Case C-525/11

Mednis SIA

v

Valsts ieņēmumu dienests

(Reference for a preliminary ruling from the Augstākās tiesas Senāts)

‛VAT — Directive 2006/112/EC — Article 183 — Conditions for the refund of the excess VAT — National legislation deferring the refund of part of the excess VAT pending examination of the taxable person’s annual tax return — Principles of fiscal neutrality and proportionality’

Summary — Judgment of the Court (Third Chamber), 18 October 2012

1. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Refund of excess — Refund of part of the excess deferred until the examination of the taxable person’s annual tax return — Not permissible

   (Council Directive 2006/112, Art. 183)

2. Harmonisation of fiscal legislation — Common system of value added tax — Objectives and scheme — Prevention of tax evasion, avoidance and abuse — Observance of the principle of proportionality

   (Council Directive 2006/112)

3. Questions referred for a preliminary ruling — Interpretation — Temporal effects of judgments by way of interpretation — Retroactive effect — Limitation by the Court — Conditions — Importance for the Member State concerned of the financial consequences of the judgment — Criterion not conclusive

   (Art. 267 TFEU)

1.  Article 183 of Directive 2006/112 on the common system of value added tax must be interpreted as not authorising the tax authority of a Member State to defer, without undertaking a specific analysis and solely on the basis of an arithmetical calculation, the refund of part of the excess value added tax which has arisen during a one-month tax period, pending the examination by that authority of the taxable person’s annual tax return.

   The conditions for reimbursement of excess value added tax cannot undermine the principle of fiscal neutrality by making the taxable person bear the burden of the value added tax in whole or in part. In particular, they must enable the taxable person, in appropriate circumstances, to recover the entirety of the credit arising from that excess value added tax. 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.

   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. However, a period of a year, or even longer, during which the taxable persons must bear the financial burden of the value added tax, whereas as a general rule the taxable period is fixed at one calendar month, cannot be considered to be reasonable.

   While the aim of such legislation is to reduce the risk of tax evasion or avoidance, it must be stated that its application in a general and preventative manner, purely on the basis of an arithmetical finding, without 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, infringes the principle of proportionality.

   (see paras 24-28, 33, 36, 38 and operative part)

2.  See the text of the decision.

   (see paras 31, 32)

3.  See the text of the decision.

   (see paras 41-44)

Case C-525/11

Mednis SIA

v

Valsts ieņēmumu dienests

(Reference for a preliminary ruling from the Augstākās tiesas Senāts)

‛VAT — Directive 2006/112/EC — Article 183 — Conditions for the refund of the excess VAT — National legislation deferring the refund of part of the excess VAT pending examination of the taxable person’s annual tax return — Principles of fiscal neutrality and proportionality’

Summary — Judgment of the Court (Third Chamber), 18 October 2012

1. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Refund of excess — Refund of part of the excess deferred until the examination of the taxable person’s annual tax return — Not permissible

   (Council Directive 2006/112, Art. 183)

2. Harmonisation of fiscal legislation — Common system of value added tax — Objectives and scheme — Prevention of tax evasion, avoidance and abuse — Observance of the principle of proportionality

   (Council Directive 2006/112)

3. Questions referred for a preliminary ruling — Interpretation — Temporal effects of judgments by way of interpretation — Retroactive effect — Limitation by the Court — Conditions — Importance for the Member State concerned of the financial consequences of the judgment — Criterion not conclusive

   (Art. 267 TFEU)

1.  Article 183 of Directive 2006/112 on the common system of value added tax must be interpreted as not authorising the tax authority of a Member State to defer, without undertaking a specific analysis and solely on the basis of an arithmetical calculation, the refund of part of the excess value added tax which has arisen during a one-month tax period, pending the examination by that authority of the taxable person’s annual tax return.

   The conditions for reimbursement of excess value added tax cannot undermine the principle of fiscal neutrality by making the taxable person bear the burden of the value added tax in whole or in part. In particular, they must enable the taxable person, in appropriate circumstances, to recover the entirety of the credit arising from that excess value added tax. 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.

   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. However, a period of a year, or even longer, during which the taxable persons must bear the financial burden of the value added tax, whereas as a general rule the taxable period is fixed at one calendar month, cannot be considered to be reasonable.

   While the aim of such legislation is to reduce the risk of tax evasion or avoidance, it must be stated that its application in a general and preventative manner, purely on the basis of an arithmetical finding, without 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, infringes the principle of proportionality.

   (see paras 24-28, 33, 36, 38 and operative part)

2.  See the text of the decision.

   (see paras 31, 32)

3.  See the text of the decision.

   (see paras 41-44)