceedings been recorded as an overpayment in the applicant’s tax account, with the result that there has been no loss of revenue to the Exchequer, and there is no evidence of an abuse? (4) Can the principle of (protection of) legitimate expectations be interpreted as meaning that the objective basis for an expectation, that is, the taxpayer’s expectation with respect to accounting treatment, is well founded if the tax authority has previously carried out an inspection of the taxpayer in the course of which it found that the keeping of receipts, books and records complied with requirements - even if there was no explicit statement to this effect or it is merely implicit in the tax authority’s conduct - or is the taxpayer entitled to rely on the principle of legitimate expectations only if the tax authority carries out an ex-post check on the tax returns which results in a closed period, the check covers all types of taxes, and the tax authority expressly approves the taxpayer’s accounting practices? Is the tax authority acting in accordance with the principles of legal certainty and protection of legitimate expectations if, in subsequent decisions, it attributes certain legal and tax consequences to accounting irregularities and does not accept that the applicant had grounds to believe that its earlier accounting practice was correct, on the grounds that the earlier inspection was purely formal or not comprehensive, or that there was no express approval?’
32 It must be observed that, although the dispute in the main proceedings has its origin in, according to the Hungarian tax authority, Marcas’ infringement of accounting provisions and even though the second question does refer to provisions of the Fourth Directive, the fact remains that, by its questions, the referring court essentially asks the Court whether EU law, in particular the right to a fair trial recognised in Article 47 of the Charter, the prohibition of abuse of rights enshrined in Article 54 of the Charter and the principles of legal certainty, proportionality and protection of legitimate expectations, is to be interpreted as precluding certain practices by the tax authority of a Member State concerning the supervision and penalisation of tax offences related to corporation tax.
33 In that regard, it must be recalled that, according to Article 51(1) of the Charter, the provisions of the Charter are addressed to the Member States only when they are implementing Union law (judgment of 16 May 2017, Berlioz Investment Fund, C‑682/15, EU:C:2017:373, paragraph 33).
34 Article 6(1) TEU and Article 51(2) of the Charter specify that the provisions of the Charter are not to extend in any way the competences of the European Union as defined in the Treaties (order of 17 July 2014, Yumer, C‑505/13, not published, EU:C:2014:2129, paragraph 25 and the case-law cited, and judgment of 10 June 2021, Land Oberösterreich (Housing assistance), C‑94/20, EU:C:2021:477, paragraph 59).
35 It is settled case-law that, where a legal situation does not fall within the scope of EU law, the Court has no jurisdiction to rule on it and any Charter provisions relied upon cannot, of themselves, form the basis for such jurisdiction (see orders of 17 July 2014, Yumer, C‑505/13, not published, EU:C:2014:2129, paragraph 26 and the case-law cited, and of 6 May 2021, PONS Holding, C‑703/20, not published, EU:C:2021:365, paragraph 16).
36 As for the general principles of EU law, they must be observed by any national legislation which falls within the scope of EU law or which implements that law (see judgment of 6 March 2014, Siragusa, C‑206/13, EU:C:2014:126, paragraph 34 and the case-law cited).
37 However, as the European Commission points out, EU law has not harmonised the rules in Member States in the field of fiscal supervision and the penalties for failure to comply with tax obligations (see, to that effect, order of 30 September 2015, Balogh, C‑424/14, not published, EU:C:2015:708, paragraph 32, and judgment of 3 March 2020, Google Ireland, C‑482/18, EU:C:2020:141, paragraph 37). Such rules cannot therefore be regarded, as such, as implementing EU law.
38 In addition, although, according to the Court, tax penalties and criminal proceedings for tax evasion related to value added tax constitute an implementation of EU law, for the purposes of Article 51(1) of the Charter, since they represent the fulfilment by the Member States of their obligation to take all measures appropriate for ensuring collection in full of a tax which generates own resources for the European Union (see, to that effect, judgment of 26 February 2013, Åkerberg Fransson, C‑617/10, EU:C:2013:105, paragraphs 26 and 27), that is not the case with tax penalties and procedures related to corporation tax, as that tax is not part of the European Union’s own resources system.
39 It follows that the Court lacks jurisdiction to answer the questions referred in so far as they concern the practices of a Member State’s tax authority in relation to the supervision and penalisation of tax offences relating to corporation tax.
40 The view must be taken that, by its first and second questions, the referring court asks, in essence, whether Article 2(3) and Article 31 of the Fourth Directive are to be interpreted as precluding a practice of a Member State’s tax authority by which that authority contests a company’s accounting records because they depart from the principles of completeness and the independence of financial years, as contained in the legislation of that Member State, even though all the other accounting principles laid down in that legislation have been observed.
41 In that regard, it must be recalled that, while the Fourth Directive is not designed to lay down the conditions in which the annual accounts of companies may or must serve as a basis for the determination by the tax authorities of the Member States of the basis for assessment and the amount of taxes, such as the corporation tax at issue in the main proceedings, it is, however, in no way excluded that annual accounts might be used as a reference base by the Member States for tax purposes (judgment of 7 January 2003, BIAO, C‑306/99, EU:C:2003:3, paragraph 70). In addition, no provision of that directive precludes Member States from correcting, for tax purposes, the effects of the accounting rules in that directive, in order to determine a taxable profit closer to the economic reality (judgment of 3 October 2013, GIMLE, C‑322/12, EU:C:2013:632, paragraph 28).
42 It must also be recalled that the Fourth Directive is intended to ensure the coordination of national provisions on the structure and content of annual accounts and reports and methods of valuation, for the purposes of protecting members and third parties (judgments of 7 January 2003, BIAO, C‑306/99, EU:C:2003:3, paragraph 69, and of 3 October 2013, GIMLE, C‑322/12, EU:C:2013:632, paragraph 29).
43 The Fourth Directive bases that goal of coordinating national provisions on the content of annual accounts on the principle that a true and fair view must be given, compliance with which is its primary objective (see, to that effect, order of 6 March 2014, Bloomsbury, C‑510/12, not published, EU:C:2014:154, paragraph 18 and the case-law cited).
44 In that connection, the Fourth Directive provides, in Article 2(3) thereof, that the annual accounts are to give a true and fair view of the company’s assets, liabilities, financial position and profit or loss.
45 The application of the principle that a true and fair view must be given must, as far as possible, be guided by the general accounting principles contained in Article 31 of the Fourth Directive (judgment of 15 June 2017, Immo Chiaradia and Docteur De Bruyne, C‑444/16 and C‑445/16, EU:C:2017:465, paragraph 42).
46 In relation to those general principles, Article 31(1)(d) of that directive provides that account must be taken of income and charges relating to the financial year, irrespective of the date of receipt or payment of such income or charges.
47 However, Article 31(2) of that directive states that departures from those general principles are to be permitted in exceptional cases and specifies that any such departures must be disclosed in the notes on the accounts and the reasons for them given together with an assessment of their effect on the assets, liabilities, financial position and profit or loss.
48 It follows from the wording of the provisions referred to in paragraphs 44 to 47 above that compliance with all the general accounting principles is required as a rule and that departures from those principles are allowed only exceptionally and must be indicated specifically in the notes on the annual accounts. In view of the fact that the function of annual accounts is to give a true and fair image of the company’s assets, liabilities, financial position and profit or loss, the only possible aim of such derogations can be to ensure that a true and fair image is given, in the exceptional cases in which compliance with one or more general accounting principles would prevent this.
49 The need to comply with all the general accounting principles stems, moreover, from the fact that each of those principles concerns a specific requirement linked to the entry of undertakings’ transactions into their accounts, infringement of which may, on its own and even if all the other principles are observed, prevent the annual accounts from giving a true and fair image of the assets, liabilities, financial position and profit or loss of the company concerned.
50 In that regard, the Hungarian Government is right to point out that the first and second questions, as formulated by the referring court, are based on the incorrect premiss that economic operators are free to choose which of the general accounting principles to comply with and, therefore, not to observe all of them.
51 In addition, it must be observed, as in essence the Italian Government does, that manipulation of the principles of completeness and the independence of financial years lends itself, in particular, to transactions dictated by tax planning objectives, such as bringing forward the allocation of a negative factor to one financial year or postponing the assignment of a positive factor with a view to deferring taxation. Such manipulation, in particular when adopting two-stage invoicing arrangements that involve estimated invoices followed by corrective invoices, such as the process adopted in the case in the main proceedings, may also lend itself to the profit or loss of the undertaking concerned being staggered over several financial years for tax optimisation purposes.
52 In the present case, it is apparent from the documents before the Court that the Hungarian Exchequer did not suffer any loss and did not consider that Marcas had intended to commit tax evasion. However, as far as concerns the accounting aspect, the fact remains that, subject to the determinations that it will be for the referring court to make, Marcas’ annual accounts did not give a true and fair image of the company because, in respect of the 2013 financial year, a portion of the income received by way of royalties was not entered in the accounts.
53 Finally, it is by no means apparent from those documents, although this will, however, fall to the referring court to establish, that departures from the principles of completeness and the independence of financial years were claimed and documented by Marcas in the notes on its annual accounts.
54 In the light of the foregoing, the first and second questions must be answered to the effect that Article 2(3) and Article 31 of the Fourth Directive are to be interpreted as not precluding a practice of a Member State’s tax authority by which that authority contests a company’s accounting records because they do not comply with the principles of completeness and the independence of financial years, as contained in the legislation of that Member State, even though all the other accounting principles laid down in that legislation are observed, where such non-compliance does not constitute an exceptional and necessary departure in order to ensure compliance with the principle that a true and fair view must be given, as disclosed in the notes on the annual accounts together with an explanation of the reasons for it and a statement of its effect on the assets, liabilities, financial position and profit or loss.
55 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.