C-335/19 E. (VAT – Reduction of the taxable amount)

JUDGMENT OF THE COURT (First Chamber)

15 October 2020 ( *1 )

[Text rectified by order of 26 November 2020]

(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 90 – Reduction of the VAT taxable amount – Total or partial non-payment of the price – Conditions imposed by national legislation for the exercise of the right to reduction – Condition that the debtor must not be the subject of insolvency or winding-up proceedings – Condition that the creditor and the debtor must be subject to VAT)

In Case C‑335/19,

REQUEST for a preliminary ruling under Article 267 TFEU from the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland), made by decision of 6 December 2018, received at the Court on 24 April 2019, in the proceedings

E. sp. z o.o. sp. k.

v

Minister Finansów,

THE COURT (First Chamber),

composed of J.-C. Bonichot (Rapporteur), President of the Chamber, L. Bay Larsen, C. Toader, M. Safjan and N. Jääskinen, Judges,

Advocate General: J. Kokott,

Registrar: M. Aleksejev, Head of Unit,

having regard to the written procedure,

after considering the observations submitted on behalf of:

E. sp. z o.o. sp. k., by A. Bartosiewicz, conseiller fiscal,

the Polish Government, by B. Majczyna, acting as Agent,

the European Commission, by J. Jokubauskaitė and M. Siekierzyńska, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 4 June 2020,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 90 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).

2The request has been made in proceedings between E. sp. z o.o. sp. k. and the Minister Finansów (Minister for Finance, Poland) concerning tax rulings issued by that minister.

Legal context

EU law

3Article 63 of Directive 2006/112 provides:

‘The chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.’

4Article 73 of that directive states:

‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’

5Article 90 of Directive 2006/112 is worded as follows:

‘1. In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.

2. In the case of total or partial non-payment, Member States may derogate from paragraph 1.’

6Article 184 of that directive provides:

‘The initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled.’

7Article 185 of Directive 2006/112 is worded as follows:

‘1. Adjustment shall, in particular, be made where, after the VAT [value added tax] return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.

2. By way of derogation from paragraph 1, no adjustment shall be made in the case of transactions remaining totally or partially unpaid or in the case of destruction, loss or theft of property duly proved or confirmed, or in the case of goods reserved for the purpose of making gifts of small value or of giving samples, as referred to in Article 16.

However, in the case of transactions remaining totally or partially unpaid or in the case of theft, Member States may require adjustment to be made.’

8Under Article 273 of that directive:

‘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.

The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.’

Polish law

9Article 89a of the ustawa o podatku od towarów i usług (Law on the tax on goods and services) of 11 March 2004, in the version applicable to the dispute in the main proceedings (Dz. U. of 2011, No 177, item 1054) (‘the Law on VAT’), provides:

‘1. A taxable person may adjust the taxable amount and the VAT due in respect of a supply of goods or services made within the national territory where there are debts which it can show are likely to be irrecoverable. The adjustment also concerns the taxable amount and the amount of VAT relating to the portion of those debts which it claims are likely to be irrecoverable.

1a. A debt shall be regarded as likely to be irrecoverable where it has not been settled or assigned in any form whatsoever within 150 days of the expiry of the period for payment indicated in the contract or on the invoice.

2. Paragraph 1 shall apply where the following conditions are satisfied:

the supply of goods or services is made to a taxable person, as referred to in Article 15(1), who is registered as a taxable person for the purposes of VAT and who is not subject to insolvency or winding-up proceedings;

…

on the day preceding that on which the tax return containing the adjustment referred to in paragraph 1 is filed:

the creditor and the debtor are registered as taxable persons for the purposes of VAT;

the debtor is not subject to insolvency or winding up proceedings;

…

the period elapsed since the date of issue of the invoice establishing the debt, calculated from the end of the year in which it was issued, does not exceed two years;

…

3. The adjustment referred to in paragraph 1 may be made in the tax return for the period during which it has been established that the debt is likely to be irrecoverable, provided that the debt has not been settled or assigned in any form whatsoever on the day on which that tax return was filed by the creditor for that period.

4. Where, following the filing of the tax return recording the adjustment referred to in paragraph 1, the debt is settled or assigned in any form whatsoever, the creditor shall be required to increase the taxable amount and the amount of VAT chargeable in the return for the period during which that debt was settled or assigned. If only part of the debt has been settled, the taxable amount and the amount of VAT chargeable shall increase in proportion to that amount.

…’

10Article 89b of the Law on VAT states:

‘1. Where an invoice drawn up in respect of a supply of goods or services made within the national territory has not been settled within 150 days of the expiry of the time limit for payment specified in the contract or on the invoice, the debtor shall be required to adjust the VAT deduction relating to that invoice in a return for the period of 150 days following the expiry of the period for payment specified in the contract or on the invoice.

1a. Paragraph 1 shall not apply if the debtor has settled the debt at the latest on the last day of the period of 150 days following the expiry of the time limit for payment of that debt.

2. Where the debt has been settled in part within 150 days of the expiry of the time limit for payment specified in the contract or on the invoice, the adjustment shall be made to the input VAT relating to the unpaid part of the debt. The provisions of paragraph 1a shall apply mutatis mutandis.

…

4. Where the debt is paid after the adjustment referred to in paragraph 1, the taxable person shall have the right, in the return for the period in which the debt was settled, to increase the amount of input VAT referred to in paragraph 1. If only part of the debt has been settled, the input VAT may be increased up to the amount relating to that part.

…’

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

11E., a limited liability company incorporated under Polish law with its registered office in Poland and which is VAT registered, provides tax advice, inter alia, to VAT registered businesses which are not connected with it. The services it supplies in Poland are subject to the standard VAT rate.

12E. sent one of its customers a VAT invoice in respect of tax consultancy services taxable in Polish territory. At the time of the supply of the services, that customer was registered as a taxable person for VAT purposes and was not subject to insolvency or winding-up proceedings. However, that customer was wound up within 150 days of the expiry of the payment period, while remaining registered as a taxable person for VAT purposes. As that invoice was not settled or assigned in any form whatsoever, E. submitted to the Minister for Finance, before the end of the two-year period following the date on which the invoice was issued, a request for a tax ruling in order to ascertain whether, despite the fact that its customer was wound up after the supply of services concerned was carried out, it was entitled, on the ground that the other conditions laid down in Article 89a of the Law on VAT were satisfied, to a reduction in the VAT taxable amount on account of non-payment of the debt arising from that invoice.

13By a tax ruling of 12 January 2015, the Minister for Finance replied to E.’s request in the negative. The minister stated, inter alia, that Article 90 of Directive 2006/112 confers on taxable persons the right to reduce the VAT taxable amount only under conditions determined by each Member State, which the Republic of Poland laid down in Article 89a of the Law on VAT. Accordingly, if one of the conditions laid down in that article is not satisfied, the taxable person is not entitled to rely on the right to a reduction by deriving it directly from EU law.

14The referring court states that E. also requested three other tax rulings regarding compliance with the conditions laid down in Article 89a of the Law on VAT in various factual circumstances in which that article may be applied. It is apparent from the Court’s case file that those requests have also not given rise to favourable replies. The referring court states that it joined, on account of the connection between them, the four cases relating to the tax rulings at issue.

15E. unsuccessfully challenged those tax rulings before the Polish court with jurisdiction at first instance. It subsequently appealed on a point of law before the referring court, on the ground that the court of first instance had wrongly held that the provisions at issue of the Law on VAT did not infringe the requirements resulting from EU law.

16The referring court has doubts as to the discretion granted to the Member States to determine, in their national law, the conditions for the application of the provisions of Article 90 of Directive 2006/112. In the light, inter alia, of the judgments of 15 May 2014, Almos Agrárkülkereskedelmi (C‑337/13, EU:C:2014:328), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887), it is unsure whether the conditions laid down in Article 89a(2) of the VAT Law are lawful.

17The referring court states that the Polish legislature adopted, as a measure transposing the second subparagraph of Article 185(2) of Directive 2006/112, Article 89b of the Law on VAT in such a way as to impose on the debtor the obligation to adjust the amount of VAT deductible, as a corollary to the creditor’s right to reduce the taxable amount under the conditions laid down in Article 89a of the Law on VAT. Accordingly, the conditions laid down in Article 89a of the Law on VAT, in particular the condition that the creditor and the debtor are subject to VAT, ensure the symmetry of the tax mechanisms for the purposes of the proper collection of tax.

18The referring court also states that the condition that, under Article 89a(2), of the Law on VAT, the debtor must not be the subject of insolvency or winding-up proceedings ensures the coherence of the Polish legal system by preventing, inter alia, the order in which the claims of creditors are satisfied, laid down by the law of insolvency, from being adversely affected. Thus, in the event that the Court holds that Article 90(2) of Directive 2006/112 precludes conditions such as those laid down in Article 89a(2) of the Law on VAT, the referring court asks whether it must rule by disregarding the applicable national rules on insolvency.

19In those circumstances, the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

Do the provisions of … Directive 2006/112 …, – and in particular Article 90(2) thereof – having regard to the principles of fiscal neutrality and proportionality, permit the introduction into national law of a restriction on the ability to reduce the taxable amount in the event of partial or total non-payment by reason of the specific tax status of the debtor and the creditor?

In particular, does EU law preclude the introduction of a rule in national legislation which provides for the option of taking advantage of “bad debt relief” only on condition that on the date on which the service or goods are supplied and on the day preceding the date on which the tax return adjustment is filed in order to benefit from this relief:

the debtor is not subject to insolvency or liquidation proceedings,

the creditor and debtor are both registered as active VAT taxpayers?’

The questions referred

20By its two questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 90 of Directive 2006/112 precludes national legislation which makes the reduction of the VAT taxable amount subject to the condition that, on the day of the delivery of the goods or provision of the services and on the day preceding that on which the adjusted tax return seeking that reduction is filed, the debtor is still registered as a taxable person for the purposes of VAT and is not subject to insolvency or winding up proceedings and that, on the day preceding that on which the adjusted tax return is filed, the creditor is itself still registered as a taxable person for the purposes of VAT.

21In that regard, it should be noted that Article 90(1) of Directive 2006/112, which relates to cases of cancellation, refusal or total or partial non-payment or where the price is reduced after the supply which gave rise to the payment of VAT takes place, requires the Member States to reduce the taxable amount and, consequently, the amount of VAT payable by the taxable person whenever, after a transaction has been concluded, part or all of the consideration has not been received by the taxable person. That provision embodies one of the fundamental principles of Directive 2006/112, according to which the taxable amount is the consideration actually received and the corollary of which is that the tax authorities may not collect an amount of VAT exceeding the tax which the taxable person received (judgment of 8 May 2019, A-PACK CZ, C‑127/18, EU:C:2019:377, paragraph 17 and the case-law cited).

22In addition, under Article 273 of Directive 2006/112 Member States may impose the 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.

23Given that Article 90(1) and Article 273 of Directive 2006/112 do not, outside the limits laid down therein, specify either the conditions or the obligations which the Member States may impose, those provisions give the Member States a margin of discretion, inter alia, as to the formalities to be complied with by taxable persons vis-à-vis the tax authorities, before reducing the taxable amount (judgment of 6 December 2018, Tratave, C‑672/17, EU:C:2018:989, paragraph 32 and the case-law cited).

24It is, however, apparent from the case-law of the Court that measures to prevent tax evasion or avoidance may not, in principle, derogate from the rules relating to the taxable amount except within the limits strictly necessary for achieving that specific aim. They must have as little effect as possible on the objectives and principles of Directive 2006/112 and may not therefore be used in such a way that they would have the effect of undermining the neutrality of VAT (judgment of 6 December 2018, Tratave, C‑672/17, EU:C:2018:989, paragraph 33 and the case-law cited).

25Consequently, the formalities to be complied with by taxable persons in order to exercise, vis-à-vis the tax authorities, the right to reduce the taxable amount for VAT, must be limited to those which make it possible to provide proof that, after the transaction has been concluded, part or all of the consideration will definitely not be received. It is for the national courts to ascertain whether that is true of the formalities required by the Member State concerned (judgment of 6 December 2018, Tratave, C‑672/17, EU:C:2018:989, paragraph 34 and the case-law cited).

26Article 90(2) of Directive 2006/112 allows Member States to derogate from the rule referred to in Article 90(1) of that directive in situations of total or partial non-payment of the transaction price.

27If the total or partial non-payment of the transaction price occurs without the contract being cancelled or rescinded, the purchaser or customer remains liable for the agreed price and the seller or service provider still has, in principle, its claim, which it can rely on in legal proceedings. Since it is conceivable, however, that such a debt will become definitively irrecoverable, the EU legislature intended to leave it to each Member State to decide whether the situation of non-payment of the purchase price which, of itself, unlike cancellation or refusal of the contract, does not restore the parties to their original situation, leads to an entitlement to have the taxable amount reduced accordingly, under conditions to be determined by the Member State concerned, or whether such a reduction is not to be allowed in that situation (see, to that effect, judgment of 23 November 2017, Di Maura, C‑246/16, EU:C:2017:887, paragraph 16 and the case-law cited).

28As the Court has already held, that power to derogate is based on the notion that in certain circumstances and because of the legal situation prevailing in the Member State concerned, non-payment of consideration may be difficult to establish or may only be provisional (judgment of 8 May 2019, A-PACK CZ, C‑127/18, EU:C:2019:377, paragraph 19 and the case-law cited).

29It follows that the exercise of that power must be justified if the measures taken by the Member States for its implementation are not to undermine the objective of fiscal harmonisation pursued by Directive 2006/112, and it cannot allow the Member States to exclude altogether reduction of the VAT taxable amount in the event of non-payment (judgment of 8 May 2019, A-PACK CZ, C‑127/18, EU:C:2019:377, paragraph 20 and the case-law cited).

30In particular, although it is relevant that the Member States may counteract the uncertainty as to the non-payment of an invoice or the definitive nature of that non-payment, such a power of derogation cannot extend beyond that uncertainty, and in particular cannot extend to whether a reduction of the taxable amount may not be carried out in situations of non-payment (judgment of 8 May 2019, A‑PACK CZ, C‑127/18, EU:C:2019:377, paragraph 21 and the case-law cited)

31Moreover, to accept that it is possible for Member States to exclude any reduction of the VAT taxable amount would run counter to the principle of the neutrality of VAT, which means, inter alia, that the trader, as tax collector on behalf of the State, is entirely to be relieved of the burden of tax due or paid in the course of his economic activities which are themselves subject to VAT (judgment of 8 May 2019, A-PACK CZ, C‑127/18, EU:C:2019:377, paragraph 22 and the case-law cited).

32In the present case, the conditions laid down in Article 89a(2)(1) and (3)(a) and (b) of the Law on VAT are to be regarded both as the determination by the Republic of Poland, pursuant to Article 90(1) of Directive 2006/112, of the formalities which taxable persons must comply with in order to be able to exercise the right to reduce the VAT taxable amount in situations of total or partial non-payment of the price and, as regards taxable persons who, like E., cannot reduce that taxable amount because they do not fulfil those conditions, as the use by the Republic of Poland of the power to derogate laid down in Article 90(2) of Directive 2006/112. It follows that it is necessary to examine whether the restriction which those conditions entail for taxable persons such as E. is justified by the need to take into account the uncertainty as to whether the non-payment is definitive.

33As regards, in the first place, the condition which makes the reduction of the VAT taxable amount subject to the condition that the debtor is registered as a taxable person for VAT purposes on the day of delivery of the goods or provision of the services, it must be concluded that such a condition cannot be justified by the need to take account of the uncertainty as to whether the non-payment is definitive. Whether or not the debtor is subject to VAT on the day of delivery of the goods or provision of the services does not, in itself, allow the view to be taken that the debt is at risk of not being recovered. Particularly since, as the European Commission submits in its written observations, goods and services may be supplied to persons who are not subject to VAT, such as entities exempt from VAT or consumers, without that affecting the creditor’s obligation to collect VAT on behalf of the State and the right of that creditor to adjust the taxable amount a posteriori.

34As regards, in the second place, the condition making the reduction of the VAT taxable amount subject to the debtor still being registered as a taxable person for VAT purposes on the day preceding that on which the adjusted tax return is filed, it is important to point out, in addition to the fact referred to in the preceding paragraph of this judgment that the debtor is not necessarily a taxable person, that, in paragraph 28 of the judgment of 8 May 2019, A-PACK CZ, (C‑127/18, EU:C:2019:377), the Court held that Article 90 of Directive 2006/112 precludes national legislation which provides that a taxable person cannot reduce the taxable amount, in the case of total or partial non-payment, by its debtor, of a sum due in respect of a transaction subject to VAT, if the debtor is no longer a taxable person for the purposes of VAT.

35As regards, in the third place, the condition which makes the reduction of the VAT taxable amount subject to the creditor still being registered as a taxable person for VAT purposes on the day preceding that on which the adjusted tax return was filed, it must be concluded that that condition is not justified by the need to take into account uncertainty as to whether the non-payment is definitive. Since the existence of the debt and the debtor’s obligation to pay it do not depend on whether or not the creditor continues to be a taxable person, the fact that the creditor may or may not be a taxable person for VAT purposes on the day preceding that on which the adjusted tax return is filed does not, in itself, allow the view to be taken that there is a risk that the debt may not be recovered.

36The considerations set out in paragraphs 32 to 35 of this judgment are not invalidated by the argument set out by the Polish Government in its written observations that, having regard to the link between Article 90 of Directive 2006/112 and Articles 184 and 185 of that directive, namely the interdependence between the VAT payable by the creditor as the seller or service provider and the VAT deductible by the debtor as purchaser or recipient of the service, the requirement relating to the liability to pay VAT of the creditor and the debtor serves to ensure symmetrical reduction of the taxable amount for the purposes of the calculation of the VAT payable, laid down in Article 89a of the Law on VAT, and of the amount of VAT deductible, laid down in Article 89b of the Law on VAT, and therefore, the consistency and sound functioning of the VAT system, while observing the principle of neutrality.

37Although it is true that the Court has held that, while Article 90 of Directive 2006/112 governs the right of a supplier or provider to reduce the taxable amount where, after the transaction has been concluded, it does not receive the consideration stipulated or receives only a part of it, Article 185 of that directive concerns the adjustment of the deductions initially made by the other party to that transaction, therefore, those two articles represent the two sides of the same economic transaction and they should be interpreted consistently (judgment of 22 February 2018, T‑2, C‑396/16, EU:C:2018:109, paragraph 35).

38In particular, where a Member State provides, pursuant to Article 90(1) of Directive 2006/112, that, under certain conditions, a taxable person may reduce the taxable amount after the conclusion of a transaction, it must, in order to ensure the principle of fiscal neutrality, apply the second subparagraph of Article 185(2) of Directive 2006/112, so that the other party to that transaction, for its part, adjusts the amount of VAT deductible. That is, in fact, what the Polish legislature did when it adopted Articles 89a and 89b of the Law on VAT.

39However, the guarantee of a symmetrical reduction of the VAT taxable amount payable and the amount of VAT deductible does not depend on whether the two parties are liable to VAT. Neither the creditor’s right to reduce the taxable amount nor the obligation of the debtor to reduce the amount of VAT deductible depends on whether status as a taxable person is maintained.

40As regards, first, the creditor, it must be held that, where the creditor was a taxable person at the time when the goods were delivered or the services were supplied, the date on which, under Article 63 of Directive 2006/112, the chargeable event occurs and the tax becomes chargeable, the creditor remains liable for the VAT which that creditor collected on behalf of the State, irrespective of the fact that that creditor has in the meantime lost its status as a taxable person. Furthermore, in view of the fact that, as is apparent from paragraph 21 of this judgment, the taxable amount, as defined in Article 73 of Directive 2006/112, is the consideration actually received, that creditor may, even after having lost the status of taxable person, adjust the taxable amount so that it reflects the consideration actually received and so that the tax authorities do not collect as VAT an amount greater than that received by the creditor. Thus, the creditor’s right to reduce the taxable amount for the purposes of adjustment does not depend on the creditor’s continued status as a taxable person.

41As regards, secondly, the debtor, it should be noted that any person who is a taxable person and who is acting as such at the time of the purchase of goods or a supply of services has a right of deduction in respect of that property or service supplied and that, in the absence of fraud or abuse, and subject to any adjustments which may be made in accordance with the conditions laid down by Article 185 of Directive 2006/112, the right of deduction, once it has arisen, is retained (judgments of 2 June 2005, Waterschap Zeeuws Vlaanderen, C‑378/02, EU:C:2005:335, paragraph 32, and of 22 March 2012, Klub, C‑153/11, EU:C:2012:163, paragraph 46). Accordingly, it must be possible for the amount of deductible VAT to be adjusted by any person who no longer has the status of a taxable person but who had that status at the time the right of deduction arose. Thus, the debtor’s obligation to reduce the amount of deductible VAT does not depend on whether it retains its status as a taxable person.

42As regards the fact that, once adjustments have been made to the taxable amount and the VAT deductible, there is a risk that the VAT now owed by the debtor may not be paid to the State because the debtor is subject to insolvency or winding up proceedings, suffice it to note, as observed by the Advocate General in points 58 to 60 of her Opinion, that the correlation between the adjustment of the taxable amount and that of the VAT deductible does not necessarily mean that those adjustments must be made at the same time. Thus, that correlation does not prevent the Member States, in view of the absence of a temporal criterion in the second sentence of Article 185(2) of Directive 2006/112, from requiring adjustment of the deductible VAT as soon as the debtor is in default of payment and even before insolvency or winding-up proceedings are opened in respect of the debtor, so as to prevent any risk of financial loss for the State.

43Moreover, a requirement, such as that at issue in the main proceedings, that creditors and debtors are subject to VAT cannot be justified either by the prevention of irregularities or abuses or by reference to the provisions of Article 273 of Directive 2006/112.

44It should be noted, first, that the objective of preventing irregularities and abuses does not allow Member States to go against the purpose and scheme of Article 90(2) of Directive 2006/112, as set out in paragraphs 26 to 30 of this judgment, and to justify a derogation from Article 90(1) of that directive on grounds other than those relating to uncertainty as to the non-payment or the definitive nature of that non-payment (see, by analogy, judgment of 8 May 2019, A-PACK CZ, C‑127/18, EU:C:2019:377, paragraph 25).

45Secondly, in the light of the case-law referred to in paragraph 24 of this judgment, concerning Article 273 of Directive 2006/112, it does not appear from the file submitted to the Court that authorising a creditor, such as E., to reduce the taxable amount for VAT purposes despite the subsequent loss of its status as a taxable person or the status of the debtor as a taxable person would pose a particular risk of tax evasion or avoidance. That is all the more so given that, as has been recalled in paragraphs 40 and 41 above, the right to adjust the taxable amount and the obligation to adjust the amount of VAT deductible do not depend on whether both the creditor and the debtor retain their status as taxable persons. In any event, excluding any possibility of a reduction of the taxable amount in such circumstances and forcing such a creditor to pay an amount of VAT which it did not receive in the course of its economic activities goes beyond what is strictly necessary to achieve the objectives referred to in Article 273 of Directive 2006/112 (judgment of 8 May 2019, A-PACK CZ, C‑127/18, EU:C:2019:377, paragraph 27).

46As regards, in the fourth place, the condition making the reduction of the VAT taxable amount subject to the condition that the debtor is not subject to insolvency or winding up proceedings on the day of delivery of the goods or provision of the services and on the day preceding that on which the adjusted tax return is filed, it should be noted that, by depriving the creditor of its right to a reduction on the ground that it cannot be established that the debt was definitely irrecoverable before the outcome of the insolvency or winding-up proceedings, such a condition effectively takes account of the inherent uncertainty of whether the non-payment is definitive.

47However, it should be recalled that, in accordance with the principle of proportionality, which is one of the general principles of EU law, the means employed to implement Directive 2006/112 must be appropriate to achieve the objectives stated in that directive and must not go beyond what is necessary in order to attain them (judgment of 23 November 2017, Di Maura, C‑246/16, EU:C:2017:887, paragraph 25).

48It is clear that the uncertainty as to definitive non-payment could also be taken into account by granting the reduction of the VAT taxable amount when the creditor demonstrates, before the outcome of the insolvency or winding up proceedings, a reasonable probability that the debt will not be honoured, even if that taxable base is re-evaluated upwards in the event that payment nonetheless occurs. It would thus be for the national authorities to determine, with due regard to the principle of proportionality and subject to review by the courts, the evidence for a probable extended period of non-payment to be provided by the creditor, according to the specific features of the applicable national law. Such a rule would be an equally effective means of attaining the objective pursued, while being less onerous for the creditor, who pre-finances the VAT by collecting it on behalf of the State (see, by analogy, judgment of 23 November 2017, Di Maura, C‑246/16, EU:C:2017:887, paragraph 27).

49It should also be pointed out in that regard that, first, Article 89a(1a) of the VAT Law specifically lays down a temporal criterion at the end of which the debt is considered to be likely to be irrecoverable and, secondly, that, under Article 89a(4) of that law, the creditor must increase the taxable amount and the amount of VAT payable when, following the reduction in the taxable amount, the debt is eventually settled or assigned. Read together, those provisions in themselves constitute an appropriate measure which, as was pointed out in the preceding paragraph of this judgment, satisfies the requirements of the principle of proportionality.

50The finding made in paragraph 48 of this judgment applies a fortiori in the context of insolvency or winding-up proceedings, in which the certainty that the debt is definitively irrecoverable can, in principle, be established only after a lengthy period. Such a period is, in any event, such as to inflict on traders subject to that legislation, when they are confronted with non-payment of an invoice, a cash-flow disadvantage compared to their competitors in other Member States, which would clearly undermine the objective of fiscal harmonisation pursued by Directive 2006/112 (see, by analogy, judgment of 23 November 2017, Di Maura, C‑246/16, EU:C:2017:887, paragraph 28).

51[As rectified by order of 26 November 2020] As regards the fact, raised by the referring court, that the condition referred to in paragraph 46 above makes it possible to ensure the coherence of the Polish legal system by preventing, inter alia, the order in which creditors’ claims are satisfied in insolvency law being adversely affected, it should be recalled that, first, Article 90(1) of Directive 2006/112 fulfils the conditions for it to have direct effect (judgment of 15 May 2014, Almos Agrárkülkereskedelmi, C‑337/13, EU:C:2014:328, paragraph 34) and that, secondly, the principle of the primacy of EU law means that any national court, hearing a case within its jurisdiction, has, as an organ of a Member State, the obligation to disapply any provision of national law which is contrary to a provision of EU law with direct effect in the case pending before it (judgment of 24 June 2019, Popławski, C‑573/17, EU:C:2019:530, paragraph 61).

52It follows that, where a taxable person such as E. does not satisfy the conditions laid down by national legislation, which do not comply with Article 90(1) of Directive 2006/112, it may rely on that provision before the national courts against the State in order to obtain a reduction in the taxable amount (see, to that effect, judgment of 15 May 2014, Almos Agrárkülkereskedelmi, C‑337/13, EU:C:2014:328, paragraph 35), it being for the national court before which proceedings have been brought to set aside those conditions which do not comply with Article 90(1) of Directive 2006/112. The fact that, in so doing, other provisions of national law are affected is irrelevant, otherwise the obligation, for national courts to disapply a provision of national law which is contrary to a provision of EU law which has direct effect would be rendered meaningless, thereby undermining the primacy of EU law.

53In the light of all the foregoing considerations, the answer to the questions referred is that Article 90 of Directive 2006/112 must be interpreted as precluding national legislation which makes the reduction of the VAT taxable amount subject to the condition that, on the day of delivery of the goods or provision of the services and on the day preceding that on which the adjusted tax return seeking that reduction is filed, the debtor is registered as a taxable person for the purposes of VAT and is not the subject of insolvency or winding-up proceedings, and that, on the day preceding the date of filing of the adjusted tax return, the creditor is itself still registered as a taxable person for the purposes of VAT.

Costs

54Since 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 (First Chamber) hereby rules:

Article 90 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national legislation which makes the reduction of the taxable amount for the purposes value added tax (VAT) subject to the condition that, on the day of delivery of the goods or provision of the services and on the day preceding that on which the adjusted tax return seeking that reduction is filed, the debtor is registered as a taxable person for the purposes of VAT and is not the subject of insolvency or winding-up proceedings, and that, on the day preceding the date of filing of the adjusted tax return, the creditor is itself still registered as a taxable person for the purposes of VAT.

Signatures

[Signatures]

( *1 ) Language of the case: Polish.

ORDONNANCE DE LA COUR (première chambre)

26 novembre 2020 ( *1 )

« Rectification d’arrêt »

Dans l’affaire C‑335/19 REC,

ayant pour objet une demande de décision préjudicielle au titre de l’article 267 TFUE, introduite par le Naczelny Sąd Administracyjny (Cour suprême administrative, Pologne), par décision du 6 décembre 2018, parvenue à la Cour le 24 avril 2019, dans la procédure

E. sp. z o.o. sp. k.

contre

Minister Finansów,

LA COUR (première chambre),

composée de M. J.–C. Bonichot (rapporteur), président de chambre, M. L. Bay Larsen, Mme C. Toader, MM. M. Safjan et N. Jääskinen, juges,

avocat général : Mme J. Kokott,

greffier : M. A. Calot Escobar,

l’avocate générale entendue,

rend la présente

Ordonnance

Grounds

1Le 15 octobre 2020, la Cour (première chambre) a rendu l’arrêt E. (TVA – Réduction de la base d’imposition) (C‑335/19, EU:C:2020:829).

2Cet arrêt contient une erreur qu’il convient de rectifier d’office, en vertu de l’article 103, paragraphe 1, du règlement de procédure de la Cour.

Operative part

Par ces motifs, la Cour (première chambre) ordonne :

Le point 51 de l’arrêt du 15 octobre 2020, E. (TVA – Réduction de la base d’imposition) (C‑335/19, EU:C:2020:829), doit être rectifié comme suit :

« Quant au fait, soulevé par la juridiction de renvoi, que la condition mentionnée au point 46 du présent arrêt permet d’assurer la cohérence du système juridique polonais en évitant notamment qu’il soit porté atteinte à l’ordre de désintéressement des créanciers dans le droit de la faillite, il convient de rappeler que, d’une part, l’article 90, paragraphe 1, de la directive 2006/112 remplit les conditions pour produire un effet direct (arrêt du 15 mai 2014, Almos Agrárkülkereskedelmi, C‑337/13, EU:C:2014:328, point 34) et, d’autre part, le principe de primauté du droit de l’Union implique que tout juge national saisi dans le cadre de sa compétence a, en tant qu’organe d’un État membre, l’obligation de laisser inappliquée toute disposition nationale contraire à une disposition de droit de l’Union qui est d’effet direct dans le litige dont il est saisi (arrêt du 24 juin 2019, Popławski, C‑573/17, EU:C:2019:530, point 61). »

La minute de la présente ordonnance est annexée à la minute de l’arrêt rectifié. Mention de cette ordonnance est faite en marge de la minute de l’arrêt rectifié.

Signatures

Signatures

( *1 ) Langue de procédure : le polonais.

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 4 June 2020 ¹

(Request for a preliminary ruling – Tax law – Value added tax – Directive 2006/112/EC – Articles 90 and 185 – Reduction of the taxable amount – Total or partial non-payment of the price – Requirement that the recipient of the service is not insolvent or being liquidated – Corresponding adjustment of the initial input tax deduction – Time of adjustment)

I. Introduction

1Under what conditions can a taxable person adjust his tax liability if his contracting partner has not paid him? This is ultimately a question that the Court of Justice has been called upon to deal with on many occasions. ² It gives rise to a fundamental problem in an indirect tax system, especially in cases where two undertakings are involved. This is because the adjustment of the supplier’s tax liability corresponds to an adjustment of the input tax deduction already made in respect of the recipient of the supply. However, the latter adjustment is generally unsuccessful if the recipient of the supply is in insolvency proceedings or has even already been liquidated. The State is left empty-handed in such cases.

2The Polish legislature has precluded this risk to tax revenue by allowing the service provider’s tax liability to be adjusted only if the service recipient is not subject to insolvency proceedings or in liquidation at the time of the adjustment. The service provider therefore bears the risk of being liable for tax that he has not actually been able to collect. The Court must decide whether this is reconcilable with his function of ‘tax collector on behalf of the State’. ³

3However, the legitimate interest of Poland and the European Union in preventing a loss of value added tax (VAT) may be taken into account in other ways. The Court should therefore use this request for a preliminary ruling as an opportunity to express its view on the point in time at which the input tax deduction in respect of the recipient of the supply is adjusted if he has not yet paid the consideration and is therefore not subject to the burden of any VAT.

II. Legal framework

A. EU law

4The EU-law framework is formed by Articles 73, 90, 184, 185 and 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’). ⁴

5Article 73 of the VAT Directive provides for the taxable amount:

‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’

6Article 90 of the VAT Directive provides for the subsequent adjustment of the taxable amount and the legal consequences for the supplier:

‘1. In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.

2. In the case of total or partial non-payment, Member States may derogate from paragraph 1.’

7Articles 184 and 185 of the VAT Directive concern the adjustment of deductions of the recipient of the supply in the case of subsequent changes. Article 184 provides:

‘The initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled.’

8Article 185 of the VAT Directive reads as follows:

‘1. Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.

2. By way of derogation from paragraph 1, no adjustment shall be made in the case of transactions remaining totally or partially unpaid or in the case of destruction, loss or theft of property duly proved or confirmed, or in the case of goods reserved for the purpose of making gifts of small value or of giving samples, as referred to in Article 16.

However, in the case of transactions remaining totally or partially unpaid or in the case of theft, Member States may require adjustment to be made.’

9Article 273 of the VAT Directive provides for options for the Member States inter alia to combat evasion:

‘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.

The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.’

B. Polish law

10These requirements of EU law were transposed into Polish law by the Ustawa o podatku od towarów i usług (Law on tax on goods and services), of 11 March 2004 (Dz. U. 2011, No 177, heading 1054, as amended, ‘the Law on VAT’).

11Article 89a of the Law on VAT reads:

‘1. A taxable person may adjust the taxable amount and the amount of output tax arising from the supply of goods or services within the territory of Poland with respect to accounts receivable which are deemed probably unrecoverable. The adjustment shall also apply to the taxable amount and the amount of tax attributable to the part of the accounts receivable which are deemed probably unrecoverable.

1a. Accounts receivable shall be deemed probably unrecoverable where the accounts receivable have not been settled or disposed of in any manner within 150 days of the payment date stipulated in the agreement or invoice.

2. The provision of paragraph 1 shall apply where the following conditions are met:

the supply of goods or services has been made for the benefit of a taxable person referred to in Article 15(1) who is registered as an active VAT taxpayer and is not subject to insolvency or liquidation proceedings;

…

on the day preceding the date of filing the tax return in which the adjustment referred to in paragraph 1 is made:

the creditor and debtor are both registered as active VAT taxpayers;

the debtor is not subject to insolvency or liquidation proceedings;

…

less than two years have elapsed since the end of the year in which the invoice documenting the accounts receivable was raised;

3. The adjustment referred to in paragraph 1 may be made in the settlement for the period in which the accounts receivable are deemed probably unrecoverable provided that the accounts receivable have not been settled or disposed of in any manner by the date on which the creditor files the tax return for that period.

4. Where, following the filing of the tax return in which the adjustment referred to in paragraph 1 is made, the amount due is settled or disposed of in any manner, the creditor shall increase the taxable amount and the amount of output tax in the settlement for the period in which the amount due is settled or disposed of. Where the amount due is settled in part, the taxable amount and the amount of output tax shall be increased in proportion to the amount settled.

5. When filing the tax return in which the adjustment referred to in paragraph 1 is made, the creditor shall notify its competent tax office of that adjustment, stating the amounts of the adjustment and the details of the debtor.

…

7. The provisions of paragraphs 1 to 5 shall not apply if the creditor and debtor are linked by a relationship of a kind referred to in Article 32(2) to (4).

8. The minister responsible for public finances shall determine, by way of a regulation, the template for the notification referred to in paragraph 5 …’

12Article 89b of the Law on VAT provides:

‘1. In the event of non-payment of the amount due arising from the invoice which documents the supply of goods or services in the territory of Poland within 150 days of the date stipulated in the agreement or invoice for payment, the debtor shall adjust the deducted amount of VAT resulting from that invoice in the settlement for the period in which 150 days elapsed from the expiry of the date stipulated in the agreement or invoice for payment.

1a. The provision of paragraph 1 shall not apply if the debtor has paid the amount due at the latest on the last day of the settlement period in which 150 days elapsed from the expiry of the date for payment of that amount.

…

2. In the event of partial payment of the amount due within 150 days of the expiry of date stipulated in the agreement or invoice for payment, the adjustment shall apply to the input VAT attributable to the unpaid part of the amount due. The provision of paragraph 1a shall apply mutatis mutandis.

…

4. Where the amount due is settled following the adjustment referred to in paragraph 1, the taxable person shall have the right to increase the amount of input VAT in the return for the period in which the amount due is settled by the amount of tax referred to in paragraph 1. Where the amount due is settled in part, the input VAT may be increased in proportion to the amount settled.

…

6. Where it is found that a taxable person has breached the obligation specified in paragraph 1, the head of the tax office or the fiscal control authority shall determine an additional tax liability of 30% of the amount of the tax arising from unpaid invoices which has not been adjusted in accordance with paragraph 1. No additional tax liability shall be determined in respect of natural persons who, in connection with the same act, are liable for a petty fiscal offence or for a fiscal offence.’

III. Facts and preliminary ruling proceedings

13The dispute underlying the request for a preliminary ruling is based on an application for an individual tax ruling submitted by E. sp. z o.o. (the applicant in the main proceedings, ‘the applicant’) to the Minister Finansów (Minister for Finance, Poland).

14The applicant is registered as an active VAT taxpayer. It provides tax advice services to, inter alia, third party economic operators for consideration. The applicant issued a VAT invoice to one of them for tax advice services supplied which were subject to taxation in the territory of Poland. At the date on which the service had been supplied, the client was registered as an active VAT taxpayer and was not subject to insolvency proceedings and was not in liquidation. Up until the date of submitting the application for an individual tax ruling, the applicant had not received the payment that had been invoiced. More than two years had not elapsed from the date on which the invoice had been issued. However, the prescribed payment date was exceeded by more than 150 days.

15At the date on which the application for an individual tax ruling was submitted, the debtor of the accounts receivable was still registered as an active VAT taxpayer, but was now in liquidation. In the application for an individual tax ruling, the applicant sought to ascertain whether the taxable amount and therefore the output tax arising from the supply of services in the territory of Poland could be adjusted in the circumstances described.

16By decision of 12 January 2015, the Minister for Finance held that this was not possible. He based this on the ground that, under point 3 of Article 89a(2) of the Law on VAT, the fact that the debtor of the accounts receivable was in liquidation precluded an adjustment of the taxable amount and therefore the output tax. As the rule in Article 90 of the VAT Directive was optional for the Member States, Article 89a of the Law on VAT did not infringe Article 90 of the VAT Directive.

17The applicant brought an action against this before the Wojewódzki Sąd Administracyjny w Szczecinie (Regional Administrative Court, Szczecin, Poland). The company brought an appeal in cassation against the judgment dismissing the action. The Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) stayed the proceedings and referred the following two questions to the Court of Justice for a preliminary ruling under Article 267 TFEU:

Do the provisions of [the VAT Directive] – and in particular Article 90(2) thereof – having regard to the principles of fiscal neutrality and proportionality, permit the introduction into national law of a restriction on the ability to reduce the taxable amount in the event of partial or total non-payment by reason of the specific tax status of the debtor and the creditor?

In particular, does EU law not preclude the introduction of a rule in national legislation which provides for the option of taking advantage of “bad debt relief” only on condition that on the date on which the service or goods are supplied and on the day preceding the date on which the tax return adjustment is filed in order to benefit from this relief:

the debtor is not subject to insolvency or liquidation proceedings,

the creditor and debtor are both registered as active VAT taxpayers?’

18The applicant, Poland and the European Commission submitted written observations in the proceedings before the Court.

IV. Legal assessment

A. The questions referred

19By these two questions, which, in line with the Commission’s opinion, can be answered together, the referring court asks how Article 90 of the VAT Directive is to be interpreted. Specifically, it would like to ascertain whether that article precludes a provision such as that in Article 89a of the Law on VAT. Pursuant to the latter provision, an adjustment of the taxable amount despite the fact that the agreed consideration has not been paid is excluded in the event that the recipient of the supply is insolvent or not registered.

20However, in so far as the court’s questions relate to the fact that the debtor of the account receivable (that is to say the recipient of the supply) is no longer registered as an active taxable person at the time of the adjustment, the questions are hypothetical and therefore inadmissible. ⁵ According to the facts communicated to the Court of Justice, the applicant’s debtor was a taxable person registered as active both at the time of supply of the service and at the time of the application. The questions are admissible only in so far as they relate to the fact that the recipient of the supply is already in insolvency or liquidation proceedings.

21The answers to these questions hinge decisively on the purpose of Article 90 of the VAT Directive (see B). This limits the possibilities for Member States to restrict an adjustment of the taxable amount. Even though the Court did once state in a ruling that, in the case of non-payment of the purchase price, Article 90(2) of the VAT Directive allows Member States to decide ‘whether such a reduction is not allowed in that situation’, ⁶ that decision has been further developed by subsequent rulings ⁷ (see C). Thus, Member States must always justify restrictions on the adjustment of the taxable amount by the taxable supplier (see D).

22On closer examination, however, the referring court’s main concern is the question of whether and how the national legislature can eliminate, in compliance with EU law, a systemic risk of loss of VAT revenue arising in cases involving non-payment and the subsequent insolvency of the recipient of the supply. In addition, Article 185 of the VAT Directive is discussed (see E).

B. The purpose of adjusting of the taxable amount

23There should be agreement on the starting point: VAT must indeed be paid in any event by the supplier. However it is settled case-law of the Court that VAT is an indirect tax on consumption to be borne by the end consumer. ⁸ In this respect, the taxable traders simply act ‘as tax collectors for the State and in the interest of the public exchequer’. ⁹ The tax liability of the supplier thus has a purely technical function that results solely from the indirect way in which VAT is collected.

24From a substantive perspective, the aim of VAT as a general tax on the consumption of goods is to impose a tax not on the supplier, but on consumer capacity, which is demonstrated by consumers’ expenditure of assets to procure a consumable benefit. ¹⁰ This is particularly clear from the provisions of Article 73 of the VAT Directive. According to that article, the taxable amount consists of everything which constitutes the consideration which ‘has been or is to be obtained’ by the supplier (that is to say the service provider).

25Consequently, the Court ¹¹ has explicitly ruled on several occasions that ‘the taxable amount serving as a basis for the VAT to be collected by the tax authorities cannot exceed the consideration actually paid by the final consumer which is the basis for calculating the VAT ultimately borne by him’.

26If the recipient of the supply does not pay the supplier, the supplier therefore does not substantively owe any VAT. The basis for charging VAT is not applicable because the trader has not ultimately provided any goods or services for consideration within the meaning of Article 2 of the VAT Directive.

27In that regard, the referring court’s fears that an adjustment of the taxable amount in the event of non-payment of the price would result in untaxed final consumption are unfounded. Going beyond the deeming provisions in Articles 16 and 26 of the VAT Directive, without payment there is also no ‘final consumption’ to be taxed, because the recipient has not spent any assets on it.

28A distinction must be made between this substantive basis for charging tax and the method of taxation. Pursuant to Article 63 of the VAT Directive, the VAT claim arises when the goods or the services are supplied. It is not decisive that the recipient has also paid the consideration (‘debit principle’). This method of charging for VAT is clearly based on the assumption that the agreed consideration is generally paid promptly after a supply of goods or services.

29If, however, as a matter of substantive law only the actual price for goods or services paid by the recipient is taxed, but the method of taxation is based on the agreed price, the two systems must be reconciled at some point. This is ensured by Article 90(1) of the VAT Directive, according to which the initial tax debt of the supplier must be corrected accordingly.

30Accordingly, it corresponds to the consistent case-law of the Court that Article 90(1) of the VAT Directive is an expression of a fundamental principle of the VAT Directive, according to which the taxable amount is the payment actually received. The corollary of this principle is that the tax authorities may not charge an amount of VAT exceeding the tax paid by the taxable person. ¹²

31Article 90(1) of the VAT Directive consequently represents the necessary counterpart to the method of taxation in Article 63 of the VAT Directive (‘debit principle’). ¹³ It obliges the Member State to reduce the taxable amount accordingly. ¹⁴

C. Member States do not have the power to exclude a reduction of the taxable amount in the case of non-payment

32The Court in its judgment in Goldsmiths therefore decided that a deviation from this fundamental principle in Article 90(1) of the VAT Directive must be justified, so that measures adopted by the Member States on the basis of Article 90(2) of the VAT Directive do not undermine the objective of tax harmonisation. ¹⁵

33However, in the judgment in Almos Agrárkülkereskedelmi – on which the arguments of the referring court and in particular Poland are based – the Court stated that, in the event of non-payment of the price, taxable persons could not rely on a right to reduction of their taxable amount for VAT under Article 90(1) of the VAT Directive if the Member State concerned intended to apply the derogation provided for in Article 90(2) of that directive. ¹⁶ In that judgment, the Seventh Chamber stated, moreover, that the VAT Directive ‘intended to leave it to each Member State to determine whether the situation of non-payment of the purchase price … leads to an entitlement to have the taxable amount reduced accordingly under conditions it determines, or whether such a reduction is not allowed in that situation’. ¹⁷

34However, as already stated by the Court in its ruling in Di Maura ¹⁸ and in subsequent rulings, ¹⁹ that judgment must not be interpreted as meaning that it is possible for Member States to exclude any reduction of the VAT taxable amount.

35Although Article 90(2) of the VAT Directive permits the Member States to derogate from paragraph 1 in the case of total or partial non-payment, the legislative texts for the predecessor provision, the content of which is identical, show, first, that this power was provided for only in order to avoid abuses. ²⁰ Secondly – as the Court has already held ²¹ – this power to derogate, in situations of total or partial non-payment, is based solely on the notion that in certain circumstances and because of the legal situation prevailing in the Member State concerned, non-payment of consideration may be difficult to establish or may only be temporary.

36It follows that the exercise of such a power to derogate must be justified, so that the measures taken by the Member States for its implementation do not undermine the objective of fiscal harmonisation pursued by the VAT Directive. ²² It also follows that the power to derogate cannot allow the Member States to exclude altogether reduction of the VAT taxable amount in the event of non-payment. ²³

37To accept that it is possible for Member States to exclude any reduction of the VAT taxable amount would also run counter to the principle of the neutrality of VAT. This would mean, inter alia, that the trader, as tax collector on behalf of the State, is entirely to be relieved of the burden of tax due or paid in the course of his economic activities, themselves subject to VAT. ²⁴ In addition, as I have already stated in my opinion in the Di Maura case, ²⁵ the fundamental rights of the taxable supplier must be considered. They may be interfered with only in a proportionate manner (second sentence of Article 52(1) of the Charter of Fundamental Rights of the European Union). ²⁶

38In this respect, it is possible to infer from the case-law of the Court a certain differentiation as to whether and how restrictions to the adjustment of the taxable amount within the meaning of Article 90 of the VAT Directive can be justified. Specifically, the Court distinguishes between substantive aspects (for derogations ²⁷ within the meaning of Article 90(2) of the VAT Directive) and formal aspects (for conditions ²⁸ within the meaning of Article 90(1) of the VAT Directive). However, both derogations and conditions provided for by Member States must be proportionate. ²⁹

39In this respect, a substantive derogation in the case of non-payment of the price must relate to the uncertainty caused by the fact that ‘non-payment of consideration may be difficult to establish or may only be temporary’. ³⁰

40From a formal perspective, however, conditions of a more general nature may be laid down to ensure that the correct amount of tax is collected and fraud is prevented. In this respect, the Court has already ruled, for example, that acknowledgement of receipt of a correcting invoice ³¹ by the recipient of the supply or prior notice of the adjustment of the taxable amount ³² to the recipient of the supply may, in principle, be possible conditions for a reduction of his own tax liability.

D. Justification for restricting an adjustment of the taxable amount

41In the present case, the Polish legislature made the adjustment of the taxable amount (and thus the tax liability) of the supplier conditional on the fact that the recipient of the supply is still a registered taxpayer who is neither subject to insolvency proceedings nor in liquidation both at the time of supply of the service and on the day preceding the date of filing the adjusted tax return.

42This does not appear to be merely a formal, general condition for the adjustment of the taxable amount by the taxable supplier. First, the latter has no influence whatsoever on this characteristic, which is why it cannot be considered a mere formality. Secondly, this requirement excludes an adjustment of the taxable amount per se if supplies of goods or services are made to a trader which, although still in existence, is in insolvency or liquidation proceedings.

43However, the VAT Directive is based on the presumption that such supplies and services are subject to tax. Accordingly, Article 90 of the VAT Directive (see point 30 above) is based, as a fundamental principle, on the presumption that the taxable amount of such supplies of goods and services may be adjusted where all or part of the consideration is not paid. Contrary to the view taken by Poland, the exclusion of this possibility for such supplies and services is therefore not a merely formal condition but a substantive derogation.

44In order to be permissible, therefore, such a substantive derogation in the case of non-payment of the price would have to relate to the uncertainty caused by the fact that ‘non-payment of consideration may be difficult to establish or may only be temporary’. ³³ This is not the case, however.

45As already stated by the Court in the A-PACK CZ s.r.o. ³⁴ case, and as rightly emphasised by the Commission also, the fact that the recipient of the supply is in insolvency proceedings is rather evidence of the definitive nature of the non-payment. The same applies to the fact that the recipient of the supply is in liquidation. It is therefore neither possible nor proportionate to restrict an adjustment of the taxable amount in cases where it is almost certain that the agreed consideration will definitively not be paid.

46This is all the more true given that, under Polish law, a basic requirement for an adjustment of the taxable amount is a period of 150 days during which no payment has been made despite having fallen due. The question of whether pre-financing of VAT over a period of five months can be regarded as proportionate in any case can be left open here. The reason for this is that, in a case where the consideration has not been paid for 150 days and the recipient of the supply is already in liquidation, there is no longer any uncertainty as to the definitive nature of the non-payment.

47Even measures which the Member States may adopt under Article 273 of the VAT Directive to ensure the correct collection of the tax and to prevent evasion must likewise not go further than is necessary to attain such objectives and must not undermine the neutrality of VAT. ³⁵ As already held by the Court, strict liability on the part a taxable person as from a specific date (in this case, the opening of the insolvency or liquidation proceedings) would go beyond what is necessary to preserve the public exchequer’s rights. ³⁶ There would be strict liability, however, if the taxable supplier could not adjust his tax liability despite non-payment of the price.

48Furthermore, it is not clear how the restriction of an adjustment of the tax liability as from the point at which a specific event beyond the control of the supplier occurs is supposed to be capable of combating VAT abuse.

49In conclusion, therefore, Article 90 of the VAT Directive does not allow Member States to exclude the adjustment of the tax liability of the taxable supplier because the recipient of the supply is already subject to insolvency proceedings or in liquidation at the time of the supply or the time of the adjustment.

E. Eliminating the risk of loss of tax revenue

50In essence, the Polish legislature’s primary concern – as pointed out by the referring court – is to eliminate the risk of loss of tax revenue due to the recipient’s lack of solvency. Poland’s arguments in the present proceedings are therefore essentially based on the functioning of the VAT system and the protection of the financial interests of Poland and also the Union.

51This is a common problem that exists in many countries. Who should bear the insolvency risk of the recipient of the supply in respect of VAT – the State or the supplier? The reason for this is that if the recipient of the supply is a taxable person himself, the change in the taxable amount of the supplier actually leads to an adjustment of input tax for the recipient of the supply pursuant to Article 185 of the VAT Directive. The latter must also adjust the incorrect input tax deduction – which corresponds to the adjusted tax liability of the supplier. The State then has a tax claim against the recipient of the service.

52However, this mechanism is unsuccessful if the recipient of the supply is in insolvency proceedings or in liquidation. In such cases, there will generally no longer be sufficient funds available to reimburse the State with the amount of the deduction that has already been claimed. The referring court takes the view that the adjustment of the tax liability by the supplier even ‘interferes with the insolvency proceedings in an impermissible manner’. This meant that, at the expense of the tax authorities, a creditor of the debtor is satisfied and compensated by the State. This delineates the risk of a loss of tax revenue for the Member State, even if the line of argument largely comes to nothing. The supplier is also not satisfied. His claim is also lost, as are those of the other creditors. Only the State acts as a creditor in respect of the input tax adjustment claim, which, however, is generally worthless.

53Ultimately, however, this risk of loss of tax revenue, that is to say the risk of harm to the financial interests of the Union and Poland, results solely from a very literal interpretation of Article 167 of the VAT Directive. The wording of this provision links the right of deduction of the recipient of the supply solely to the incurring of tax liability by the supplier. Therefore, the recipient of the supply already has a right of deduction before payment is made (‘immediate deduction’). ³⁷

54This immediate deduction should be applied in order to limit the risk of default for the State and thus take account of the interests of the Member States and the Union in the effective collection of VAT. This is because Member States are free to adjust the deduction promptly in the event of non-payment of the consideration rather than reverting to using the recipient of the supply as an ‘insolvency guarantor’.

55The rule in Article 167 of the VAT Directive is based on the notion that the recipient of a supply of goods or services will pay for it promptly and will therefore also be charged input tax promptly. There is therefore a presumption that VAT will be charged promptly. The wording does not indicate whether, on the other hand, the intention is for relief to be provided by means of deductions over a period of years even if no VAT has been charged.

56That would also run counter the purpose of the deduction system. This is because the deduction system allows the deduction of only the sums paid by each taxable person to his own suppliers in respect of VAT on the corresponding transaction. ³⁸ Before such a payment is made, no tax has been charged ³⁹ and the ‘refund’ of input tax that has not yet been paid is merely a form of subsidy. ⁴⁰

57Furthermore, such a right of deduction existing for several years until the supplier adjusts the tax liability would be open to abuse by the recipient of the supply. This would be contrary to the principles underlying Article 273 of the VAT Directive, which allows Member States to provide for obligations to ensure that the correct amount of tax is collected. Such an unlimited right of deduction without there being a VAT burden is inconsistent in particular with the spirit of Article 325 TFEU, according to which the Member States must protect the financial interests of the Union.

58In particular, Article 185(1) of the VAT Directive provides for an adjustment of deductions inter alia where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted. In the case of non-payment, Member States may even require adjustment to be made (paragraph 2). This possibility is detached from the circumstance of whether the supplier has already adjusted his tax liability. Thus, pursuant to the second sentence of Article 185(2) of the VAT Directive, Member States may provide that the recipient of a supply who has not paid the consideration and has therefore not been charged VAT is obliged to adjust his deduction at the earliest opportunity pursuant to Article 185 of the VAT Directive.

59In that context, the end of a tax period is a reasonable period in which to verify the presumption underlying the immediate deduction of input tax that the recipient of the supply will pay in the near future. At the time of the next tax return for the next tax period (generally one month later), it will be clear whether the input tax deduction made has been made in error up to now from a substantive perspective (as no VAT has been charged). This confines the systemic risk of a loss of tax revenue to that one tax period.

60In this respect, the tax creditor (in this case Poland) does not have to wait until the recipient of the supply is in insolvency proceedings or in liquidation, but can already anticipate the risk to tax revenue at an earlier point.

61If the recipient of the supply does actually pay the consideration to the taxable supplier at a later point, there is a new change in the factors used to determine the amount to be deducted. Therefore, a new adjustment is made pursuant to Article 185(1) of the VAT Directive. This ensures that the recipient of the supply is relieved of the burden of VAT as soon as it becomes a cost factor for him. This is perfectly in line with the principle of neutrality of VAT as developed and interpreted by the Court. ⁴¹

62Therefore, the solution to the problem in cases involving the non-payment of the consideration between two taxable persons, as described by the referring court, is not to be found in a restriction of the adjustment of the tax liability for the taxable supplier, but in a more rapid correction of an input tax deduction without the recipient of the supply being charged input tax.

V. Conclusion

Conclusion

63I therefore propose that the Court answer the questions referred for a preliminary ruling by the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) as follows:

Article 90 of Council Directive 2006/112/EC 28 November 2006 on the common system of value added tax does not allow Member States to exclude the adjustment of the tax liability of the taxable supplier because the recipient of the supply is already subject to insolvency proceedings or in liquidation at the time of the supply or the time of the adjustment. However, in the case of transactions remaining partially unpaid, Article 185(2) of that directive does allow Member States to require that the input tax deduction be adjusted in the next tax period.

¹ Original language: German.

² In this regard, see for instance judgments of 3 July 2019, UniCredit Leasing (C‑242/18, EU:C:2019:558), of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377), of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989), of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887), of 2 July 2015, NLB Leasing (C‑209/14, EU:C:2015:440), of 3 September 2014, GMAC UK (C‑589/12, EU:C:2014:2131), of 15 May 2014, Almos Agrárkülkereskedelmi (C‑337/13, EU:C:2014:328), of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40), and of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339).

³ In this regard see, inter alia, judgments of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 23), of 21 February 2008, Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 21), and of 20 October 1993, Balocchi (C‑10/92, EU:C:1993:846, paragraph 25).

⁴ OJ 2006 L 347, p. 1.

⁵ Regarding this legal consequence, see, for example: judgment of 14 February 2019, Vetsch Int. Transporte (C‑531/17, EU:C:2019:114, paragraph 45).

⁶ Judgment of 15 May 2014, Almos Agrárkülkereskedelmi (C‑337/13, EU:C:2014:328, paragraph 25).

⁷ Particularly by the judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20 et seq.), of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 35 et seq.), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 20 et seq.).

⁸ Judgments of 7 November 2013, Tulică and Plavoşin (C‑249/12 and C‑250/12, EU:C:2013:722, paragraph 34), and of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400, paragraph 19), and order of 9 December 2011, Connoisseur Belgium (C‑69/11, not published, EU:C:2011:825, paragraph 21).

⁹ Judgments of 21 February 2008, Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 21), and of 20 October 1993, Balocchi (C‑10/92, EU:C:1993:846, paragraph 25).

¹⁰ See judgments of 3 March 2020, Vodafone Magyarország (C‑75/18, EU:C:2020:139, paragraph 62), of 11 October 2007, KÖGÁZ and Others (C‑283/06 and C‑312/06, EU:C:2007:598, paragraph 37, ‘it is proportional to the price charged by the taxable person in return for the goods and services which he has supplied’), and of 18 December 1997, Landboden-Agrardienste (C‑384/95, EU:C:1997:627, paragraphs 20 and 23).

¹¹ Judgment of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400, paragraph 19), and, similarly, also the judgments of 16 January 2003, Yorkshire Co-operatives (C‑398/99, EU:C:2003:20, paragraph 19), and of 15 October 2002, Commission v Germany (C‑427/98, EU:C:2002:581, paragraph 30), and also the Opinion of Advocate General Léger in MyTravel (C‑291/03, EU:C:2005:283, point 69).

¹² Judgments of 3 July 2019, UniCredit Leasing (C‑242/18, EU:C:2019:558, paragraph 37), of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 17), of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989, paragraph 29), of 20 December 2017, Boehringer Ingelheim Pharma (C‑462/16, EU:C:2017:1006, paragraph 32), of 2 July 2015, NLB Leasing (C‑209/14, EU:C:2015:440, paragraph 35), of 3 September 2014, GMAC UK (C‑589/12, EU:C:2014:2131, paragraph 37), of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 27), and of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339, paragraph 15).

¹³ The same function is contained in Articles 184 and 185 of the VAT Directive, which represents the counterpart to the deduction on a debit principle under Articles 168 and 178 of the VAT Directive and corrects a deduction which was initially too high. Article 185(2) of the VAT Directive in particular allows deductions to be adjusted to ensure that they correspond to the actual VAT charged. The customer, who pays no VAT in the absence of his payment of the consideration, is also not required to be relieved of a (notional) charge by means of a deduction.

¹⁴ See also, expressly, judgments of 3 September 2014, GMAC UK (C‑589/12, EU:C:2014:2131, paragraph 31), and of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 26).

¹⁵ Judgment of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339, paragraph 18).

¹⁶ Judgment of 15 May 2014 (C‑337/13, EU:C:2014:328, paragraph 23).

¹⁷ Judgment of 15 May 2014, Almos Agrárkülkereskedelmi (C‑337/13, EU:C:2014:328, paragraph 25).

¹⁸ Judgment of 23 November 2017 (C‑246/16, EU:C:2017:887, paragraph 20 et seq., in particular paragraph 23).

¹⁹ Judgment of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20 et seq.), and of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 35 et seq.).

²⁰ See p. 15 of the explanatory memorandum of the Commission proposal of 20 June 1973 (COM(73) 950 final) on Article 12 (taxable amount).

²¹ Judgments of 3 July 2019, UniCredit Leasing (C‑242/18, EU:C:2019:558, paragraph 54 et seq.), of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 19), of 22 February 2018, T‑2 (C‑396/16, EU:C:2018:109, paragraph 37), of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 17), and of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339, paragraph 18).

²² See judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20), of 22 February 2018, T‑2 (C‑396/16, EU:C:2018:109, paragraph 38), of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 18), and of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339, paragraph 18).

²³ Judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraphs 20 and 21).

²⁴ Judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20), and of 23 November 2017 (Di Maura, C‑246/16, EU:C:2017:887, paragraph 23).

²⁵ My Opinion in the Di Maura case (C‑246/16, EU:C:2017:440, point 45 et seq.).

²⁶ The pre-financing of VAT affects the freedom to choose an occupation, to conduct a trade, and the basic right to property (Articles 15, 16 and 17 of the Charter). In addition, in accordance with Article 20 of the Charter, there is possible discrimination against a trader for whom VAT only becomes chargeable in accordance with Article 66(b) of the VAT Directive when payment is received (‘money received basis’).

²⁷ Judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 21), of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 37 et seq.), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 22).

²⁸ Judgments of 3 July 2019, UniCredit Leasing (C‑242/18, EU:C:2019:558, paragraphs 38 and 39), of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989, paragraph 32 et seq.), and of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 23 et seq.).

²⁹ See judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 26), of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989, paragraph 33), of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 25), and of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 28).

³⁰ See expressly judgment of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 23) and, similarly, judgments of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 40), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 22).

³¹ Judgment of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 25) – provided that this is possible without significant effort or expense.

³² Judgment of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989, paragraphs 35 and 36). However, the question of the subsequent provision of lacking information was not addressed.

³³ See expressly judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 23), and see also judgments of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 40), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 22).

³⁴ Judgment of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 24)).

³⁵ See, inter alia, judgment of 9 July 2015, Salomie and Oltean (C‑183/14, EU:C:2015:454, paragraph 62 and the case-law cited).

³⁶ Judgment of 6 December 2012, Bonik (C‑285/11, EU:C:2012:774, paragraph 42), and of 21 June 2012, Mahagében (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 48).

³⁷ This is in line with the case‑law of the Court – see, for example, judgment of 28 July 2011, Commission v Hungary (C‑274/10, EU:C:2011:530, paragraph 48).

³⁸ For example, judgment of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 24 and the case-law cited). See also judgment of 29 April 2004, Terra Baubedarf-Handel (C‑152/02, EU:C:2004:268, end of paragraph 35). It is true that in the German version of that judgment the Court uses the wording ‘abgeführt hat’ (‘has been paid’ in the English version). However, since it is referring to the recipient of the supply who pays that VAT not to the tax office but to the service provider, it is clearly the latter that is meant. The French version also uses the phrase ‘avoir été acquittée’, which can also be naturally translated correctly as ‘gezahlt wurde’ (‘has been paid’). This becomes particularly clear in paragraph 36 – in which it is also correctly translated.

³⁹ See also the Opinion of Advocate General Campos Sánchez-Bordona in Volkswagen (C‑533/16, EU:C:2017:823, point 64): ‘It is not possible to separate deduction from payment of the tax: if the taxable person has not paid the tax … there is no legal or financial basis on which to exercise the right.’ See also my Opinion in Biosafe – Indústria de Reciclagens (C‑8/17, EU:C:2017:927, point 44).

⁴⁰ See, in very clear terms, H. Stadie in Rau/Dürrwächter, UStG, § 15 Anm. 87 – Version: May 2019.

⁴¹ Judgments of 13 March 2014, Malburg (C‑204/13, EU:C:2014:147, paragraph 41), and of 3 March 2005, Fini H (C‑32/03, EU:C:2005:128, paragraph 25 and the case-law cited).