VAT Newsletter 4/2013
The European Court of Justice („ECJ”) has ruled on the case C-142/12 (Marinov)
The dispute in this case refers to the establishment of the taxable amount in case of taxable operations performed by a taxable person at the moment of its VAT deregistration.
Lampatov – H – Hristomir Marinov (hereinafter referred to as “Marinov”) is a Bulgarian company that was removed from the VAT registry due to the non-payment of the VAT related to the operations performed. Subsequently, Marinov was subject to a tax inspection which found that, during the period under review, the company had hired cars under leasing agreements for which it had deducted the VAT related to all leasing rates. Thus, at the time of its removal, the Company was in the possession of the leased vehicles, as well as other purchased vehicles, for which it deducted the related VAT, and with which it had performed taxable transactions as per the Bulgarian legislation.
The fiscal authorities considered that, at the time of its removal from the VAT registry, Marinov had performed taxable transactions and established the taxable amount for these transactions to be the market value of goods in question.
The company challenged the evaluation of the assets, performed according to the “market value”, considering that the depreciation of the assets from their acquisition date should also be taken into account.
ECJ concludes that the taxable amount from a VAT perspective with respect to the termination of the taxable activity, is the market value of the existing assets at the time of that termination, unless that value corresponds in practice to the residual value of the goods at that date.
The dispute in this case refers to the refusal of the Belgian tax authorities to grant the VAT deduction right related to certain invoices on the grounds that they were incomplete and it could not be established whether they corresponded to actual services or not.
Petroma Transports SA, a Belgian company, member of the Martens group, has provided personnel services to the other companies within the group, for which agreements establishing the method of remuneration for the rendered services have been concluded.
The Belgian tax authority refused to grant the VAT deduction right arguing that the invoices were incomplete and it could not be established whether they corresponded to actual services.
Subsequently, additional information was submitted, consisting of service agreements or invoices manually filled in with the missing information, but they were not accepted by the fiscal authority because of their late submission, subsequent to the communication of the findings by the fiscal inspection team, respectively because they lacked probative force.
ECJ concludes that the provisions of the Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes, must be interpreted as not precluding national legislation under which the right to deduct VAT may be refused by the tax authorities on grounds that invoices are incomplete, even if the invoices are supplemented after the refusal decision was adopted by the tax authorities through the provision of information seeking to prove the occurrence, nature and amount of the invoiced transactions.
ECJ also concludes that the principle of fiscal neutrality does not preclude the tax authorities from refusing to refund the VAT paid by a company, in case where the exercise of the right to deduct the VAT levied on those services has been denied to the companies receiving those services by reason of irregularities found in the invoices.