C-101/16 Paper Consult

JUDGMENT OF THE COURT (Second Chamber)

19 October 2017 ( *1 )

(Reference for a preliminary ruling — Taxation — Value added tax (VAT) — Directive 2006/112/EC — Right to deduct — Conditions governing the exercise of that right — Article 273 — National measures — Fight against tax evasion and tax avoidance — Invoice issued by a taxpayer declared ‘inactive’ by the tax authorities — Risk of tax evasion — Refusal of the right to deduct — Proportionality — Refusal to take into account evidence of the absence of tax evasion or tax losses — Limitation of the temporal effects of the judgment to be delivered — No limitation)

In Case C‑101/16,

REQUEST for a preliminary ruling under Article 267 TFEU from the Curtea de Apel Cluj (Court of Appeal, Cluj, Romania), made by decision of 21 January 2016, received at the Court on 19 February 2016, in the proceedings

SC Paper Consult SRL

v

Direcția Regională a Finanțelor Publice Cluj-Napoca,

Administrația Județeană a Finanțelor Publice Bistrița-Năsăud,

THE COURT (Second Chamber),

composed of M. Ilešič, President of the Chamber, A. Rosas (Rapporteur), C. Toader, A. Prechal and E. Jarašiūnas, Judges,

Advocate General: P. Mengozzi,

Registrar: L. Carrasco Marco, Administrator,

having regard to the written procedure and further to the hearing on 26 January 2017,

after considering the observations submitted on behalf of:

SC Paper Consult SRL, by A. Bora, avocat,

the Romanian Government, by R.H. Radu, M. Bejenar and E. Gane, acting as Agents,

the European Commission, by M. Owsiany-Hornung and G.-D. Balan, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 31 May 2017,

gives the following

Judgment

Legal context and the dispute

1The present request for a preliminary ruling concerns the interpretation of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), as amended by Council Directive 2010/45/EU of 13 July 2010 (OJ 2010 L 189, p. 1) (‘the VAT Directive’).

2The request has been made in the context of a dispute between, on the one hand, SC Paper Consult SRL (‘Paper Consult’) and, on the other hand, the Direcția Regională a Finanțelor Publice Cluj-Napoca (Regional Directorate-General of Public Finances, Cluj-Napoca, Romania) and the Administrația Județeană a Finanțelor Publice Bistrița-Năsăud (Regional Public Finance Administration of Bistrița-Năsăud, Romania), concerning a challenge brought by Paper Consult against an administrative decision which denied it the right to deduct value added tax (VAT) which it had paid on the supplies of services purchased from SC Rom Packaging SRL (‘Rom Packaging’), on the ground that the latter had been declared an ‘inactive’ taxpayer at the date on which the contract was entered into.

Legal context

EU law

Directive 2006/112

3Recital 59 of Directive 2006/112 reads as follows:

‘Member States should be able, within certain limits and subject to certain conditions, to introduce, or to continue to apply, special measures derogating from this Directive in order to simplify the levying of tax or to prevent certain forms of tax evasion or avoidance.’

4The second subparagraph of Article 1(2) of Directive 2006/112, which is set out in Title I thereof, entitled ‘Subject matter and scope’, provides:

‘On each transaction, VAT, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of VAT borne directly by the various cost components.’

5Article 168 of Directive 2006/112, which is set out in Title X thereof, entitled ‘Deductions’, is worded as follows:

‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:

the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;

…’

6In accordance with Article 178(a) of Directive 2006/112:

‘In order to exercise the right of deduction, a taxable person must meet the following conditions:

for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI’.

7Article 214(1)(a) of that directive provides:

‘1. Member States shall take the measures necessary to ensure that the following persons are identified by means of an individual number:

every taxable person, with the exception of those referred to in Article 9(2), who within their respective territory carries out supplies of goods or services in respect of which VAT is deductible, other than supplies of goods or services in respect of which VAT is payable solely by the customer or the person for whom the goods or services are intended, in accordance with Articles 194 to 197 and Article 199’.

8The first paragraph of Article 273 of Directive 2006/112 states that:

‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.’

Regulation (EU) No 904/2010

9Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax (OJ 2010 L 268, p. 1) is a recast version of Council Regulation (EC) No 1798/2003 of 7 October 2003 on administrative cooperation in the field of value added tax and repealing Regulation (EEC) No 218/92 (OJ 2003 L 264, p. 1). In particular, it extends the content of the electronic database VAT Information Exchange System (‘the VIES’).

10Recital 16 of that regulation is worded as follows:

‘Online confirmation of the validity of VAT identification numbers is a tool which is increasingly used by operators. The system for confirming the validity of VAT identification numbers should provide automated confirmation of the relevant information to operators.’

11Article 17(1)(c) of Regulation No 904/2010 requires the Member States also to store, in the VIES, data on VAT identification numbers issued which are no longer valid.

12According to Article 23 of that regulation, a tax administration may presume that a person has ceased all economic activity when, despite being required to do so, that person has failed to submit VAT returns and recapitulative statements for a year after expiry of the deadline for submission of the first return or statement missed or, inter alia, where persons have declared false data or have failed to communicate changes to their data.

13In accordance with the fourth paragraph of Article 62 of Regulation No 904/2010, Article 17 did not yet apply at the time of the facts in the main proceedings.

Romanian Law

14At the time of the facts in the main proceedings, Article 781(1) of the ordonanța Guvernului nr. 92/2003 privind Codul de procedură fiscală, republicată, cu modificările și completările ulterioare (Government Order No 92/2003 on the Code of tax procedure, republished, with subsequent amendments and additions) provided:

‘Register of inactive/re-activated taxpayers

Taxpayers which are legal persons or any other entity which does not have legal personality shall be declared inactive and shall be subject to the provisions of Article 11(11) and (12) of Law No 571/2003 on the Tax Code, as subsequently amended and supplemented (“the Tax Code”), if they meet one of the following conditions:

they do not file, for a calendar half-year, any of the returns required by law;

they avoid tax inspections by declaring information regarding the identity of their registered office which does not allow the tax authority to identify that office;

the tax authorities have established that they do not carry on their activity at their registered office or registered tax residence.’

15Article 11(11) of the Tax Code provides:

‘Taxable persons established in Romania, declared inactive in accordance with Article 78 of [Order No 92/2003], who undertake an economic activity in the period of inactivity shall be subject to the obligations relating to the payment of taxes and duties under this law; they may not, however, during that period, exercise the right to deduct expenditure and [VAT] for acquisitions made.’

16Article 11(12) of the Tax Code states:

‘Beneficiaries who acquire goods and/or services from taxable persons established in Romania, after those taxable persons have been registered as inactive in the Register of inactive/re-activated taxpayers in accordance with Article 78 of [Order No 92/2003] may not exercise the right to deduct expenditure and [VAT] in respect of those purchases, with the exception of the acquisition of goods in the context of enforcement proceedings and/or the acquisition of goods and/or services from a taxable person in the course of an insolvency procedure as provided for in Law No 85/2006 on the insolvency procedure, as subsequently amended and supplemented.’

17Article 21(4)(r) of the Tax Code is worded as follows:

‘The following expenditure shall not be deductible: …

expenditure recorded in the accounts, on the basis of a document issued by an inactive taxpayer whose tax registration certificate has been suspended by Order of the President of the National Agency for Fiscal Administration.’

18Article 3 of ordinul Președintelui Agenției Naționale de Administrare Fiscală nr. 819/2008 (Decree No 819/2008 of the President of the National Agency for Fiscal Administration) (‘the NAFA’) provides:

‘1. Taxpayers shall be declared inactive as from the date of entry into force of the Decree of the President of [the NAFA] approving the list of taxpayers declared inactive.

2. The list of inactive taxpayers shall be displayed at the headquarters of [the NAFA] and published on its website, in the section “Public information — Information relating to economic operators”.

3. The Order of the President of [the NAFA] approving the list of taxpayers declared inactive shall enter into force within 15 days of the date of display, in accordance with Article 44(3) of [Order No 92/2003].’

19Annex No 1 to Decision No 3347/2011 of the President of the NAFA, setting out the reporting obligations referred to in Article 781(1)(a) of Order No 92/2003, lists the following reporting obligations:

100 “Declaration of obligations of payment into the State budget”;

112 “Declaration on obligations of payment towards social security contributions, income tax and register of insured persons”;

101 “Declaration on corporation tax”;

300 “Declaration on [VAT]”;

301 “Special declaration on [VAT]”;

390 VIES “Declaration summarising intra-Community deliveries/purchases of goods”;

394 “Declaration providing information concerning deliveries/supplies and purchases made on national territory”.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

20By decision of 11 May 2012, the tax authorities established that Rom Packaging, established in Bucharest (Romania), had supplied services to Paper Consult, established in Bistriţa-Năsăud (Romania), for an amount of RON 190340 (approximately EUR 44560) excluding VAT, on the basis of a contract for supplies of services concluded on 3 January 2011.

21As Rom Packaging had been declared inactive since 7 October 2010 and removed from the register of persons subject to VAT as from 1 November 2010 for failure to submit the tax declarations required by law, and in view of Article 11(12) of the Tax Code, the tax authorities found that Paper Consult was not entitled to deduct the amount of RON 45680 (approximately EUR 10694), this being the amount paid in respect of VAT for the supplies of services provided by Rom Packaging.

22The complaint lodged by Paper Consult against the tax inspectorate’s measure was rejected as unfounded by decision of the Regional Directorate-General of Public Finances of Cluj-Napoca of 17 July 2014. The tax proceedings brought by Paper Consult against that decision were, in turn, dismissed by the civil judgment of 8 July 2015 of the Tribunalul Bistrița-Năsăud (High Court, Bistrița-Năsăud Romania).

23Paper Consult appealed against that judgment to the Curtea de Apel Cluj (Court of Appeal, Cluj, Romania). It did not contest the factual evidence relied on by the tax authorities and by the Tribunalul Bistrița-Năsăud (High Court, Bistrița-Năsăud). However, it claimed that it had not received any communication regarding the decision of the President of the NAFA of 21 September 2010 declaring Rom Packaging inactive, but that that decision had merely been displayed at the NAFA’s headquarters and published on its website. Paper Consult maintained that, in those circumstances, that decision was not enforceable against it and could not be regarded as constituting the basis of the refusal to grant it its right to deduct VAT, as such a measure was contrary to EU law.

24Paper Consult submits that, in order to be able to benefit from the right to deduct VAT, it suffices to meet the conditions laid down in Article 178 of Directive 2006/112.

25The referring court, however, observes that, according to the case-law of the Court of Justice, the fight against tax avoidance, evasion and abuses is an objective that is recognised and encouraged by Directive 2006/112, provided that the national measures adopted for that purpose are proportionate. According to that court, it is not an excessive burden for taxpayers to carry out a basic check, on the NAFA’s website, of the persons with whom they intend to enter into a contract, in order to determine whether or not they have been declared ‘inactive taxpayers’. However, the referring court notes that there is no Court of Justice case-law relating to such a situation.

26In those circumstances, the Curtea de Apel Cluj (Court of Appeal, Cluj,) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Does Directive 2006/112/EC preclude national rules under which a taxable person is denied the right to deduct VAT on the ground that the person upstream, who issued the invoice in which the expenditure and the VAT are indicated separately, has been declared inactive by the tax authorities?

If the answer to the first question is in the negative, does Directive 2006/112/EC preclude national rules under which it is sufficient to display the list of registered inactive taxpayers at the headquarters of the NAFA and to publish that list on the website of that agency, in the section “Public information — Information relating to economic operators” in order that the right to deduct VAT in the circumstances described in the first question may be refused?’

Admissibility

27The Romanian Government disputes the admissibility of the questions referred for a preliminary ruling. It submits that the referring court has failed to explain why it considers that the answer to its questions is necessary for a resolution of the dispute before it, inasmuch as Paper Consult’s arguments focus exclusively on the contention that the declaration of inactivity cannot be relied on against it and do not concern the actual effects of that inactivity as they follow from the national rules.

28It must be borne in mind that, according to settled case-law, in the context of the cooperation between the Court and the national courts provided for by Article 267 TFEU, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine, in the light of the particular circumstances of the case, both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of EU law, the Court is in principle required to give a ruling (judgments of 15 January 2013, Križan and Others, C‑416/10, EU:C:2013:8, paragraph 53, and of 21 December 2016, Vervloet and Others, C‑76/15, EU:C:2016:975, paragraph 56).

29It follows that questions concerning EU law enjoy a presumption of necessity and relevance. The Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (judgments of 15 January 2013, Križan and Others, C‑416/10, EU:C:2013:8, paragraph 54, and of 21 December 2016, Vervloet and Others, C‑76/15, EU:C:2016:975, paragraph 57).

30In the present case, the referring court indicated in its decision that, in addition to a plea in law alleging that the decision of the President of the NAFA could not be relied on against it, Paper Consult also put forward a plea to the effect that it had complied with the conditions for benefiting from the right to deduct VAT. The referring court thus took the view that it was necessary to request a ruling from the Court on the interpretation of Directive 2006/112.

31Consequently, it is not manifestly evident that the interpretation of EU law sought by the referring court bears no relation to the purpose of the main proceedings or that it is hypothetical.

32The referring court’s questions must therefore be declared admissible.

Substance

33By its questions, which it is appropriate to examine together, the referring court asks, in essence, whether Directive 2006/112 must be interpreted as precluding national rules, such as those at issue in the main proceedings, which deny the right to VAT deduction to a taxable person on the ground that the trader which supplied services and issued a corresponding invoice, on which the expenditure and the VAT are indicated separately, has been declared inactive by the tax authorities of a Member State, that declaration of inactivity being public and accessible on the internet to any taxable person in that State.

34Those questions concern, in essence, the balancing, on the one hand, of the right to deduct, which is an essential component of the VAT scheme, and, on the other hand, of the fight against tax evasion, which is an objective recognised and encouraged by Directive 2006/112.

35As regards the right to deduct, it must be borne in mind that, according to settled case-law, the right of taxable persons to deduct the VAT due or already paid on goods purchased and services received as inputs from the VAT which they are liable to pay is a fundamental principle of the common system of VAT established by EU legislation (see, inter alia, judgments of 25 October 2001, Commission v Italy, C‑78/00, EU:C:2001:579, paragraph 28, and of 21 June 2012, Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 37).

36As the Court has repeatedly held, the right to deduct provided for in Article 167 et seq. of Directive 2006/112 is an integral part of the VAT scheme and in principle may not be limited. In particular, the right to deduct is exercisable immediately in respect of all the taxes charged on transactions relating to inputs (see, inter alia, judgments of 21 March 2000, Gabalfrisa and Others, C‑110/98 to C‑147/98, EU:C:2000:145, paragraph 43, and of 21 June 2012, Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 38).

37The deduction system is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT consequently ensures the neutrality of taxation of all economic activities, whatever the purpose or results of those activities, provided that they are themselves subject in principle to VAT (see, inter alia, judgments of 21 March 2000, Gabalfrisa and Others, C‑110/98 to C‑147/98, EU:C:2000:145, paragraph 44, and of 21 June 2012, Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 39).

38The right to deduct VAT is, however, subject to compliance with both substantive requirements or conditions and formal requirements or conditions.

39With regard to the substantive requirements or conditions, it is apparent from the wording of Article 168(a) of Directive 2006/112 that, in order to have a right to deduct, it is necessary, first, that the interested party be a ‘taxable person’ within the meaning of that directive and, second, that the goods or services relied on to confer entitlement to that right be used by the taxable person for the purposes of his own taxed output transactions, and that, as inputs, those goods or services must be supplied by another taxable person (see, to that effect, inter alia, judgments of 6 September 2012, Tóth, C‑324/11, EU:C:2012:549, paragraph 26, and of 22 October 2015, PPUH Stehcemp, C‑277/14, EU:C:2015:719, paragraph 28 and the case-law cited).

40As to the detailed rules governing the exercise of the right to deduct, which may be considered formal requirements or conditions, Article 178(a) of Directive 2006/112 provides that the taxable person must hold an invoice drawn up in accordance with Articles 220 to 236 and Articles 238 to 240 of that directive.

41According to settled case-law, the fundamental principle of VAT neutrality requires deduction of input tax to be allowed if the substantive requirements are satisfied, even if the taxable person has failed to comply with some of the formal requirements (judgments of 12 July 2012, EMS-Bulgaria Transport, C‑284/11, EU:C:2012:458, paragraph 62 and the case-law cited, and of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 45).

42The position may, however, be different if non-compliance with such formal requirements effectively prevents the production of conclusive evidence that the substantive requirements have been satisfied (judgments of 12 July 2012, EMS-Bulgaria Transport, C‑284/11, EU:C:2012:458, paragraph 71, and of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 46). It is apparent from the documents before the Court, and as the Advocate-General noted in points 40 to 43 of his Opinion, that this was not so in the case in the main proceedings.

43Similarly, it is settled case-law that the right to deduct may be refused when it is established, in the light of objective evidence, that that right is being invoked fraudulently or abusively. The fight against tax evasion, avoidance and abuse is an objective recognised and encouraged by Directive 2006/112 and EU law cannot be relied on for fraudulent or abusive ends (judgment of 21 June 2012, Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraphs 42 and 43 and the case-law cited).

44As regards the national rules at issue in the main proceedings, it is apparent from the evidence submitted to the Court that these have the objective of combating VAT evasion, by punishing, through the refusal of the right to deduct tax, conduct which may contribute to delaying the detection of such evasion or, at the very least, a failure to pay VAT on the part of taxpayers who do not meet the statutory reporting obligations, or who avoid tax inspections by declaring information for the identification of their registered office that does not enable the tax authorities to identify that office, or in relation to whom the tax authorities have established that they do not carry on their activity at the registered office or declared tax domicile.

45The European Commission has noted in its observations, referring to data appearing in a press release that it published on 4 September 2015, that VAT evasion is particularly extensive in Romania since, in the course of 2013, the difference between anticipated VAT revenue and VAT actually collected was in the order of 41.1%.

46To that effect also, the Romanian Government stated, during the hearing, that it was the difficulties encountered by the authorities in the fight against VAT evasion that led the Romanian legislature to set up a mechanism for preventing tax evasion through the declaration of the inactivity of such taxpayers whose improper fiscal conduct prevents the detection of irregularities in the collection of VAT and is an indication of tax evasion. Moreover, the non-payment of VAT affects the sales price of the goods and services and confers on the seller a competitive advantage which increases the volume of sales, with the result that the imposition of financial penalties is insufficient to combat VAT evasion.

47The pursuit of such an objective undoubtedly amounts to the fulfilment of the obligation of the Member States, stemming from Article 4(3) TEU, Article 325 TFEU, and Articles 2, 250(1) and 273 of Directive 2006/112, to take all legislative and administrative measures appropriate for ensuring collection of all VAT due on their territory and for preventing tax evasion (judgment of 17 December 2015, WebMindLicenses, C‑419/14, EU:C:2015:832, paragraph 41 and the case-law cited). Furthermore, there is a direct link between the collection of VAT revenue in compliance with the applicable EU law and the availability to the European Union budget of the corresponding VAT resources, since any lacuna in the collection of the first potentially causes a reduction in the second (see judgment of 26 February 2013, Åkerberg Fransson, C‑617/10, EU:C:2013:105, paragraph 26).

48In that regard, it must be noted that the Member States are required to check taxable persons’ returns, accounts and other relevant documents, and to calculate and collect the tax due (see judgment of 9 July 2015, Cabinet Medical Veterinar Dr. Tomoiagă Andrei, C‑144/14, EU:C:2015:452, paragraph 26 and the case-law cited).

49In accordance with the first paragraph of Article 273 of Directive 2006/112, Member States may impose obligations, other than those provided for by that directive, if they consider such obligations necessary to ensure the correct collection of VAT and to prevent evasion.

50However, the measures adopted by the Member States must not go beyond what is necessary to achieve the objectives pursued. Therefore, they cannot be used in such a way that they would have the effect of systematically undermining the right to deduct VAT and, consequently, the neutrality of VAT (judgments of 21 March 2000, Gabalfrisa and Others, C‑110/98 to C‑147/98, EU:C:2000:145, paragraph 52, and of 21 June 2012, Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 57).

51On several occasions, the Court has held that the authorities may not oblige a taxable person to undertake complex and far-reaching checks as to that person’s supplier, thereby de facto transferring their own investigative tasks to that person (see, to that effect, judgments of 21 June 2012, Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 65, and of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 50).

52By contrast, it is not contrary to EU law to require a trader to take every step which could reasonably be required of him to satisfy himself that the transaction which he is carrying out does not result in his participation in tax evasion (see, to that effect, judgments of 27 September 2007, Teleos and Others, C‑409/04, EU:C:2007:548, paragraphs 65 and 68, and of 21 June 2012, Mahagében and Dávid, C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 54).

53In this regard, it must be noted that the national rules at issue in the main proceedings do not transfer to the taxable person the monitoring tasks devolving on the authorities, but inform him of the outcome of an administrative investigation from which it is apparent that the taxpayer declared inactive can no longer be monitored by the competent authority, either because that taxpayer no longer met the statutory reporting obligations, or because it has declared information identifying its registered office that does not enable the tax authority concerned to identify it, or because it does not carry on its activity at the registered office or declared tax domicile.

54The only obligation imposed on the taxable person is, in fact, to consult the list of taxpayers declared inactive displayed at the NAFA’s headquarters and published on its website, such a verification being, in addition, straightforward to carry out.

55It thus appears that, by obliging the taxable person to carry out that verification, the national legislation pursues an objective that is legitimate and even imposed by EU law, namely that of ensuring the proper collection of VAT and the prevention of VAT evasion, and that such a verification can reasonably be required of an economic operator. It is, however, necessary to determine whether that legislation does not go beyond what is necessary to achieve the objective pursued.

56While the failure to file tax declarations laid down by law may be regarded as indicative of evasion, it does not prove irrefutably that VAT evasion has occurred. Furthermore, it is apparent from the material submitted to the Court that, subject to the checks to be carried out by the referring court, even if the taxpayer has regularised its situation and succeeded in being removed from the list of taxpayers registered as inactive, the penalty laid down in Article 11(12) of the Tax Code would remain, with the result that the purchaser of the goods or service cannot recover the right to deduct VAT. By contrast, Article 11(11) of the Tax Code provides that the ‘re-activated’ taxpayer is authorised, after its ‘re-activation’, to recover the VAT in respect of which it has been refused a right of deduction during the period of inactivity.

57In this regard, the Romanian Government indicated that the legislation had been modified and that, since 1 January 2017, in the case where a taxpayer declared inactive has been re-activated, the tax effects of the inactivation are annulled, both for the taxpayer concerned and for its commercial partners, which recover the right to deduct VAT relating to the transactions carried out during the period of inactivity.

58According to Paper Consult, Rom Packaging paid to the public purse the VAT received by reason of the contract concluded with Paper Consult. In response to a question put by the Court, the Romanian Government confirmed that amounts corresponding to the VAT owed by Rom Packaging had indeed been paid, but that it was not possible to verify that those amounts related to the transactions concluded between the two companies since Rom Packaging had not submitted its final VAT statement.

59Subject to the checks to be undertaken by the referring court, the fact remains that Article 11(12) of the Tax Code, in the version applicable to the facts in the main proceedings, does not provide for a regularisation in favour of the downstream taxable person despite evidence that VAT has been paid by the upstream taxable person, as the non-recognition of the right to deduct is final.

60However, the impossibility, for the taxable person, to demonstrate that the transactions concluded with the trader declared inactive meet the conditions laid down by Directive 2006/112 and, in particular, that the VAT has been paid into the public purse by that trader, goes beyond what is necessary to attain the legitimate objective pursued by that directive.

61Accordingly, the answer to the questions referred is that Directive 2006/112 must be interpreted as precluding national rules, such as those at issue in the main proceedings, under which the right to deduct VAT is refused to a taxable person on the ground that the trader which supplied a service to that taxable person and issued a corresponding invoice, on which the expenditure and the VAT are indicated separately, has been declared inactive by the tax authorities of a Member State, that declaration of inactivity being public and accessible on the internet to any taxable person in that State, in the case where that refusal of the right to deduct is systematic and final, making it impossible to adduce evidence that there was no tax evasion or loss of tax revenue.

The request for a limitation of the temporal effects of the Court’s judgment

62The Romanian Government has asked the Court, in the event that the latter should find that EU law precludes legislation such as that at issue in the main proceedings, to impose temporal limits on the effects of the judgment to be delivered.

63In support of its request, that government relies on, in the first place, its good faith, resulting from objective doubts concerning the scope of the Court’s case-law and from the follow-up to an ‘EU Pilot’ procedure concerning the national rules at issue in the main proceedings, in the context of which, on the basis of the Romanian authorities’ response, the Commission had decided not to pursue the matter, which led those authorities to believe that those rules were compatible with EU law. Secondly, the Romanian Government highlights the serious financial consequences that would arise if, following the Court’s judgment, VAT deductions had to be granted to all traders who had concluded transactions with traders declared inactive since 2007.

64In this connection, it should be recalled that, according to settled case-law of the Court, 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 courts having jurisdiction are satisfied (see judgments of 10 May 2012, Santander Asset Management SGIIC and Others, C‑338/11 to C‑347/11, EU:C:2012:286, paragraph 58, and of 22 September 2016, Microsoft Mobile Sales International and Others, C‑110/15, EU:C:2016:717, paragraph 59).

65It 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 to rely 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, namely that those concerned should have acted in good faith and that there should be a risk of serious difficulties (judgments of 10 May 2012, Santander Asset Management SGIIC and Others, C‑338/11 to C‑347/11, EU:C:2012:286, paragraph 59, and of 22 September 2016, Microsoft Mobile Sales International and Others, C‑110/15, EU:C:2016:717, paragraph 60).

66More specifically, the Court has taken that step only in quite specific circumstances, notably 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 European Union provisions, to which the conduct of other Member States or the Commission may even have contributed (judgments of 10 May 2012, Santander Asset Management SGIIC and Others, C‑338/11 to C‑347/11, EU:C:2012:286, paragraph 60, and of 22 September 2016, Microsoft Mobile Sales International and Others, C‑110/15, EU:C:2016:717, paragraph 61).

67With regard to the doubts highlighted by the Romanian Government relating to the interpretation of EU Law, it must be noted that a refusal to allow taxable persons to exercise the right to deduct VAT constitutes an exception to a fundamental principle of the common system of VAT, the legality of which, according to settled case-law, is acknowledged only in exceptional circumstances.

68The Commission’s closure of an ‘EU Pilot’ procedure has no bearing on this analysis. The closure of such an informal procedure, which is not in any way governed by the provisions of the Treaties, but involves voluntary cooperation between the Commission and the Member States, designed generally both to ensure the correct application of EU law and to resolve, at an early stage, issues arising from that application, does not in any way prejudge the Commission’s ability to institute formal proceedings for failure to fulfil an obligation under Article 258 TFEU. In any event, the Commission’s attitude can in no way, as such, give rise to a legitimate expectation on the part of a Member State as to the compliance of its national rules with EU law where, as in the present case, it is apparent from the case-law that there is no objective and significant uncertainty as to the scope of EU law, in particular the provisions of Directive 2006/112.

69As the criterion relating to the good faith of those concerned has not been satisfied in regard to the Romanian authorities, there is no need to determine whether the criterion relating to the seriousness of the economic repercussions has been met.

70It follows from the foregoing that it is not appropriate to limit the temporal effects of the present judgment.

Costs

71Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national 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.

Operative part

On those grounds, the Court (Second Chamber) hereby rules:

Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national rules, such as those at issue in the main proceedings, under which the right to deduct value added tax is refused to a taxable person on the ground that the trader which supplied a service to that taxable person and issued a corresponding invoice, on which the expenditure and the value added tax are indicated separately, has been declared inactive by the tax authorities of a Member State, that declaration of inactivity being public and accessible on the internet to any taxable person in that State, in the case where that refusal of the right to deduct is systematic and final, making it impossible to adduce evidence that there was no tax evasion or loss of tax revenue.

Signatures

[Signatures]

( *1 ) Language of the case: Romanian.

OPINION OF ADVOCATE GENERAL

MENGOZZI

delivered on 31 May 2017 ¹

(Reference for a preliminary ruling — Admissibility — Directive 2006/112/EC — Taxation — Right to deduct value added tax (VAT) — Refusal — Invoices issued by a taxpayer declared inactive by the tax authorities — List of taxpayers declared inactive — Risk of tax evasion — Limitation of the temporal effects of the judgment to be delivered)

I. Introduction

Introduction

1Does Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax ² preclude national rules under which a taxpayer is denied the right to deduct value added tax (VAT) paid on the purchase of goods and services from other taxpayers declared ‘inactive’ under those national rules, a list of whom is published on the website of the national tax authorities?

2That is, in essence, the subject matter of the question referred for a preliminary ruling by the Curtea de Apel Cluj (Court of Appeal, Cluj, Romania).

3The reference was made in the context of proceedings between SC Paper Consult SRL (‘Paper Consult’) and the Romanian tax authorities, who refused to allow Paper Consult to deduct the VAT paid on provisions of services purchased from SC Rom Packaging SRL (‘Rom Packaging’) under a contract concluded on 3 January 2011, on the ground that the latter company had been declared an inactive taxpayer as from 7 October 2010 and struck from the register of taxable persons for the purposes of VAT as from 1 November 2010, pursuant to Article 78a(1) of the ordonanţa Guvernului nr. 92/2003 privind Codul de procedură fiscală, republicată, cu modificările şi completările ulterioare (Government Order No 92/2003 on the Code of tax procedure, republished, with subsequent amendments and additions (‘Order No 92/2003’).

4Under Article 78a(1) of Order No 92/2003, taxpayers are declared inactive in one of the following three situations: (i) where they do not fulfil any of the statutory reporting obligations for a period of six months; (ii) where they evade tax supervision by declaring registered office identification that does not enable the tax authorities to identify it; or (iii) where the tax authorities have established that they do not pursue their activity at the registered office or declared tax domicile.

5Taxpayers declared inactive are subject to Article 11(1a) and (1b) of legea nr. 571/2003 privind Codul fiscal (Law No 571/2003, ‘the Tax Code’).

6Under Article 11(1a) of the Tax Code, taxable persons established in Romania who have been declared inactive must settle payment of the taxes provided for therein, but are not allowed to deduct expenses and VAT on purchases made during the period of inactivity.

7Under Article 11(1b) of the Tax Code, persons acquiring goods and/or services from taxable persons established in Romania who have been registered as inactive are not entitled to deduct expenses and VAT on those purchases, except for purchases of goods made in enforcement proceedings and/or purchases of goods and/or services from taxable persons in bankruptcy proceedings.

8Article 3(1) of ordinul Preşedintelui ANAF nr. 819/2008 (Decree No 819/2008 of the President of the National Agency for Fiscal Administration (‘the NAFA’)) provides that taxpayers are declared inactive as from the date of entry into force of the Decree of the President of the NAFA approving the list of taxpayers declared inactive. Article 3(2) of Decree No 819/2008 provides that that list is to be posted at the head office of the NAFA and published on its website whilst under Article 3(3) of Decree No 819/2008, the Decree of the President of the NAFA approving the list of taxpayers declared inactive is to enter into force within 15 of the date of posting.

9At the time of the facts in the case in the main proceedings, Annex No 1 to Decision No 3347/2011 of the President of the NAFA, setting out the reporting obligations referred to in Article 78a(1)(a) of Order No 92/2003, listed the following reporting obligations:

100 ‘Declaration of obligations of payment into the State budget’;

112 ‘Declaration on obligations of payment towards social security contributions, income tax and register of insured persons’;

101 ‘Declaration on corporation tax’;

300 ‘Declaration on [VAT]’;

301 ‘Special declaration on [VAT]’;

390 VIES ‘Declaration summarising intra-Community deliveries/purchases of goods’;

394 ‘Declaration on deliveries/provisions and purchases made on national territory’.

10In the main proceedings, according to the information provided to the Court, the decision was taken to declare Rom Packaging inactive due to its failure to file its tax returns.

11Given Rom Packaging’s declaration of inactivity, the Romanian tax authorities found that, under Article 11(1b) of the Tax Code, Paper Consult could not deduct the amount of RON 45680 (Romanian lei) for VAT paid on the provisions of services provided for in the contract concluded on 3 January 2011.

12Following the dismissal of its claim brought under administrative proceedings, Paper Consult brought an action before the Tribunalul Bistriţa-Năsăud (High Court, Bistriţa-Năsăud, Romania), which was also dismissed on 8 July 2015.

13Paper Consult then instituted appeal proceedings before the Curtea de Apel Cluj (Court of Appeal, Cluj), arguing that Rom Packaging’s declaration of inactivity is ineffective against it because it was not notified individually and that, in order to be entitled to the VAT deduction, Rom Packaging must satisfy the conditions laid down in Article 178 of Directive 2006/112, that is to say, it must hold an invoice drawn up in accordance with the provisions of sections 3 to 6 of Chapter 3 under Title XI of that directive.

14The referring court observes that, according to the Court of Justice’s case-law, the need to combat tax avoidance, evasion and abuses is an objective that is recognised and encouraged by Directive 2006/112, provided that the national measures in question are proportionate. It considers that Article 273 of Directive 2006/112, which provides that Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, authorises national rules such as those applicable in the main proceedings. According to the referring court, taxpayers do not accept a burden they consider to be excessive in the form of a minimal check on the NAFA’s website to see whether or not persons with whom they intend to conclude a contract have been declared inactive.

15Given that there was no case-law on the matter, the Curtea de Apel Cluj (Court of Appeal, Cluj) decided to stay the proceedings and to refer the following questions for a preliminary ruling:

Does Directive 2006/112/EC preclude national rules under which a taxable person is denied the right to deduct VAT on the ground that the person upstream, who issued the invoice on which the expenditure and VAT are indicated, has been declared as inactive by the tax authorities?

If the answer to the first question is in the negative, does Directive 2006/112/EC preclude national rules under which it is sufficient to display the list of registered inactive taxpayers at the headquarters of the Agenției Națională de Administrare Fiscală (National Agency for Fiscal Administration) and to publish that list on the website of that agency, in the section Public information — Information relating to economic operators, in order that the right to deduct VAT in the circumstances described in the first question may be refused?’

16Paper Consult, the Romanian Government and the European Commission submitted written observations on those questions. The latter two parties presented oral argument at the hearing which was held on 26 January 2017.

II. Analysis

Admissibility

17The Romanian Government submits that the questions referred are inadmissible on the ground that the referring court failed to explain why it considers that the answer to its questions is necessary to resolve the dispute before it, since Paper Consult’s arguments focus solely on the declaration of inactivity being ineffective and do not discuss the actual effects of the inactivity as they follow from the national rules.

18The Romanian Government’s objection must, in my view, be rejected.

19It is true that, in accordance with the task assigned to it under the system of cooperation instituted by Article 267 TFEU of contributing to the administration of justice in the Member States, the Court refuses to deliver advisory opinions on hypothetical questions. ³ In such cases, the request for interpretation of EU law made by the national court is not objectively required for that court to make a decision and resolve the dispute before it.

20In the present case, as observed by the Romanian Government, it is apparent from the order for reference that the dispute in the main proceedings raises a legal issue involving an individual maintaining that the tax authorities are bound to recognise its entitlement to a VAT deduction, even when that entitlement arises from a transaction concluded with a taxpayer declared inactive. It is also apparent from the reasons in the order for reference that Paper Consult argues that its entitlement to a deduction of VAT paid upstream need comply only with Article 178(a) of Directive 2006/112.

21That statement of reasons, although succinct, is sufficient to convey the reasons why the referring court seeks guidance on the interpretation of Directive 2006/112.

22Moreover, to my mind, it is not for the Court, as part of the presumption of relevance attaching to questions referred for a preliminary ruling on the interpretation of EU law, to question the assessment made by the referring court of the exact scope of the arguments put forward by the parties to the main proceedings, as presented before that court. The national court retains sole responsibility for defining the legal and factual framework giving rise to the order for reference, which it is not for the EU Court to question. ⁴

23Moreover, even if, as suggested by the Romanian Government in its written observations, the referring court has gone beyond the pleas of illegality put forward before it, nor may the EU Court in that situation, in examining the admissibility of a reference for a preliminary ruling, ascertain whether the reference was made in accordance with national procedural rules. ⁵

24I therefore suggest to the Court that it declare the reference for a preliminary ruling admissible.

Substance

25As I indicated in my introductory remarks, by the present reference for a preliminary ruling, the referring court asks, in essence, whether Directive 2006/112 must be interpreted as precluding national rules that do not allow a deduction for VAT paid upstream to taxable persons procuring goods or services from other taxable persons, on the ground that the latter have been declared ‘inactive’ under those national rules, where the list of those inactive persons is published on the national tax authorities’ website.

26Although, in the wording of its questions, the referring court does not identify any specific provision of Directive 2006/112, it is indubitable, as understood by the interested parties who lodged observations in the present case, that it is intended to seek clarification as to the articulation between the principle of entitlement to a VAT deduction, as provided for in Article 167 et seq. of Directive 2006/112, and those obligations for which the Member States may deem necessary to make provision in order to ensure correct VAT collection and to prevent evasion pursuant to Article 273 thereof.

27It is apparent from the case file and the observations of the Romanian Government that refusing entitlement to a VAT deduction to operators who are taxable persons for VAT purposes in Romania and who effect procurements from taxpayers declared inactive in that Member State is aimed at discouraging those operators from purchasing from such taxpayers — whose situation carries with it a risk of evasion due to non-compliance with their tax reporting obligations — and, ultimately, to help eliminate those taxpayers from the market if they do not regularise their situation.

28The relationships between the principle of entitlement to a deduction for VAT paid upstream and the obligations that the Member States may impose on operators in order to ensure correct collection of VAT and prevent evasion have been covered in abundant case-law. ⁶

29The point of departure in that case-law consists in referring back to the ‘fundamental’ nature of the common system for VAT put in place by the EU legislation on the entitlement of taxable persons to deduct from the VAT they owe the VAT due or paid for goods purchased and services received by them upstream. ⁷

30Thus, as a rule, no restrictions can be placed on the entitlement to deduction provided for by Article 167 et seq. of Directive 2006/112 and it is available immediately for all of the taxes levied on the operations effected upstream. ⁸ Under Article 167 of Directive 2006/112, a right of deduction is to arise at the time the deductible tax becomes chargeable.

31As the Court has repeatedly held, the deduction system is meant to relieve traders entirely of the burden of the VAT payable or paid in the course of all their economic activities. Consequently, the common system of VAT consequently ensures that all economic activities, whatever their purpose or results, provided that they are themselves subject to VAT, are taxed in a wholly neutral way. ⁹

32Entitlement to the VAT deduction is nevertheless contingent on compliance with both substantive requirements or conditions and formal requirements or conditions.

33As regards substantive requirements or conditions, it is apparent from the wording of Article 168(a) of Directive 2006/112 that, in order to have a right of deduction, it is necessary, first, that the interested party be a taxable person within the meaning of that directive and, second, that the goods or services relied on to give entitlement to that right be used by the taxable person for the purposes of his own taxed output transactions, and that, as inputs, those goods or services must be supplied by another taxable person. ¹⁰

34As to the detailed rules for exercising the right to a deduction, which may be considered formal requirements or conditions, ¹¹ Article 178(a) of Directive 2006/112 provides that the taxable person must hold an invoice drawn up in accordance with Articles 220 to 236 and Articles 238, 239 and 240 of that directive. In particular, under Article 226(3) of Directive 2006/112, the invoice must state the VAT identification number under which the taxpayer made the supply of goods or services.

35The Court of Justice has had numerous references concerning situations in which a taxable person has been refused the benefit of a VAT deduction by the national tax authorities on grounds of irregularities or formal lacunae but the substantive conditions provided for by Directive 2006/112 are otherwise satisfied.

36In order to remain at the general level at this stage of the analysis, suffice it to note that it is apparent from the Court of Justice’s judgments that entitlement to a VAT deduction paid upstream is granted where the substantive conditions required for that right to arise are met, even if taxable persons have omitted some formal requirements. ¹²

37Since refusal of entitlement to a VAT deduction paid upstream is an exception to the application of the fundamental principle constituted by that right, ¹³ it is only in particular circumstances that the Court will be prepared to accept that lacunae in formal requirements may allow the tax authorities to refuse the benefit of such a right to a taxable person.

38It follows from the case-law to date that the loss of entitlement to a VAT deduction may arise in two distinct scenarios. One is where the infringement of the formal requirements prevents production of certain proof that the substantive conditions for entitlement to the VAT deduction have been met. ¹⁴ The other, in essence, allows the VAT deduction to be refused when it is established, in the light of objective proof, that the right is relied on fraudulently or abusively, where the taxable person knew or ought to have known that the operations in question were involved, directly or indirectly, in a fraud. ¹⁵

39The rationale for the first scenario is that the formal requirements are provided for precisely in order to ensure application of the VAT and to enable supervision by the Member States’ tax authorities. It is therefore perfectly logical to refuse the benefit of the entitlement to deduction where the infringement of such requirements is so great that it makes it impossible or overly difficult to ascertain whether the substantive conditions for entitlement to a deduction have been met.

40However, that is not the case in the dispute in the main proceedings.

41It is apparent from the order for reference that Paper Consult, which was refused entitlement to the deduction, is a taxable person for the purposes of Directive 2006/112 and that it purchased and paid for the provisions of services covered by the contract of 3 January 2001, as part of its economic activity, from another economic operator, Rom Packaging, which was also bound to pay VAT but had been declared inactive due to its failure to comply with its tax reporting obligations under the national rules. There is nothing in the case file indicating that the Romanian tax authorities were unable to ascertain the veracity of the services billed by Paper Consult or that they were unable to verify the identity and status of those two economic operators.

42Regarding more specifically Rom Packaging’s status as a taxable person and in the light of the Romanian Government’s written observations denying that status, I note that, under Article 11(1a) of the Tax Code, taxpayers who have been declared inactive retain their status as taxable persons because they remain bound to pay VAT, although they are not entitled to a VAT deduction during their period of inactivity.

43In any event, the status as taxable person for the purposes of Directive 2006/112, which under Article 9(1) thereof includes ‘any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity’ is not contingent on either the obligation to file a tax return and pay VAT or the obligation to register for VAT purposes. ¹⁶ The Court of Justice held recently that, notwithstanding the declaration of ‘non-existence’ of an economic operator under national rules on the grounds, inter alia, that the operator in question was not registered for VAT purposes, did not file tax returns and did not pay its taxes, such an operator could be recognised as having the status of taxable person for the purposes of Directive 2006/112. ¹⁷ That status was also recognised for the issuer of an invoice who had previously had his business operator’s licence withdrawn and accordingly no longer had the right to use his tax identification number. ¹⁸

44The second scenario in which the Court has recognised that entitlement to a deduction could be refused can be essentially traced back to the Member States’ power under the first paragraph of Article 273 to ‘impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion’. ¹⁹

45As I mentioned earlier, the Romanian scheme for declaration of inactivity of certain taxpayers is based on three alternative scenarios in which the Romanian rules presume that there is a risk of tax evasion. They include failing to file any tax returns, including VAT returns, for a period of six months, as was the situation of Rom Packaging. That failure is sanctioned by a refusal to allow entitlement to a deduction of VAT paid on purchases made by those taxpayers during the period covered by the declaration of inactivity, in accordance with Article 11(1a) of the Romanian Tax Code. In my view, that provision clearly contains measures aimed at preventing situations deemed to present a risk of tax evasion from actually becoming tax evasion. Since a failure to file tax returns, including for VAT, is likely to cover up an attempt at tax evasion by the taxpayer concerned, the objective pursued is indeed that of preventing such an evasion from occurring, by not allowing that taxpayer entitlement to deduct the VAT paid upstream throughout the period of inactivity.

46The present case, however, does not concern the tax situation of a taxpayer who has been declared inactive, but that of taxable persons who, like Paper Consult, effect procurements from such a taxpayer, despite the latter’s declaration of inactivity.

47In also sanctioning taxable persons who purchase goods and/or services from an operator declared inactive by not allowing them a VAT deduction, Article 11(1b) of the Romanian Tax Code indubitably forms part of the objective of combating tax evasion pursued by the declaration of inactivity scheme.

48Read in conjunction with the declaration of inactivity scheme, that article is aimed at obliging those taxable persons, at the very least indirectly, to make inquiries about the potentially inactive status of their future co-contractor (which implies a risk of tax evasion).

49Such an obligation goes beyond the requirement, recognised by the Court of Justice, according to which, when there are indications pointing to an infringement or fraud, a reasonable trader could, depending on the circumstances of the case, be obliged to make enquiries about another trader from whom he intends to purchase goods or services in order to ascertain the latter’s trustworthiness. ²⁰

50The obligation to make inquiries about the potentially inactive status of taxable persons, introduced into Romanian law, is compulsory for any trader carrying on economic activity in Romania intending to effect procurements from any other trader in Romania, irrespective of whether that operator has in fact been declared inactive and therefore did commit the irregularities established by the Romanian tax authorities. It is thus a general obligation, imposed on all traders, to verify the fiscal ‘trustworthiness’ of their future co-contractor, by consulting the public list of traders declared inactive drawn up by the Romanian tax authorities, irrespective of any indications that the future co-contractor might have engaged in irregularities or VAT evasion.

51However, given that the inactive status under Romanian law is administrative in nature, public and easily accessible, that obligation does not, to my mind, place an excessive burden on taxable persons subject to VAT in Romania, who can be expected not to be unaware of the national rules and to exercise the normal diligence of at least a reasonably informed trader, in consulting the list of taxpayers declared inactive by the Romanian tax authorities published on the NAFA’s website.

52In my view, that obligation can be equated with a measure that may reasonably be imposed on the taxable person to make inquiries as to whether the intended transaction entails a risk of participation in tax evasion.

53Moreover, both the Romanian Government and the Commission state that the national system of online publicity bears a number of points in common with the system in place at Union level: the VIES (VAT Information Exchange System) on-the-web, which enables operators to obtain confirmation of the VAT identification number of their trading partners and the national tax administrations to monitor intra-Community transactions and to detect any irregularities. ²¹

54Unlike the cases in which the Court of Justice found that there was a transfer to taxable persons of tasks involving supervision and detection of irregularities and evasion which, as a rule, fall to the national tax authorities, ²² the Romanian rules only require taxable persons to check that the trader with whom they intend to effect purchases is on the list — which is public and accessible on the NAFA’s website — of operators declared inactive following checks conducted by the national tax authorities themselves. That requirement to consult the list of operators declared inactive is clearly not a transfer to those taxable persons of supervisory tasks which are properly the remit of national tax authorities.

55Accordingly, it must be presumed that a taxable person who concludes transactions subject to VAT with an operator declared inactive must, in any event, know or ought to have known that the completion of such transactions carries with it a risk of tax evasion.

56Does knowledge or reasonably presumed knowledge of such a risk warrant entitlement to a VAT deduction being refused to that taxable person?

57In my opinion it does not.

58In the first place, this scenario does not correspond to the situations envisaged in the case-law, according to which entitlement to a VAT deduction may legitimately be refused where a taxable person knew, or should have known, that he was taking part in a transaction connected with VAT fraud, in particular when that fraud is (or was) committed by his supplier. ²³

59Consequently, under EU law and the case-law as they currently stand, a mere risk of VAT fraud, the degree of which will likely be contentious, does not warrant a refusal to allow entitlement to a deduction.

60In the second place, it must be remembered that the Court has held that national measures pursuing the objectives referred to in Article 273 of Directive 2006/112 must observe the principle of proportionality and, accordingly, cannot be used in such a way that they would have the effect of systematically undermining the right to deduct VAT and, consequently, the fundamental principle of VAT neutrality. ²⁴

61In the present case, the refusal to allow entitlement to the VAT deduction is a sanction the dissuasive effect of which is, in reality, aimed not so much at ensuring the effectiveness of the obligation to consult the list of operators declared inactive drawn up by the President of the NAFA as discouraging taxable persons from making purchases from operators declared inactive, with the ultimate objective of excluding the latter from the market if they do not regularise their situation, as explained by the Romanian Government.

62That being so, a taxable person who, after consulting the list of operators declared inactive and having found that the operator from which it intends to purchase is on that list, nevertheless goes ahead and purchases from that operator, ²⁵ will in any event not be entitled under Romanian law to benefit from the VAT deduction relating to those transactions, irrespective of any assurances it may have been given by that operator to the effect that the specific transactions giving rise to entitlement to a deduction are not involved in tax evasion and that the VAT will moreover be paid into the State Treasury.

63In other words, as rightly pointed out by the Commission during the hearing, the Romanian rules lay down, in respect of all taxable persons who conclude transactions subject to VAT with operators declared inactive, an irrefutable presumption of participation in tax evasion. Those rules provide for systematic refusal of entitlement to a VAT deduction for any taxable person making purchases from an operator declared inactive, notwithstanding the fact that, in the light of the material and evidence that that taxable person and that operator are able to produce, including following a tax inspection, any risk of tax evasion in relation to the transactions in question may be legitimately ruled out, that they satisfy the substantive and formal requirements for entitlement to a VAT deduction for the purposes of Directive 2006/112 and that there has been no loss of tax revenue.

64National rules such as these, to my mind, go beyond what is necessary to attain the objectives aimed at ensuring the correct collection of VAT and preventing tax evasion.

65In the main proceedings, the referring court has not provided any material suggesting that the transactions concluded between Paper Consult and Rom Packaging concealed tax evasion or that the VAT entered on the invoices issued by the latter to Paper Consult relating to those transactions did not correspond to the amount paid into the State Treasury.

66Moreover, to my mind the disproportionate nature of the national rules is further illustrated by the fact, highlighted by Paper Consult in its written observations and not disputed by the Romanian Government, that, under Article 11(1b) of the Romanian Tax Code, refusal of entitlement to a VAT deduction to the co-contractor of the operator declared inactive is definitive, that is to say, that co-contractor continues to bear the burden of that tax even after the operator declared inactive has regularised its situation in terms of its tax obligations. That situation stands in contrast to and is inconsistent with that of the operator declared inactive who, under Article 11(1a) of the Romanian Tax Code, is allowed to recover VAT deduction of which was refused during the period of inactivity, during a subsequent fiscal year following its being ‘reactivated’ by the Romanian tax authorities.

67Regarding this aspect of the national rules, the Romanian Government stated at the hearing — in the context of the questions put by the Court concerning the proportionality of the refusal to allow entitlement to a VAT deduction imposed on the co-contractor of an operator declared inactive — that, by virtue of an amendment to the Romanian Tax Code, since 1 January 2017 it henceforth allows any taxable person having made purchases from an operator declared inactive to benefit from the VAT deduction relating to the transactions completed during the period of inactivity of that operator, where the operator subsequently regularised its situation, in particular in terms of its tax reporting obligations.

68It is for the referring court to ascertain the scope of that amendment, inter alia with regards to the possibility of retroactive application to the facts giving rise to the main proceedings, having regard also to the fact that, according to the information provided by the Commission in its written observations, Rom Packaging was ‘reactivated’ by decision of the President of the NAFA of 24 April 2012.

69Irrespective of the facts of the main proceedings, the amendment made to the Romanian Tax Code and the explanations provided by the Romanian Government at the hearing nevertheless give the impression that the Romanian authorities themselves realised that a systematic and definitive refusal to allow entitlement to a VAT deduction imposed on the business partners of an operator declared inactive was disproportionate when the operator had subsequently regularised its situation in terms of its tax reporting obligations.

70A mere suspension of entitlement to a VAT deduction pending regularisation of the transactions giving rise to that entitlement seems to me a more suitable measure than systematic and definitive refusal of the benefit of that entitlement when a taxable person in Romania purchases goods and/or services from an operator declared inactive in that Member State.

71It is true that, where a person subject to VAT in Romania has purchased from an operator declared inactive after having failed to consult the list of operators declared inactive, that taxable person has failed to comply with one of its obligations under the national rules by which it is bound. As I have stated above, such an obligation does not appear to me to be excessive in and of itself. To my mind, EU law does not preclude non-compliance with such a formality from being sanctioned by a penalty that is dissuasive and proportionate to the seriousness of the non-compliance which may take the form of, say, a fine. However, failure to comply with such an obligation does not mean that, with respect to the specific transactions giving rise to entitlement to a VAT deduction, the taxable person was unable to obtain from the operator declared inactive the assurances referred to by me above, to the effect that those transactions are not linked to any tax evasion and that the VAT will be paid into the State Treasury.

72In any event, the irrefutable presumption on which the Romanian rules are based, which makes it impossible for any taxable person to produce the slightest evidence enabling it to demonstrate that the transactions concluded with the operator declared inactive meet the conditions laid down in Directive 2006/112 to be entitled to a VAT deduction in respect of those transactions, in my view exceeds what is necessary to attain the legitimate objectives pursued by those rules.

73In the light of the foregoing considerations, I propose that the Court answer the questions referred for a preliminary ruling by the national court as follows: Directive 2006/112 must be interpreted as precluding national rules such as those at issue in the main proceedings under which, even where no tax evasion and no loss of tax revenue has been established, a systematic and definitive refusal of entitlement to a VAT deduction is imposed on a taxable person who has paid the VAT relating to transactions concluded with an operator declared ‘inactive’ under those rules, notwithstanding the fact that the declaration of inactivity of the operator concerned, which is based on there being a risk of tax evasion, is public and easily accessible to any taxable person in the Member State in question.

The Romanian Government’s request for limitation of the temporal effects of the Court’s judgment delivered

74Should the Court concur in my analysis, it will have to rule on the Romanian Government’s request that the temporal effects of the judgment to be delivered be limited.

75In support of its request, the Romanian Government submits, firstly, that the Romanian authorities acted in good faith. That good faith is based on two grounds, the first being the objective doubts as to the Court’s case-law, the second being the conduct of the Commission, who in May 2014 accepted the response of the Romanian authorities given further to a complaint lodged under the ‘EU Pilot’ procedure concerning the national rules at issue in the present case, which led those authorities to believe that the rules were compatible with EU law. Secondly, the Romanian Government highlights the serious financial consequences that would arise if, following the Court’s judgment, the VAT deduction had to be granted to all operators having concluded transactions with operators declared inactive since 2007. The Romanian Government submits that that additional burden would amount to 0.5% of the Romanian gross domestic product.

76In its oral observations, the Commission asks the Court to dismiss that request on the ground that the conditions established by the case-law are not met.

77I concur with the Commission’s submissions.

78In accordance with settled case-law of the Court, the interpretation which the Court, in the exercise of the jurisdiction conferred upon it by Article 267 TFEU, 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 coming into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships arising and established before delivery of the judgment ruling on the request for interpretation, provided that in other respects the conditions under which an action relating to the application of that rule may be brought before the courts having jurisdiction are satisfied. ²⁶

79It 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, namely that those concerned should have acted in good faith and that there should be a risk of serious difficulties. ²⁷

80As those criteria are cumulative, if one of them is not fulfilled it is not necessary to examine whether or not the other one is. ²⁸

81I further point out that the Court limits the temporal scope of its judgments delivered by way of preliminary ruling only in very specific circumstances, inter alia when there is a risk of serious financial repercussions due, in particular to the high number of legal relationships established in good faith on the basis that the rules deemed to be validly in force and it appears that individuals and the national authorities were encouraged to adopt conduct that did not comply with EU law due to considerable objective uncertainty as to the scope of EU law provisions, which uncertainty was reinforced by the very conduct adopted by other Member States or by the Commission. ²⁹

82In the present case, I take the view that the criterion relating to good faith on the part of the interested parties, including the Romanian tax authorities, is not fulfilled.

83As to the doubts — and not already the considerable objective uncertainty within the meaning of the case-law — highlighted by the Romanian Government concerning the interpretation of EU law, although it is true that the situation giving rise to the present set of proceedings is somewhat different from the cases having been examined previously by the Court, the fact remains that, as I pointed out in my analysis above, a refusal to allow entitlement to a VAT deduction imposed on taxable persons is an exception to a fundamental principle of the common system of VAT, the legality of which, according to settled case-law, is allowed only in exceptional circumstances. Although that case-law has been refined in recent years, the principles on which it is based date back many years and, in any event, go back to before 1 January 2007, the date on which Romania acceded to the European Union. ³⁰ Therefore, if a situation of considerable and objective uncertainty were to be recognised, it would undeniably have its origin not in the scope of the provisions of EU law, but in Romania’s maintaining the rules giving rise to the present case following its accession to the European Union.

84The Commission’s closing of an ‘EU Pilot’ procedure has no bearing on this analysis.

85That informal procedure, which was established by the Commission in its communication ‘A Europe of results — applying [Union] law’, ³¹ involves voluntary cooperation between the Commission and the Member States and is aimed generally both at ensuring the correct application of EU law and at resolving at an early stage issues arising from that application. Although such a procedure may have as its sole purpose requests for information, most of the time it is aimed at avoiding, in so far as possible, the initiation of infringement proceedings pursuant to Article 258 TFUE. ³² In any event, the Commission’s attitude can in no way per se give rise to a legitimate expectation on the part of a Member State as to the compliance of national rules with EU law where, as in the present case, it is apparent from the case-law that there is no considerable and objective uncertainty as to the scope of EU law, in particular the provisions of Directive 2006/112.

86In those circumstances, I propose that the Court refuse the Romanian Government’s form of order seeking limitation of the temporal effects of the judgment to be delivered, without its being necessary to examine the criterion relating to the existence of a risk of serious difficulties.

III. Conclusion

Conclusion

87In the light of all the foregoing considerations, I propose that the Court should answer the question referred by the Curtea de Apel Cluj (Court of Appeal, Cluj, Romania) as follows:

Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national rules, such as those at issue in the main proceedings, which entail, even where no tax evasion and no loss of tax revenues has been established, systematic and definitive refusal of a value added tax deduction to a taxpayer having paid value added tax on transactions concluded with an operator declared ‘inactive’ under those rules, notwithstanding the fact that the declaration of inactivity of the operator in question, which is contingent on there being a risk of tax evasion, is publicly and easily accessible to any taxable person in the Member State in question.

¹ Original language: French.

² OJ 2006 L 347, p. 1.

³ See, inter alia, to that effect, judgment of 24 October 2013, Stoilov i Ko (C‑180/12, EU:C:2013:693, paragraphs 38 and 47 and the case-law cited).

⁴ On that settled case-law, see, inter alia, judgment of 13 October 2016, Prezes Urzędu Komunikacji Elektronicznej and Petrotel (C‑231/15, EU:C:2016:769, paragraph 16 and the case-law cited).

⁵ See, inter alia, to that effect, judgments of 3 March 1994, Eurico Italia and Others (C‑332/92, C‑333/92 and C‑335/92, EU:C:1994:79, paragraph 13), and of 29 June 2010, E and F (C‑550/09, EU:C:2010:382, paragraph 35). See also my Opinion in pending case Santogal M-Comércio e Reparação de Automóveis (C‑26/16, EU:C:2017:79, point 21).

⁶ See, inter alia, judgments of 19 September 2000, Ampafrance and Sanofi (C‑177/99 and C‑181/99, EU:C:2000:470); of 6 July 2006, Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446); of 21 June 2012, Mahagében and Dávid (C‑80/11 and C‑142/11, EU:C:2012:373); of 6 September 2012, Tóth (C‑324/11, EU:C:2012:549); of 6 December 2012, Bonik (C‑285/11, EU:C:2012:774); orders of 28 February 2013, Forvards V (C‑563/11, not published, EU:C:2013:125); of 16 May 2013, Hardimpex (C‑444/12, not published, EU:C:2013:318); judgments of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719); and of 28 July 2016, Astone (C‑332/15, EU:C:2016:614).

⁷ See, inter alia, judgments of 25 October 2001, Commission v Italy (C‑78/00, EU:C:2001:579, paragraph 28); of 21 June 2012, Mahagében and Dávid (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 37); and of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 43).

⁸ See, to that effect, inter alia, judgments of 21 June 2012, Mahagében and Dávid (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 38); of 6 September 2012, Tóth (C‑324/11, EU:C:2012:549, paragraph 24); of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraph 26); of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 44); and order of 10 November 2016, Signum AlfaSped (C‑446/15, not published, EU:C:2016:869, paragraph 30).

⁹ See, to that effect, inter alia, judgments of 21 June 2012, Mahagében and Dávid (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 39); of 6 September 2012, Tóth (C‑324/11, EU:C:2012:549, paragraph 25); of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraph 27); and order of 10 November 2016, SignumAlfa Sped (C‑446/15, not published, EU:C:2016:869, paragraph 31).

¹⁰ See, inter alia, to that effect, judgments of 6 September 2012, Tóth (C‑324/11, EU:C:2012:549, paragraph 26), and of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraph 28 and the case-law cited).

¹¹ See, in that regard, judgments of 15 July 2010, Pannon Gép Centrum (C‑368/09, EU:C:2010:441, paragraph 44), and of 15 September 2016, Barlis 06 — Investimentos Imobiliários e Turísticos (C‑516/14, EU:C:2016:690, paragraph 41).

¹² See, to that effect, inter alia, judgments of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 45 and the case-law cited); of 15 September 2016, Barlis 06 — Investimentos Imobiliários e Turísticos (C‑516/14, EU:C:2016:690, paragraph 42); and of 15 September 2016, Senatex (C‑518/14, EU:C:2016:691, paragraph 38 and the case-law cited).

¹³ See judgment of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 52).

¹⁴ See, to that effect, inter alia, judgment of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 46 and the case-law cited).

¹⁵ See, to that effect, inter alia, judgments of 31 January 2013, LVK (C‑643/11, EU:C:2013:55, paragraphs 59, 60 and 64); and of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraphs 47 to 50).

¹⁶ See judgment of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraphs 39 and 40).

¹⁷ See judgment of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraphs 19, 31, 39 and 42).

¹⁸ See judgment of 6 September 2012, Tóth (C‑324/11, EU:C:2012:549, paragraphs 28 to 33).

¹⁹ Emphasis added. See, in that regard, inter alia, judgments of 21 June 2012, Mahagében and Dávid (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 55), and of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 49).

²⁰ See, inter alia, judgment of 21 June 2012, Mahagében and Dávid (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 60); orders of 28 February 2013, Forvards V (C‑563/11, not published, EU:C:2013:125, paragraph 40); of 16 May 2013, Hardimpex (C‑444/12, not published, EU:C:2013:318, paragraph 25); and of 15 July 2015, Koela-N (C‑159/14, not published, EU:C:2015:513, paragraph 47).

²¹ See, in that regard, judgment of 9 February 2017, Euro Tyre (C‑21/16, EU:C:2017:106, paragraph 28).

²² See, inter alia, judgments of 21 June 2012, Mahagében and Dávid (C‑80/11 and C‑142/11, EU:C:2012:373, paragraphs 61, 62 and 65), and of 6 September 2012, Tóth (C‑324/11, EU:C:2012:549, paragraphs 42 to 44).

²³ See, to that effect, judgment of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraphs 48 and 49 and the case-law cited).

²⁴ See, to that effect, inter alia, judgments of 21 June 2012, Mahagében and Dávid (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 57), and of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 49). For the record, the Court reiterates regularly that 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, inter alia, judgments of 18 October 2012, Mednis (C‑525/11, EU:C:2012:652, paragraph 32 and the case-law cited), and of 16 March 2017, Bimotor (C‑211/16, not published, EU:C:2017:221, paragraph 27).

²⁵ That decision may be based on perfectly legitimate economic reasons, such as the presence of a selective or exclusive distribution circuit or particular properties of goods or services sold by the operator declared inactive.

²⁶ See, inter alia, judgments of 10 May 2012, Santander Asset ManagementSGIIC and Others (C‑338/11 to C‑347/11, EU:C:2012:286, paragraph 58); of 18 October 2012, Mednis (C‑525/11, EU:C:2012:652, paragraph 41); and of 22 January 2015, Balazs (C‑401/13 and C‑432/13, EU:C:2015:26, paragraph 49).

²⁷ Judgment of 22 January 2015, Balazs (C‑401/13 and C‑432/13, EU:C:2015:26, paragraph 50 and the case-law cited).

²⁸ See, inter alia, judgments of 27 February 2014, Transportes Jordi Besora (C‑82/12, EU:C:2014:108, paragraph 28), and of 22 January 2015, Balazs (C‑401/13 and C‑432/13, EU:C:2015:26, paragraph 53).

²⁹ See, to that effect, judgment of 22 January 2015, Balazs (C‑401/13 and C‑432/13, EU:C:2015:26, paragraph 51 and the case-law cited).

³⁰ As to the fundamental and, in principle, unlimited nature of the entitlement to deduct VAT paid upstream, see, inter alia, the judgment of 6 July 1995, BP Soupergaz (C‑62/93, EU:C:1995:223, paragraphs 16 to 18); and on observance (and infringement) of the principle of proportionality in the context of a measure systematically refusing entitlement to VAT deduction to taxpayers’ categories of expenses in order to prevent tax avoidance and evasion, see the judgment of 19 September 2000, Ampafrance and Sanofi (C‑177/99 and C‑181/99, EU:C:2000:470, paragraphs 60 to 62).

³¹ COM(2007) 502 final.

³² On the various characteristics of that procedure in the context of EU legal rules on access to documents of the institutions, see, inter alia, the Opinion of Advocate General Sharpston in Sweden v Commission (C 562/14 P, EU:C:2016:885, points 40 to 54).