Keywords
Summary

Keywords

Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax

(Council Directive 77/388, Art. 18(4))

Summary

Article 18(4) of Sixth VAT Directive 77/338 on the harmonisation of the laws of the Member States relating to turnover taxes, and the principle of proportionality preclude national legislation which, in order to allow the investigations required to prevent tax evasion and avoidance, extends from 60 to 180 days, as from the date of submission of the taxable person’s value added tax return, the period available to the national tax office for repayment of excess value added tax to a category of taxable persons unless those persons lodge a security deposit of a high set amount.

National legislation determining conditions for repayment of excess value added tax which are more onerous for one category of taxable persons because of a presumed risk of evasion, without making any provision for the taxable person to demonstrate the absence of tax evasion or avoidance in order to take advantage of less restrictive conditions, is not a means proportionate to the objective of combating tax evasion and avoidance and has a disproportionate effect on the objectives and principles of the Sixth Directive.

Similarly, such provisions do not appear to be in conformity with the condition that repayment of the excess tax must be made within a reasonable time. The period for repayment of 180 days laid down for those categorised as new taxable persons, namely those who commenced their activities within less than 12 months is, on the one hand, six times longer than the one month tax accounting period and, on the other hand, three times longer than the period applied to other taxable persons, without any explanation why it is necessary, in order to prevent tax evasion and avoidance, to establish a difference in treatment of such a scale.

The possibility offered to new taxable persons to lodge a security deposit in order to take advantage of the normal period of 60 days cannot affect those considerations, given that the security deposit is not proportionate either to the amount of the excess tax to be repaid or to the economic size of the taxable person. In particular, the lodging of such a security deposit is likely to entail a not inconsiderable financial risk for undertakings which have just commenced their activities and may, consequently, lack significant resources. In reality, the effect of the obligation to put in place such a security deposit, in order to be able to take advantage of the period which ordinarily applies, is only to replace the financial burden associated with the fact that the amount of the excess tax is tied up for a period of 180 days with the burden consequent on the amount of the security deposit being tied up.

(see paras 24, 26-27, 29-33, operative part 1)