C-16/95 Commission v Spain

JUDGMENT OF THE COURT (Fifth Chamber)

14 December 1995 *

In Case C-16/95,

Commission of the European Communities, represented by Blanca Rodriguez Galindo and Enrico Traversa, of its Legal Service, acting as Agents, with an address for service in Luxembourg at the office of Carlos Gómez de la Cruz, also of the Legal Service, Wagner Centre, Kirchberg,

applicant,

v

Kingdom of Spain, represented by Alberto Navarro Gonzalez, Director-General of Community Legal and Institutional Coordination, and Miguel Bravo-Ferrer Delgado, Abogado del Estado in the Community Legal Affairs Department, acting as Agents, with an address for service in Luxembourg at the Spanish Embassy, 4-6 Boulevard E. Servais,

defendant,

APPLICATION for a declaration that, by disregarding the six-month time-limit for the refund of value added tax to taxable persons not established in the territory of the country, in accordance with Article 7(4) of the Eighth Council Directive (79/1072/EEC) of 6 December 1979 on the harmonization of the laws of the Member States relating to turnover taxes — Arrangements for the refund of value added tax to taxable persons not established in the territory of the country

* Language of the case: Spanish.

has failed to fulfil its obligations under the EC Treaty,

THE COURT (Fifth Chamber),

composed of: D. A. O. Edward, President of the Chamber, J.-P. Puissochet, J. C. Moitinho de Almeida, P. Jann (Rapporteur) and M. Wathelet, Judges,

Advocate General: N. Fennelly, Registrar: R. Grass,

having regard to the Report of the Judge-Rapporteur,

after hearing the Opinion of the Advocate General at the sitting on 12 October 1995,

gives the following

Judgment

Grounds

1By application lodged at the Court Registry on 18 January 1995, the Commission of the European Communities brought an action under Article 169 of the EC Treaty for a declaration that, by disregarding the six-month time-limit for the refund of value added tax to taxable persons not established in the territory of the country, in accordance with Article 7(4) of the Eighth Council Directive (79/1072/EEC) of 6 December 1979 on the harmonization of the laws of the Member States relating to turnover taxes — Arrangements for the refund of value added tax to taxable persons not established in the territory of the country has failed to fulfil its obligations under the EC Treaty.

2Under Article 7(4) of the directive:

'Decisions concerning applications for refund shall be announced within six months of the date when the applications, accompanied by all the necessary documents required under this directive for examination of the application, are submitted to the competent authority ... Refunds shall be made before the end of the abovementioned period, at the applicant's request, in either the Member State of refund or the State in which he is established. In the latter case, the bank charges for the transfer shall be payable by the applicant.'

3On receipt of numerous complaints from traders in other Member States concerning delays in the refund of value added tax by the Spanish administration, the Commission forwarded them by letter of 5 March 1991 to the Spanish Permanent Representative's Office, requesting an explanation from the competent authorities. No official reply was received, whereupon the Commission decided, after telexing a reminder, to initiate the infringement procedure; in that connection, it requested the Spanish Government, by letter of 10 November 1992, to submit its observations on the matter within two months. At the request of the Spanish authorities, that time-limit was extended until 10 February 1993. No reply was received and on 28 March 1994 the Commission delivered a reasoned opinion, requesting the Member State to comply with the directive within two months of the date of receiving notification. Again no reply was received and the Commission accordingly lodged the present application.

4The Commission points out that, under the directive, refunds of value added tax are to be made within six months of the date when applications, supported by all the necessary documents required for their examination, are submitted. Despite the fact that the directive has been transposed into Spanish law, the Commission notes that refunds to taxable persons not established within the Kingdom of Spain are taking much longer than the prescribed period and may take as long as 12 months.

5In the Commission's view, therefore, this is a clear case of an infringement of Article 7(4) of the directive.

6The Spanish Government does not deny the infringement and explains that the delay in refunding value added tax to non-resident taxable persons is due to organizational problems and is not the result of a deliberate discriminatory intent. In that connection it points out that the national authorities are seeking ways of ensuring compliance with the six-month period referred to in the directive.

7Since the Commission has withdrawn that part of its application concerning the duty of cooperation laid down by Article 5 of the Treaty, there is no need to take a decision on that point.

8As regards Article 7(4) of the directive, it is established case-law that Member States are obliged to ensure that the provisions of a directive are applied exactly and in full (see, in particular, the judgment in Case C-287/91 Commission v Italy [1992] ECR I-3515, paragraph 7).

9It must therefore be held that, by disregarding the six-month time-limit for the refund of value added tax to taxable persons not established in the territory of the country, the Kingdom of Spain has failed to fulfil its obligations under Article 7(4) of the directive.

Costs

Costs

10Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Kingdom of Spain has failed in its submissions, it must be ordered to pay the costs.

Operative part

On those grounds,

THE COURT (Fifth Chamber)

hereby:

1. Declares that, by disregarding the six-month time-limit for the refund of value added tax to taxable persons not established in the territory of the country, the Kingdom of Spain has failed to fulfil its obligations under Article 7(4) of the Eighth Council Directive (79/1072/EEC) of 6 December 1979 on the harmonization of the laws of the Member States relating to turnover taxes — Arrangements for the refund of value added tax to taxable persons not established in the territory of the country;

2. Orders the Kingdom of Spain to pay the costs.

Edward Puissochet Moitinho de Almeida

Jann Wathelet

Delivered in open court in Luxembourg on 14 December 1995.

R. Grass D. A. O. Edward

Registrar President of the Fifth Chamber

OPINION OF ADVOCATE GENERAL

FENNELLY

delivered on 12 October 1995 ( *1 )

1This case arises out of delays in the reimbursement of value added tax to nonresident taxable persons by Spain. It is effectively undefended and an oral hearing has been dispensed with.

2The Commission has brought the present application pursuant to Article 169 of the EC Treaty, seeking the following reliefs:

a declaration that the Kingdom of Spain has failed to fulfil its obligations under the Treaty:

by not respecting the six-month period allowed for the reimbursement of value added tax to taxable persons not established in the territory of the country, as required by Article 7(4) of the Eighth Council Directive 79/1072/EEC of 6 December 1979, concerning arrangements for the refund of value added tax to taxable persons not established in the territory of the country;

by failing to comply with the duty of cooperation of Member States required by Article 5 of the Treaty;

to order the Kingdom of Spain to bear the costs of the proceedings.

3Article 7(4) of the Eighth Council Directive 79/1072/EEC (the ‘Eighth Directive’) ¹ provides as follows:

‘Decisions concerning applications for refund shall be announced within six months of the date when the applications, accompanied by all the necessary documents required under this Directive for examination of the application, are submitted to the competent authority referred to in paragraph 3. Refunds shall be made before the end of the abovementioned period, at the applicant's request, in either the Member State of refund or the State in which he is established. In the latter case, the bank charges for the transfer shall be payable by the applicant.

The grounds for refusal of an application shall be stated. Appeals against such refusals may be made to the competent authorities in the Member State concerned, subject to the same conditions as to form and time limits as those governing claims for refunds made by taxable persons established in the same State.’

4The Commission does not dispute that, in principle, the provisions of the Eighth Directive have been correctly implemented by Royal Decree No 1624/92 ² but, rather, its complaint concerns the extent to which the provisions of that Directive, though formally implemented into national law, are being applied in practice. The Commission's concern arises from the fact that from 1991 onwards it was in receipt of numerous complaints by undertakings established in other Member States to the effect that they were regularly failing to receive reimbursements within the six-month period and sometimes were subject to delays of up to twelve months. Furthermore, in many cases the Spanish tax authorities allegedly neglected even to inform those applicants, who had not been reimbursed at the end of the six-month period, of the state of advancement of their files.

5In the light of this apparent failure to comply with the provisions of Article 7(4) of the Eighth Directive, the Commission decided to initiate the pre-contentious stage of proceedings under Article 169 of the Treaty. By way of a formal letter of 10 November 1992, the Spanish Government was invited to submit its observations concerning these delays within two months. At the request of the Spanish authorities, this period was extended by the Commission to 10 February 1993.

6In the absence of any formal response from the Spanish Government to the formal letter, the Commission on 28 March 1994 sent a reasoned opinion pursuant to Article 169 of the Treaty requiring the Kingdom of Spain to comply with its terms within two months. Not having received a reply to that opinion within that two-month period, the Commission brought the present application which was registered at the Court on 18 January 1995.

7Following the written procedure, the Court decided, with the consent of the parties pursuant to its powers under Article 44a of the Rules of Procedure, to dispense with the necessity for an oral hearing in this case.

8On the basis of figures supplied by the Spanish authorities, at an informal meeting held with Commission officials on 14 July 1993, the Commission notes that since 1990 over 5000 files have been pending at the end of each year, with the figure for 1993 rising to 5479 of which 4915 concerned taxable persons resident within the Community. According to the figures given for Community residents, in more than 400 cases reimbursements were not made within the six-month period.

9The Commission submits that these figures demonstrate that the Kingdom of Spain has manifesdy failed to comply with its obligations under Article 7(4) of the Eighth Directive. It refers to the judgment of the Court in Commission v Italy ³ in which the Italian Republic was condemned for an identical violation of Community law. According to the Commission that case clearly established the principle that a Member State could not invoke defects in its administrative organization to shirk its obligations under the Eighth Directive.

10The Kingdom of Spain does not dispute that an infringement has occurred. In its defence it points to the major efforts that it has been making over several years to conform with the requirements of the Eighth Directive regarding the six-month period for processing applications for refunds. It submits that recent statistics demonstrate that these efforts have borne fruit to the effect that at present the maximum delays amount only to two and a half months and the average delay to 52 days. ⁴ It distinguishes the present situation from that treated by the Court in its judgment in the Italian case: whereas in that case the failure to meet the deadline set by the Eighth Directive was systematic, in the present case the delays in payment are merely occasional and marginal affecting only a small percentage of files, in fact 11.4%, and that the quantitative effects of the delay both in time and amount are not significant.

11The Commission also initially maintained that the uncooperative attitude of the Spanish authorities, in not formally responding to either the formal letter or the reasoned opinion and in not readily making available, prior to the 14 July 1993 meeting, the data and information sought by the Commission in relation to its administrative practices, constituted a breach by the Kingdom of Spain of its duty of cooperation pursuant to Article 5 of the Treaty. The Spanish Government in its defence rejected this allegation. It pointed to the informal contacts which had occurred with the Commission and, particularly, to that 14 July meeting as evidence of its cooperation during the non-contentious phase of these proceedings.

12In its reply the Commission rejects the submission advanced by the Spanish Government regarding the informal way in which it had cooperated with the Commission prior to the judicial phase of this case. Furthermore, in terms of the number of applications pending, the delays in their processing and the outstanding amounts involved, the Commission contradicts the Spanish contention that a significant improvement has taken place since 1993. None the less, the Commission, having regard to the explanations advanced by the Spanish Government in its defence, indicated that it was no longer necessary to maintain its application based on an infringement of Article 5 of the Treaty.

13In its rejoinder the Spanish Government does not contest the less than enthusiastic interpretation of the recent figures advanced in its defence which is rendered by the Commission in the reply. While maintaining its formal plea that the application should be rejected, it notes the Commission's recognition of its efforts fully to comply with requirements of the Eighth Directive and declares its intention not only to continue but also to intensify these efforts.

14The obligation imposed by Article 7(4) of the Eighth Directive is unconditional. Member States are obliged to ensure both the full and exact application of the provisions of any directive. ⁵ It follows, in my opinion, that a Member State may not seek to minimize its failure fully and exactly to comply with unambiguous obligations imposed by a directive by referring to the number of instances, albeit the majority, in which the national authorities have complied with the relevant provisions. It may well be, particularly in the light of the improvements which have been made, that the Spanish delays in reimbursing nonresident taxable persons do not amount to a systematic failure to comply with the terms of Article 7(4) of the Eighth Directive. At the same time the Commission is undoubtedly correct in submitting that a delay of 50 to 60 days over and above that permitted in the reimbursement of a not insignificant number of claims can only be regarded as a manifest infringement by the Kingdom of Spain of that article.

15In my opinion, the Kingdom of Spain should be condemned to bear the costs of these proceedings pursuant to Article 69(2) of the Rules of Procedure. While the Commission subsequently decided not to pursue one of the initial aspects of its application to the Court and while the Kingdom of Spain has asked for its costs, I do not believe that the Commission acted unreasonably or vexatiously within the meaning of Article 69(3), second indent, of the Rules of Procedure in bringing that matter to the Court. Prior to the Commission's very reasonable decision to drop its request concerning Article 5 of the Treaty, neither the allegation regarding pre-July 1993 delays in obtaining data and information from the Spanish authorities nor the failure of the Spanish Government to respond formally to the Commission at any stage of the non-contentious phase of these proceedings was convincingly explained.

Conclusion

16Accordingly I am of the opinion that the Court should:

declare that

by not respecting the six-month period allowed for the reimbursement of value added tax to taxable persons not established in the territory of the country as required by Article 7(4) of the Eighth Council Directive 79/1072/EEC of 6 December 1979, concerning arrangements for the refund of value added tax to taxable persons not established in the territory of the country,

the Kingdom of Spain has failed in its obligations under the Treaty;

order the Kingdom of Spain to bear the costs of these proceedings.

( *1 ) Original language: English.

¹ OJ 1979 L 331, p. 11.

² The provisions of Article 7(4) are implemented by Article 31 of this Decree, which is dated 29 December 1992.

³ Case C-287/91 [1992] ECR I-3515.

⁴ The statistics provided by the Kingdom of Spain in its defence cover tne period up to 20 February 1995.

⁵ See, c. g., Cases 91/79 and 92/79 Commission v Italy [1980] ECR 1099 and 1115, paragraph 6 of both judgments.