C-42/83 Dansk Denkavit

In Case 42/83

R E F E R E N CE to the Court under Article 177 of the E EC Treaty by the Østre Landsret [Eastern Division of the Danish High Court] for a preliminary ruling in the proceedings pending before that court between

DANSK DENKAVIT A PS

and

MINISTERIET FOR SKATTER OG AFGIFTER [Ministry for Fiscal Affairs]

on the interpretation of the Sixth Council Directive of 17 M ay 1977 on the harmonization of the laws of the Member States relating to turnover taxes (77/388/EEC) and Article 95 of the E EC Treaty,

T HE C O U RT

composed of: Lord Mackenzie Stuart, President, T. Koopmans, K. Bahlmann and Y. Galmot (Presidents of Chambers), P. Pescatore, A. O'Keeffe, G. Bosco, O. D ue and C. Kakouris, Judges,

Advocate General: G. F. Mancini Registrar: H. A. Rühi, Principal Administrator

gives the following

J U D G M E NT

Facts and Issues

I — Facts and procedure The facts of the case, the course of the procedure and the observations

submitted pursuant to Article 20 of the

Grounds

1Article 10 (2) of the Sixth Council Protocol on the Statute of the Court of Directive of 17 May 1977 (77/388/EEC) Justice of the EEC may be summarized on the harmonization of the laws of the as follows :

DANSK DENKA VIT v MINISTERIET FOR SKATTER OG AFGIFTER Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment (Official Journal 1977, L 145, p. 1) provides, with regard to the chargeable event and the chargeàbility of internal VAT, that: "The chargeable event shall occur and the tax shall become chargeable when the goods are delivered or the services are performed". As regards imported goods, paragraph (3) of the same article provides similarly that: "The chargeable event shall occur and the tax shall become chargeable at the time when the goods enter the territory of the country

As regards the accounting period and the period within which payment must be made, Article 22 (4) of the directive provides, with regard to the internal system, that: "Every taxable person shall submit a return within an interval to be determined by each Member State. This interval may not exceed two months following the end of each tax period", which may be "fixed by Member States as a month, two months or a quarter".

As regards payment of the tax, Article 22 . (5) provides that the net amount of the value-added tax must be paid when the return is submitted but that the Member States may fix a different date for the payment of the amount or may demand an interim payment.

On the other hand, with respect to similar obligations in relation to import VAT, Article 23 of the directive merely provides that "Member States shall lay down the detailed rules for the making of the declarations and payments".

By virtue of the second paragraph of Article 23, Member States may provide that the value-added tax payable on importation of goods need not be paid at the time of importation and that the tax is to be included in the general return for the undertaking in respect of transactions under the internal system, provided that it is mentioned as such in the return referred to in Article 22 (4).

In its Proposal for a Fourteenth Council Directive on the harmonization of the laws of the Member States relating to turnover taxes — Deferred payment of the tax payable on importation by taxable . persons (Doc. COM(82) 402 of 5. 7. 1982, Official Journal C 201 of 5. 8. 1982), the Commission proposed a new wording for that article by virtue of which that optional course of action would become compulsory for the Member States.

Since the proposal has not been adopted, certain Member States have chosen the optional system provided for in the second paragraph of the existing Article 23 of the Sixth Directive, whereas others, including Denmark, have opted for the separate collection of import VAT, either at the time of importation or after a specified period has elapsed.

2The applicable Danish legislation is as follows:

By virtue of Article 20 (1) of the Danish Law on value-added tax, promulgated on 1 July 1982 under No 369, every undertaking which is subject to VAT must inform the authorities, no later than one month and 20 days after the expiry of each tax period, of the amount of its input and output tax during that period. According to Article 15 of the Law, output tax is that which relates to the taxable turnover of the undertaking whilst input tax is that which is invoiced to the undertaking by its suppliers and also the import VAT charged on goods imported by the undertaking from abroad. By virtue of Article 20 (2), the tax period is usually a quarter.

The difference between the output tax and the input tax (net taxation) during the tax period constitutes the tax liability. Article 22 of the Law provides that the amount of tax payable is due one month after the expiry of the tax period and must be paid within 20 days thereafter. If an undertaking's input tax exceeds its output tax during a tax period, the difference is paid to the undertaking by the customs administration (negative tax liability).

By virtue of Article 29 of the Law on value-added tax, tax is paid on goods of foreign origin when they are imported and the tax is calculated in accordance with the rules laid down in Chapter 8 of the Customs Law (Articles 69 to 95).

Article 85 of the Danish Customs Law (which was promulgated on 15 December 1982 under No 659) provides that the accounting period for taxes on consumption levied on goods imported with a view to profit by persons registered in accordance with Article 82 of the Law is one month. The tax on consumption in respect of goods cleared through customs during the accounting period must be paid to the customs administration before the end of the month following the accounting period, but, under Article 15 (1) of the Law on value-added tax, it may be set off as input tax at the end of the tax period for domestic transactions during which the importation took place, as extended by the corresponding period for payment.

2652 Under the legislation now in force, the rate of tax is 22 % for both VAT on taxable turnover and import VAT.

As is clear from the provisions referred to above, the accounting periods and the time-limits for payment differ according to whether the payment is in respect of the net tax payable by undertakings on their total turnover or their liability in respect of import VAT. In the case of the net tax payable, undertakings thus enjoy an average credit period of two and a half months, plus 20 days as from the date of supply or invoicing of the goods sold. In the case of import VAT charged on goods from abroad, the average credit period is one and a half months as from clearance of the goods through customs.

3The plaintiff in the main proceedings, Dansk Denkavit ApS [hereinafter referred to as "Dansk Denkavit"], a subsidiary of the Netherlands company Denkavit International BV, which markets animal feeding-stuffs which are purchased from the Denkavit consortium in the Netherlands and are imported into Denmark, has at its own request been registered as an importer and thus pays import VAT in respect of goods of foreign origin, in accordance with the abovementioned national provisions which are applicable to persons who import by way of trade.

Having commenced business at the beginning of 1981, the plaintiff in the main proceedings noted the disparity described above and, with a view to securing its elimination, applied on 3 June 1981 to the Danish Ministry with responsibility for taxes and excise duties for authorization to pay import VAT on the basis of the same accounting period and the same period of credit as for internal VAT. Its application was rejected by the administration on 27 July 1981 on the ground that it was unable by virtue of Danish legislation to grant the application, and the plaintiff in the main proceedings then brought an action before the Østre Landsret.

4Dansk Denkavit claimed in the proceedings that the differences between the accounting periods and time-limits for payment for internal VAT and import VAT constituted an infringement of Article 95 of the EEC Treaty and, even though it was not in dispute that the national provisions in force did not allow the plaintiff's application to be acceded to, the difference between the average periods of credit could not be maintained, regard being had to Article 95 of the EEC Treaty.

According to Dansk Denkavit, the difference between the periods in question entails a difference in the real burden represented by the taxes on the goods concerned since the taxes must be regarded as encumbering the goods as from the time when they are paid to the Treasury. Specifically with regard to the Sixth Council VAT Directive, the plaintiff claimed that it contains no provision requiring Member States to lay down different accounting periods and that the directive cannot, moreover, be interpreted as allowing the laying down of different accounting periods, because if that were the case it would have to be regarded as void by reason of its incompatibility with Article 95 of the Treaty.

5In support of its submissions before the national court, the defendant, the tax administration, contended that the national legislation in force was not contrary to the Sixth VAT Directive or to Article 95 of the Treaty.

It contended that the provisions of the Sixth VAT Directive and in particular Articles 10 (3) and 23, read in conjunction with Article 22 thereof, clearly show that the directive is inspired by the principle that the time-limits for import VAT and the internal tax liability are not the same.

6In those circumstances, the Østre Landsret considered it necessary to seek a preliminary ruling from the Court before giving judgment and asked the Court to answer the following questions :

"1. Must the Sixth Council Directive (77/388/EEC of 17 May 1977) on the harmonization of the laws of the Member States relating to turnover taxes, in particular Articles 10, 22 and 23 thereof, be interpreted in such a way that the directive precludes a Member State from laying down accounting periods and periods within which payment must be made in respect of value-added tax chargeable on the importation of goods from another Member State (value-added tax on imports) which are in conformity with the periods prescribed by Article 22 (4) of the directive but which mean that registered importers obtain a shorter average period of credit for making payment of that tax to the revenue authorities than the average period of credit which the same Member State generally permits registered undertakings, including importers, in respect of payment to the revenue authorities of the net amount of value added tax on the general turnover (net tax liability)?

2. What significance must be attached in deciding Question 1 to the fact that the provisions of the Member State in question on the rendering of accounts and payment of value-added tax on imports may be regarded as entailing an average period of credit for importers which constitutes a reasonable counterpart to the average period of credit which purchasers at the same commercial and industrial stage can obtain from suppliers, for the payment of the purchase price, inclusive of value-added tax, when they purchase products manufactured in the Member State in question?

3. Must Article 95 of the EEC Treaty be interpreted in such a way that it precludes a Member State from laying down, in respect of value-added tax on imports, accounting periods and periods within which payment must be made in the manner described in Questions 1 and 2?

4. If the answer to Question 3 is in the affirmative, must the provisions of the Sixth Council Directive (77/388/ EEC, of 17 May 1977) be treated as inapplicable in the judgment in the case before the Danish Court, and if so to what extent?"

7The order making the reference was received at the Court Registry on 17 March 1983.

8Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by the Danish Government, represented by Laurids

2654 Mikaelsen, Legal Adviser, and Gregers Larsen, by Dansk Denkavit ApS, represented by Karen Dyekjær-Hansen, and by the Commission of the European Communities, represented by its Legal Adviser D. R. Gilmour, acting as Agent, assisted by Frantz Dahl of the Copenhagen Bar.

9 Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. However, it invited the Commission to answer a question concerning the national legislation of the other Member States regarding the time-limits at issue in the main proceedings.

II — Written observations submitted pursuant to Article 20 of the Protocol of the Statute of the Court of Justice

1.1. In its observations the plaintiff in the main proceedings, Dansk Denkavit, maintains that the system adopted by Danish legislation concerning the accounting period and time-limit for payment for internal VAT, on the one hand, and import VAT on the other, gives rise to discrimination against products imported from the other Member States and is thus contrary to Article 95 of the EEC Treaty, which prohibits the direct or indirect imposition on the products of other Member States of any internal taxation in excess of that imposed directly or indirectly on similar domestic products.

1.2. According to Dansk Denkavit, the discrimination against imported products in favour of domestic products lies in the fact that, in the case of import VAT, the tax is actually collected and, in addition, the accounting period and the time-limit for payment are specific to that tax and are short, whereas in the case of internal VAT the accounting period and the time-limit for payment are longer.

1.3. It points out that, by contrast with goods supplied by Danish undertakings, goods which are imported are invoiced net of VAT. Import VAT is therefore the counterpart of the tax which, in the case of an internal purchase, must be paid to the undertaking's supplier before the supplier pays the proceeds of the tax to the Treasury, with the difference, however, that the import tax is not paid to the supplier but by the importer himself directly to the Treasury.

The effect of this payment made direct to the Treasury is to extract the import tax from the chain of transactions, because it is placed at the disposal of the Treasury immediately but cannot be set off as input tax (Article 15 (4) of the Law on VAT) until the expiry of the period comprising the tax period applicable to domestic transactions during which the import took place and the period for payment of the net tax liability arising from those transactions. The plaintiff emphasizes the result of this is that the import tax must be financed throughout that period.

On the other hand, under the internal VAT system, the supplier renders an invoice to the buyer incorporating the amount of the VAT on the supply in question (Article 17 (1) of the Law on VAT) and that invoiced amount of VAT is regarded on the one hand as output tax for the supplier (Anicie 15 (1) in conjunction with Article 13 (2) of the Law on VAT) and on the other as input tax for the buyer (Article 15) within the same tax period, that is to say the period within which invoicing takes place (Article 13 (2) in conjunction with Article 15). Regard being had to the procedure for deduction, the result is that the amount of VAT paid by the supplier is always identical to the amount simultaneously deducted by the buyer, so that the VAT is not paid to the Treasury until the end of the prescribed period for payment following the tax period during which the goods are supplied to the final consumer. The VAT thus remains at the disposal of the undertakings at one or other of the marketing stages until the VAT paid to the suppliers by the consumer is paid to the Treasury.

The taxable transaction on the basis of which the period of credit can be measured is thus the sale to the final consumer, by reason of the fact that at each of the previous marketing stages no payment is actually made to the Treasury.

The plaintiff points out that the VAT is therefore in every case at the disposal either of the seller or of the buyer during the period in course, until it is finally paid to the Treasury, and undertakings which benefit from that system will, like undertakings which by contrast suffer a pecuniary loss as a result of the system, be able to take that situation into account in their pricing policy. It states that, as long as the amount of VAT in question remains at the disposal of the buyer, the buyer receives a direct benefit in terms of interest and that, if the amount of VAT in question remains at the disposal of the seller — for the period between receipt of the price including VAT and payment of the VAT to the Treasury —, it is the seller who enjoys an equivalent advantage, in terms of interest, which is reflected by the possibility of reducing the price of the goods by a corresponding amount. The amount of VAT in question, until actually paid to the Treasury, remains at the disposal of traders in the internal market in the form of interest-free liquid funds giving rise to the same economic consequences regarding the formation of the price of the product, regardless of whether the amount is at the disposal of the buyer or of the seller.

In that regard it emphasizes that whilst that analysis, which concerns marketing under the internal system, contains nothing new in view of the fact that the VAT system is wholly neutral as regards undertakings, it does show that what is decisive is the period of credit granted to the supplier before he must account to the Treasury for the VAT paid by the consumer and that the advantage arising from that period of credit becomes particularly apparent at the stage of sale to the final consumer by the trader representing the last link in the commercial chain, which means that the undertaking concerned can lower its sale prices to the consumer by an amount corresponding to the advantage represented by that period of credit.

1.4. In that regard, Dansk Denkavit, referring to the provisions of Danish legislation, states that, as regards the tax charged on transactions on the internal market, it is possible to calculate for each transaction subject to VAT the average period of credit before VAT must be accounted for. It observes that on average the transactions effected during a tax period, which (for VAT under the internal system) is three months, take place in the middle of the period, so that the duration of the period itself gives an average credit period of around one and a half months, to which must be added the period for payment of one month and 20 days.

Thus the average period of credit for payment of the tax on transactions on the internal market is one and a half months, which gives, after addition of one month and 20 days representing the

2656 period for payment, two and a half months and 20 days.

On the other hand, in the case of import VAT, the average period of credit is equivalent to one half of the accounting period (which is one month), that is to say half a month, plus the period for payment of one month, giving a total of one month and a half.

Consequently, the period of credit for import VAT is one and a half months, whereas that for VAT under the internal system is two and a half months and 20 days.

1.5. Dansk Denkavit thus draws the conclusion that the difference in treatment deriving from the fact that the importation of products gives rise to an actual payment of VAT to the Treasury at the stage of importation itself, regardless of whether or not the goods have reached the final consumer and without the import VAT in respect of the transaction being deducted at the same time, is a direct consequence of the fact that the credit period granted for the payment.of import VAT is shorter than that granted for payment of the net tax liability at the corresponding stage of marketing of domestic products.

1.6. It maintains that those discriminatory effects cannot moreover be regarded as neutralized by the fact that the period of credit allowed by the Treasury for the calculation of import VAT may correspond to the average period of credit which an undertaking can obtain from its domestic supplier for payment of the price of the purchases made. In its view, the refusal to consider such a comparison is justified. According to Dansk Denkavit:

The fact that the periods of credit granted vary from one sector to another and from one undertaking to another is in itself sufficient to render the results of such a comparison unreliable. However, in its view it is the following consideration which is decisive:

The purpose and functioning of the VAT system, which is intended to tax goods as such and to remain neutral with respect to undertakings, are such that the period of credit granted in respect of a product within the marketing chain by successive buyers and sellers remains unimportant in itself, since the length of that period may benefit each of them, in the form of interest-free liquid funds which are available to one or other of them until the amount of the VAT is paid to the Treasury, so that it can be taken into consideration in the formation of the price of the goods.

On the other hand, the fact that import VAT must be paid by the importer within a short period direct to the Treasury and not to the supplier entails the result that, regardless of the period of credit which the supplier may grant, the amount of the VAT is not available and cannot play any part in the formation of the prices of goods, enabling them to be reduced so as to reflect interest on disposable liquid funds.

Finally, Dansk Denkavit considers that its interpretation is supported by the argument that, under a national system in which the credit periods are equal, import VAT is never paid because the undertaking calculating the import VAT at the same time shows it as an input tax (deductible tax) in its ordinary VAT return. It emphasizes that in such a case exactly the same situation arises as that which arises in the case of internal VAT, namely that input VAT is always matched by the corresponding output VAT. It points out that, in the case of marketing under the internal system, payment and deduction take place in different undertakings (the seller and the purchaser respectively), whereas in the case of importation those operations are carried out by the same undertaking, the importer, which is merely the logical consequence of the fact that in the case of import VAT it is the purchaser and not the seller who pays the VAT.

1.7. As regards more specifically the incompatibility of the Danish rules with Article 95 of the EEC Treaty by reason of its discriminatory effects to the detriment of imported products, Dansk Denkavit observes:

That Article 95 is immediately applicable and creates direct effects for the nationals of Member States, according to the decision of the Court in Case 74/76 (Iannelli v Meroni, [1977] ECR 557), so that nationals are entitled to require that national law be disregarded in so far as its provisions are contrary to Article 95 of the Treaty;

That import VAT is an internal tax (judgment of the Court in Case 15/81, Gaston Schul, [1982] ECR 1409), the lawfulness of which depends on its compatibility with Article 95 of the Treaty;

That, as regards the assessment, in the light of Article 95, of the incidence of a tax on domestic products and on imported products, the decisive criterion, according to the decisions of the Court (judgments in Case 171/78, Commission v Denmark, [1980] ECR 447, Case 74/76, Iannelli v Meroni, cited above, Case 55/79 Commission v Ireland, [1980] ECR 481 and Case 15/81, Gaston Schul, cited above) is the actual effect of the contested tax, that is to say not only the nominal amount of the tax but also the period of credit granted to the trader before he must account for the tax. Dansk Denkavit also draws attention to the fact that the Commission, in its Proposal for a Fourteenth Directive on the harmonization of the laws of the Member States on turnover taxes — Deferred payment of the tax payable on importation by taxable persons (Official Journal C 201 of 5. 8. 1982 and Document COM(82) 402 of 5. 7. 1982), seeks to ensure that import VAT appears simultaneously in the general return for VAT under the internal system.

Dansk Denkavit points out in that connection that the system proposed by the Commission, whereby import VAT should be charged when it is entered in the tax return, is the only system by which, in the terms of the explanatory memorandum to the Commission's Proposal for a Fourteenth Tax Directive, "the tax imbalance working to the disadvantage of imports can be corrected".

Dansk Denkavit also observes that the incompabtibility of the Danish legislation with Article 95 of the Treaty cannot be contested on the ground that any harmonization of the tax periods and of the time-limits for payment would entail as a preliminary more extensive harmonization under Article 99 of the EEC Treaty. It observes that the scope and the respective objectives of Articles 95 and 99 of the Treaty are distinct, which led the Court to state in its judgment in Case 171/78 (Commission v Denmark, cited above) that "the implementation of the programme of harmonization laid down by Article 99 of the EEC Treaty

2658 cannot constitute a preliminary to the application of Article 95".

In that regard, Dansk Denkavit observes that the categorical prohibition laid down in Article 95 leaves the Member States the responsibility of complying therewith, and they may not plead, in order to resist the direct effect of the provision in question, that the Community institutions have failed wholly or in part to adopt the directives provided for by the Treaty concerning the prohibition of discrimination in question (judgment in Case 11/77, Patrick, [1977] ECR 1199).

As regards the question whether the national system of accounting periods and time-limits for the payment of VAT is compatible with the provisions of the Sixth Directive, Dansk Denkavit observes in the first place that a directive cannot render lawful a situation which is contrary to the provisions of the Treaty, as the Court held in Joined Cases 80 and 81/77 (Commissionnaires réunis, [1978] ECR 927) and in Case 15/81 (Gaston Schul, cited above).

Dansk Denkavit observes further that in any event, although the directive in question does not formally prohibit the grant of periods of credit under the import VAT system which are different from those granted under the internal VAT system, neither does it require that the periods should differ. It considers that the directive's silence on this point cannot be construed as authorizing the Member States to adopt a system which is contrary to the Treaty (judgment of the Court in Gaston Schul) merely because, with regard to the time of payment of the VAT, it imposes certain limitations on the options open to the Member States with respect to payment of the internal tax payable (Article 22), whilst it does not expressly place any limits on the options available regarding the payment of import VAT (Article 23).

Finally, Dansk Denkavit claims, in the alternative, that, in the event of the directive in question being interpreted differently on that point, that is to say as allowing import VAT to be charged on a discriminatory basis, it should not be applied because it would necessarily be held to be contrary to Article 95 of the EEC Treaty and therefore to be invalid.

1.8. As regards the answers to be given to the national court, Dansk Denkavit considers that the essential question is the third one, to which it proposes the following reply:

"Article 95 of the EEC Treaty must be interpreted as precluding a Member State from laying down, with respect to the importation of goods from another Member State, an accounting period and a time-limit for payment in respect of import VAT which entail an average period of credit for the payment thereof which is shorter than the period of credit applicable in the case of the payment to the Treasury of VAT under the internal system by virtue of the [Danish] rules relating to the accounting period and the time-limit for payment."

As regards the first question, Dansk Denkavit considers that the reply to that question must be given in the light of the third question, since it is appropriate to interpret the Sixth Directive as being in conformity with Article 95 of the Treaty. It therefore proposes that the following answer be given to the first question :

"The Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes (77/388/EEC), and in particular Articles 19, 22 and 23 thereof, must be interpreted as meaning that, in laying down, pursuant to Article 23, the accounting period and the time-limit for payment in respect of import VAT, the Member States are obliged to respect the prohibition of discrimination contained in Anicie 95 of the Treaty."

Dansk Denkavit proposes that the second question, which it sees as a limb of the third question and hence also of the first question, should be answered as follows :

"It is of no significance, for the purpose of the answer to Question 1, that the provisions of national law on the rendering of accounts and payment of import VAT may be regarded as entailing an average period of credit for importers corresponding to the period for payment allowed by suppliers to their buyers at the same marketing stage when the buyers purchase goods produced in the Member State in question."

Finally, with regard, to the answer to be given to the fourth question, Dansk Denkavit states that if Question 1 is answered in the negative, in other words if it is considered that the Sixth VAT Directive specifically permits different periods of credit, the reply which must be given to the fourth question is that the Sixth Directive is invalid in that respect. It observes however that such an interpretation of the Sixth VAT Directive is unnecessary and, moreover, is incorrect from both the linguistic and the legal points of view; therefore the plaintiff proposes primarily that the fourth question should be answered as follows:

"This question is devoid of purpose." In the event of the Court's answering the third question in the affirmative and the first question in the negative, the plaintiff proposes in the alternative that the fourth question be answered as follows :

"The Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes (77/388/EEC) is incompatible with Article 95 of the EEC Treaty and is therefore invalid, in so far as it requires or allows Member States to fix accounting periods and time-limits for payment in respect of import VAT which entail a period of credit for the payment of that tax which is on average shorter than that allowed by the rules on the accounting period and the time-limit for payment to the Treasury of VAT under the internal system. In so far as the provisions of the directive are contrary to Article 95 of the Treaty, the national court must refrain from applying them for the purposes of the decision which it is called upon to give in the present case."

As regards the practical consequences of the answers which it proposes should be given to the questions submitted for a preliminary ruling, Dansk Denkavit emphasizes that there is no technical difficulty from the legislative viewpoint capable of constituting an obstacle to the equal treatment of imported and domestic products. It considers that for that purpose it would be sufficient to grant the same tax period and the same payment period as for payment to the Treasury of internal VAT and that the national legal provisions in question could be amended specifically and independently, because the amendment would not in any way affect the general scheme of the VAT system or disrupt its application.

Furthermore, Dansk Denkavit points out that its replies are not prejudicial to any

2660 new harmonizing measures which the Community may adopt in the future, since the requirements which it sets out do not go beyond what may be demanded, even before any harmonization, on the basis of Article 95 of the Treaty, which is directly applicable. It emphasizes in that respect that it is not calling for a radical measure eliminating the specific scheme of the system of accounting for import VAT, since that could be brought about only by a harmonizing measure such as that embodied in the Commission's Proposal for a Fourteenth Directive.

2. In its observations, the Danish Government starts by giving a description of the VAT system, the way in which it is organized under Danish law, the harmonization of the various national systems, the function of import VAT and also a description of the Sixth Directive and the provisions of Danish legislation regarding the net tax liability of undertakings under the internal system and import VAT.

2.1. As regards the justification for and the effects of the duration of the tax periods and the time-limits for payment of the VAT payable by taxable persons, the Danish Government maintains that the policy adopted by the Danish legislation is in fact intended to establish and maintain conditions of equality as regards competition between purchases made on the internal market and imports.

It observes in the first place that, under the VAT system, it is not possible to follow the payments of tax in respect of a given product, but only to calculate, on the basis of averages, the effects of the VAT system as a whole on the liquidity position of undertakings.

DANSK DENKAVrr v MINISTERIET FOR SKATTER OG AFGIFTER Moreover, according to the Danish Government, the favourable or unfavourable character of the system does not depend exclusively on the length of the periods in question but upon a whole series of interrelated factors, such as whether tax is payable to the Treasury or a repayment is due, the length of the periods granted for the purposes of calculation and payment of the tax due and the periods of credit which an undertaking may obtain from its suppliers or grant to its customers, and so forth.

Thus, for industrial and commercial undertakings as a whole and at all stages of distribution and the provision of services, there is a cash-flow advantage in so far as the duration of the tax periods and of the periods within which payment must be made gives a longer average period of credit in respect of the tax liability than the period of credit usually obtained by final consumers from their suppliers, but the way in which such a credit advantage is shared among the undertakings involved in the chain of transactions depends on the individual ways in which each undertaking operates and on the combined effects of the other factors mentioned above.

The Danish Government states that it was in the light of those considerations that the Danish legislature chose to adopt relatively long tax periods (a quarter) and similarly long periods for payment (one month and 20 days) in order to compensate undertakings for the burdens imposed upon them by administration of the VAT system and the accounting requirements arising therefrom.

It observes that the legislature's concern to achieve as far as possible equality as regards competition between import transactions and domestic purchases induced it to grant import undertakings the same cash-flow advantages as those granted to the other undertakings by prescribing that import VAT was to be collected not at the time of importation but at a later stage.

It states that the one month accounting period for import VAT, to which must be added the period for payment which extends to the end of the following month, entails an average period of credit for importers of 45 days, which corresponds to the period of credit in respect of the purchase price which on average is likely to be obtained by a buyer from his supplier, in the case of the purchase of domestic products, where the terms of purchase are "current month plus 30 days".

It adds in this respect that since (a) an average period of credit of that duration allowed for purchases made in Denmark was taken into consideration when the accounting period and payment period for import VAT were fixed in 1970 and (b) the periods of credit in trade have since tended to become shorter, the payment period for import VAT probably entails a longer period of credit than is available for payment of VAT invoiced by a domestic supplier.

According to the Danish Government, the same considerations, connected with the concern to maintain equal conditions of competition, justify the refusal on the part of the national authorities to respond to the wish expressed by importers to have the applicable rules changed to allow import VAT to be calculated quarterly as part of the periodic return in respect of the net tax liability. It explains that the reason for this is that importers would in such circumstances, as a result of the right to deduct import VAT, be released from the obligation to pay import VAT to the Treasury, which would entail a wholly unreasonable distortion of competition.

It adds that, if the wish expressed by importers were to be complied with, the consequence would be that the net amount credited by the State to the importer would be considerably higher than that allowed to an undertaking at the same marketing stage dealing in Danish goods. The import VAT and the deduction would cancel each other out and the importer would enjoy credit for about 95 days for payment of the totality of the tax on his turnover (merely reduced by the VAT on the services and other facilities provided for the benefit of the importer). On the other hand, an undertaking of the same kind, dealing in Danish products, is granted credit by the State only for a much smaller tax liability, after deduction of the VAT which he has had to pay, within the periods of credit ordinarily granted, to his Danish supplier of goods.

Thus, according to the Danish Government, under Danish legislation import VAT is paid to the State at the same time as the importer would have paid the VAT to his supplier, if the purchase in question had taken place in Denmark; thus neutrality of competition is secured to the greatest extent possible.

The Danish Government observes that the Proposal for a 14th Directive on harmonization of the laws relating to turnover taxes moves in the direction of the request made by Dansk Denkavit, because, in a new Article 23 (2), it obliges Member States to grant any taxable person who so requests authorization not to pay the tax payable on importation at the time when the goods enter the territory of the country, provided that the tax is shown as payable and, where appropriate, as deductible in the first return submitted after the importation, pursuant to Article 22 (4).

2662 It points out however that Article 23 (4) of the proposal for a directive nevertheless imposes the condition that the taxable person must have a fixed establishment within the territory of the country in question.

The Danish Government emphasizes that it is clearly apparent from the proposal and from the preparatory proceedings that it is not concerned with a series of amendments which are essential in order to bring the Sixth Directive into conformity with the Treaty and also that the Council did not see the proposal in question as already forming part of the applicable law; moreover, within the Council, Denmark and several other Member States expressed reservations regarding the action to be taken concerning the proposal.

In that respect, the Danish Government states that it has drawn attention to the financial consequences which the implementation of that proposal would involve for the State budget. It states that, in view of the fact that the revenue from import VAT amounts in Denmark to some 30 to 35 thousand million Kroner each year, to defer payment by 50 days would entail an immediate loss of disposable funds of the order of 4 500 million Kroner and would subject the State to increased interest charges of around 500 to 600 million Kroner per annum.

2.2. With regard to the first question submitted by the Østre Landsret the Danish Government goes on to observe that the time limits for payment of import VAT provided for by Danish legislation are in conformity with those laid down in the Sixth Directive.

The Danish Government considers that it is apparent from the content, the general scheme and the purpose of that directive that no obligation of the kind described by Dansk Denkavit is, in the light of Artide 95 of the Treaty, incumbent upon the Member States and that, if it were -otherwise, the directive would have to be regarded as incompatible with the Treaty.

The Danish Government emphasizes that, as appears from the provisions of the directive concerning the chargeability and payment of import VAT, such VAT may be collected immediately when the goods enter the national territory without any period of credit being allowed, whereas calculation of the net tax payable to the Treasury, on the other hand, always involves a degree of credit, regardless of the course followed by a Member State when legislating on that matter.

It considers that, for that reason, it is impossible to interpret the directive in such a way as to render uniform the average periods of credit for payment to the Treasury of the two different kinds of tax.

In that regard, the Danish Government observes that, even if the Member States opted for the course expressly provided for in the second and third subparagraphs of Article 10 (3) of the directive, which provide respectively that:

"Where imported goods are subject to customs duties, to agricultural levies or to charges having equivalent effect established under a common policy, Member States may link the chargeable event and the date when the tax becomes chargeable with those laid down for these Community duties;" and that

"In cases where imported goods are not subject to any of these Community duties. Member States may apply the provisions in force governing customs duties as regards the chargeable event and the date when the tax becomes chargeable," the result of so doing would be to create divergences in the average periods of credit and the net tax liability, and those provisions could not produce concordant effects — if they were interpreted so as to produce the result sought by Dansk Denkavit — and would, perhaps, have to be regarded as contrary to the Treaty, in the same way as the basic rule introduced by the Sixth Directive.

According to the Danish Government, the effect of the contested national rules is to place the commercial importer in a better position not only with respect to the basic rule of the directive, which provides for the possibility of immediate collection of the VAT at the time of importation, but also with' respect to the rules laid down in the second and third subparagraphs of Article 10 (3), since the period of credit for import VAT is half a month longer than the period for customs duties and other import levies. It is therefore impossible to interpret the directive as meaning that national rules of this kind are prohibited, unless it is considered that collection of the tax when the goods cross the frontier, and likewise the collection of duties under customs provisions, are prohibited.

Moreover, according to the Danish Government, it is clear from Article 23 of the Directive that the Member States have been vested with the power to defer the payment of tax beyond the time of importation.

It again emphasizes in that respect that the Member States may adopt such measures provided that the import VAT is shown on a return drawn up in accordance with Article 22 (4) and considers that the Danish rules entail payment within periods which are acceptable under the rules of the directive.

Thus, according to the Danish Government, the wording of the Sixth Directive is perfectly clear and there are no grounds whatsoever for an interpretation such as that proposed by Dansk Denkavit.

Turning to the provisions of the directive as a whole, the Danish Government observes that they reflect the radically different circumstances surrounding payment of import VAT and the net tax liability. It emphasizes that, since the majority of the provisions of the directive are rightly based on a distinction between import VAT and the net tax liability, if Article 95 were to be interpreted as meaning that the tax periods and time-limits for payment ought to be the same, that ought necessarily to extend to all the other rules, relating for example to the chargeable event, calculation of the tax and the tax liability.

In support of this principle of differentiation between the internal VAT system and the system of import VAT, the Danish Government refers to the judgment given in Gaston Schul, in which the Court found that it was lawful to require individuals to pay import VAT even though they are not subject to VAT when they sell to domestic purchasers.

According to the Danish Government, the general scheme of the directive thus clearly shows that it is not possible to maintain that the rules relating to the net tax liability and to import VAT must be uniform; such uniformity should be envisaged only by means of harmonization of the national rules on VAT, otherwise, in view of the differences at present existing in the other Member States, the consequence would be a serious distortion of competition to the detriment of transactions carried out under the internal system.

The Danish Government thus concludes that, since the national system entails maximum neutrality as regards competition, it is in perfect harmony with the objective of the Sixth Directive and that

2664 the existence of the Proposal for a 14th Directive submitted by the Commission shows that the view maintained by Dansk Denkavit does not correspond to the existing law.

The Danish Government thus proposes that the first question should be answered in the negative, in the following terms :

"There is practically no ambiguity in the Sixth Directive, as regards either its wording or its general scheme and purpose. It is for the Community legislature, if appropriate, to make any amendments thereto."

2.3. With respect to the second question, the Danish Government observes that it concerns the essential effect of the Danish system, which entails, as regards competition, the maximum degree of neutrality possible at the present stage of development of Community law.

In the opinion of the Danish Government, it is however more correct to answer Questions 1 and 3 in the negative, there being no need to impose the condition that the legislation of a Member State should be as described in the second question submitted to the Court.

According to the Danish Government, it is immaterial that a negative reply to the first and third questions should make reference, for the purpose of the decision to be given by the Østre Landsret in the main proceedings, to the characteristics of'the tax system described in the second question.

2.4. As regards the third question submitted to the Court, the Danish Government observes that, in view of the wording of Article 95 of the Treaty and the uniform rates of import VAT and VAT under the internal system (22%), there can be no question of the national system being held to be contrary to that article.

According to the Danish Government, the compatibility of the Danish national system with Article 95 of the Treaty is also incontestable because, according to the case-law of the Court, it is appropriate to take into account, in addition to the rate of VAT, the rules governing the basis of assessment and the collection of the various taxes; the decisive criterion lies, according to the Court (judgment of 27. 2. 1980 in Case 55/79, Commission v Ireland, [1980] ECR 480) in the actual effect of each of the taxes on domestic products on the one hand and on imported products on the other.

The Danish Government considers that it is clear from that decision that Article 95 in no way implies that it is always necessary to prove the existence of a set of identical rules for imported products and for domestic products. It observes that the rules relating to the collection of an internal tax cannot be considered contrary to Article 95 unless there is actual discrimination against imported products in favour of domestic products in cases where the two categories of products are in a comparable situation.

In that respect, the Danish Government considers that it is apparent from the statements of principle made by the Court that it is appropriate in that connection to consider the objective differences disclosed by. the characteristics of each of the taxable transactions concerned and also to take into account other differences which the Member State in question is not in a position to eliminate.

For the purposes of the present case the Danish Government therefore considers absolutely decisive the fact that the Court has stated clearly that Anicie 95 does not imply that a comparison should be made of matters which are not comparable, but that due account should be taken of the difference likely to arise when, on crossing a frontier, goods become subject to the tax system of the importing Member State.

In that regard the Danish Government refers to the judgment of the Court in Case 55/79 (Commission v Ireland, cited above), in which the Court refused to treat as discrimination the fact that national producers, by contrast with beer importers, were allowed to defer payment of excise duty, since, by virtue of the difference between the degree of maturity of imported beer and that of beer produced in Ireland, the marketing stages were not comparable.

According to the Danish Government, the VAT system is infinitely more complex, as regards payment of the tax, so that it is significant that the Court, which in its judgment in Gaston Schul had the opportunity to lay down the important principles for interpreting Article 95 of the Treaty within the framework of the system of import VAT and to specify the rules for calculating the amount thereof, having regard to the residual tax in the exporting State, did not adopt as a factor in the calculation, under Article 95 of the Treaty, the periods of credit allowed for the payment of the said residual tax as compared with the periods of credit in respect of the residual tax to which domestic goods are subject.

The Danish Government considers that it is therefore inappropriate to make comparisons — which are impossible — between, on the one hand, the effects of the system adopted by the exporting State for the payment of the net tax liability and, on the other the collection by the importing State of the import VAT when the goods enter the customs territory of that State. The Danish Government deduces therefrom that the essential principle highlighted in the Sixth Directive, concerning the collection of VAT when goods cross a frontier, has thus been expressly maintained and enshrined in the judgment in question. Consequently, according to the Danish Government, the argument to the effect that the payment of import VAT by the importer must be compared with the payment, by the importer or by a domestic supplier, of trie net tax payable to the State, involves a comparison which it is not permissible to make.

It observes that import VAT constitutes a necessary compensating measure at the present stage of development of Community law, but the payment itself and the rules applicable thereto have no counterpart in the context of the marketing of goods under the internal system. The intrinsic characteristics of the VAT system make it impossible, by contrast with the position regarding excise duty, to identify within the context of the marketing of goods under the internal system a particular payment of tax which can be compared with the payment of import VAT.

In that respect the Danish Government emphasizes that in the case of a transaction under the internal system a buyer does not have to pay the VAT to the Treasury and that there is, moreover, no example of a seller having to settle a tax liability corresponding to the output tax on the whole sales value of the goods, in view of the fact that the fundamental principle underlying the VAT system is the generalized right of deduction.

According to the Danish Government, there are therefore special circumstances in the case of import VAT, in view of the fact that, whilst the tax is a component of the internal tax system of

2666 the State, it is impossible to find a counterpart for it in the context of a marketing transaction under the internal system, since the obligation to pay import VAT is connected with the crossing of a frontier, and accordingly the Sixth Directive rightly lays down, as the basic rule, that import VAT must be levied at that time.

The Danish Government thus considers that, owing to the fundamentally different circumstances surrounding payment of the net tax payable and of import VAT, it is not relevant to the reply to be given to the question submitted by the Østre Landsret to endeavour to make comparisons between the situations which arise, on the one hand, where goods are imported and, on the other, where goods are marketed under the internal system.

It observes however that, if the Court were to allow such comparisons, it would be necessary, having regard above all to the characteristic features of the system described in the second question submitted to the Court by the Østre Landsret, to reply to the third question in the negative inasmuch as the only correct basis of comparison lies in the relationship between the payment of VAT by the importer to the State and the payment by the same trader of VAT to a domestic supplier, the comparison being based solely on average values. The Danish Government thus proposes that the third question be answered in the negative on the ground that it is justified to levy import VAT as soon as the goods cross the frontier.

In the event of the Court's considering that under Article 95 a Member State is obliged to grant importers a period of credit, the duration of that period must, according to the Danish Government, be determined on the basis of the situation of undertakings described in average terms; the correct basis of comparison in that respect is achieved by so framing the rules that there is no reason for an importer to buy goods in his own country rather than importing them. It infers from that that a system which, like the Danish system, takes due account of that concern by means of rules such as those described in the second question submitted to the Gourt is in any event in conformity with Article 95 of the Treaty. The Danish Government further observes that it is not possible, by fixing rules relating to accounting periods and to the time-limits for payment of import VAT, effectively to eliminate the divergences still existing between the VAT systems of the Member States, because it is impossible to trace, within the VAT system and in respect of a particular item of goods, the time at which payments are made to the Treasury. Therefore, to lay down individual accounting periods, in the . light of the periods of credit granted in the exporting Member. State as compared with those under the rules of the importing Member State, regarding import VAT levied on particular goods, rather than being merely a source of practical difficulties, is in fact impossible.

Finally, according to the Danish Government, it is not possible at the present stage of development of Community law to make relevant comparisons between the respective liquidity positions — seen in general terms and in so far as those situations are engendered by the VAT systems — of exporters in one Member State and undertakings at the same marketing stage in another Member State. However, it observes that such analyses as it is possible to make show that rejection of the system producing the effects described in the second question would result not in greater equality as regards competition but, on the contrary, would distort competition.

2.5. As regards the fourth question, the Danish Government considers that it is devoid of purpose, in view of the negative reply proposed for the third question.

It observes that, if the Court should nevertheless consider that the third question calls for an affirmative reply, the necessary consequence would be that a series of rules contained in the Sixth Directive would have to be regarded as contrary to the Treaty.

The Danish Government considers that an affirmative reply to the third question would be based on the assumption that the rules relating to import VAT and to the net tax liability of undertakings are uniform; that result cannot be obtained merely by means of the rules relating to tax periods and time-limits for payment of VAT; it would be necessary in any case, for the purpose of payment of import VAT and discharge or the net tax liability, to render uniform the rules affecting the amount of tax in respect of which credit may be granted.

In that regard it emphasizes the most important differences between the rules of the Sixth Directive concerning the net tax liability and those concerning import VAT and cites the following, provisions: with regard to taxable transactions, Articles 2, 5 and 6 in comparison with Article 7; Article 10 concerning the chargeable event and the chargeability of the tax; Article 11 A compared with Article 14, regarding exemptions; Article 16 (2) regarding exemptions from VAT within the country for goods or services intended for export; the rules of Title XI on deductions; Article 21 concerning the persons liable to pay tax; and Article 22, in comparison with Article 23, with regard to tax periods and time-limits for payment.

The Danish Government observes that it would be difficult to maintain with respect to taxable persons the difference which the Court expressly admitted in its judgment in Gaston Schul and, since the majority of the provisions of the Sixth Directive are based on a fundamental distinction between tax charged on transactions under the internal system and tax charged on importation, it must be left to the Community legislature to decide on the appropriate measures for eliminating such considerable conflicts with the Treaty.

The Danish Government considers that a judgment to the effect that any difference between rules concerning tax on transactions under the internal system and tax on importation is contrary to Article 95 would thus create considerable legal uncertainty in the Member States, if the courts and administrative authorities in the Member States had to apply the judgment, in view of the many ways in which it would be possible to eliminate that difference. It considers that such a situation would endanger the common basis of assessment for VAT and might perhaps influence the determination of the own resources of the Community.

The Danish Government observes that the Court has held on several occasions that Article 95 is directly applicable and that the practice so far followed by the Court must be taken to mean that directives adopted by the Council may, where appropriate, be held to be invalid if they are contrary to Article 95. It adds that, according to well-established case-law of the Court, in so far as it is not possible to circumscribe a specific part of a provision which is contrary to law, it is for the competent Community institutions to take the necessary measures to remedy the incompatibility of those provisions with the Treaty (Judgments of 19. 10. 1977 in Joined Cases 117/76 and 16/77, "Quellmehl", [1977] ECR 1753, and in Joined Cases 124/76 and 20/77, "Maize Groats and Meal", [1977] ECR 1795).

The Danish Government observes that, if the legislation at issue had been a regulation, it would have been reasonable for

2668 the Court to apply the second paragraph of Article 174 of the Treaty by analogy and to indicate which of the effects of the regulation declared void were to be regarded as definitive (judgment of 15. 10. 1980 in Case 4/79, Providence agricole de la Champagne [1980] ECR 2823). It adds that, in view of the fact that in its judgment of 19 January 1982 (Case 8/81 Ursula Becker [1982] ECR 53) the Court held that in any event certain provisions of Directive 77/388/EEC were directly applicable, the Court should consider applying the second paragraph of Article 174 by analogy in a situation such as the present, even though the legislation in question is a directive, and invites the Court to state, in this case, that the provisions of national law intended to implement the directive must continue to apply until the Council has amended the directive.

The Danish Government submits that if, contrary to its expectations, the Court should reply to the third question in the affirmative, it would nevertheless be appropriate to reply to the fourth question in the negative, in view of the fact that the amendments made necessary by any invalidation of the directive at the present stage of harmonization of the VAT system are such that those amendments could only be adopted by the legislature.

3.1. By way of introduction, the Commission of the European Communities points out that the tax procedures and the declared object of VAT, which is to ensure, on the one hand, fiscal neutrality as between taxable persons in the internal market and, on the other hand, tax equality between the internal market and the import market, account for the existence of two chargeable events within the VAT system, namely:

The supply of goods in the internal market; and

the entry of goods from another country.

It states that, in view of the VAT system, and the partial harmonization effected by the Sixth Directive, the obligations of taxable persons towards the State arising from those two chargeable events are of a different nature. The basis of internal VAT is the transactions of the sellers, so that it is they and not the buyers who are responsible for paying the tax to the State. On the other hand, the basis of import VAT is not the sale but the purchase.

The Commission observes that, according to the "philosophy" on which the VAT system rests, the importer is a buyer who, by way of exception, is responsible for paying the VAT to the State. This anomaly is the immediate consequence of the continuing existence of frontiers.

It explains that the existence of tax frontiers and the necessity of charging VAT on imported goods entail the consequence that the two chargeable events mentioned above never take place at the same marketing stage.

The Commission considers that that fact is of crucial importance in any case concerning the compatibility of the rules of the VAT system with Article 95 of the Treaty, since the Court has held that for the purposes of Article 95 what must be compared are the tax burdens on domestic goods and those on imported goods at the same marketing stage.

Finally, the Commission states that by reason of the complexity of the VAT system, as applicable both internally and to imports, it was necessary to leave the Member States a degree of-latitude in the application thereof, as is evident in particular from the Sixth VAT Directive:, which, for certain matters, merely defines the framework within which the Member States must implement the system and that, in considering whether the Member States, in the exercise of the discretionary power vested in them by the Sixth VAT Directive, are applying rules favouring domestic production, it is appropriate to take account of the abovementioned characteristics of the VAT system.

3.2. With regard to the first question, the Commission examines the provisions of Article 10 (1) (a) and (b) and 10 (3), Article 22 (4) and (5) and Article 23 of the Sixth Directive, and points out that, with regard to the questions submitted, they indicate that:

The tax becomes payable at the time when — to simplify — goods are delivered or imported;

The time of payment of the tax to the State may nevertheless be deferred, at the will of the Member State;

The Sixth VAT Directive does nor. specify for how long payment of the tax may be thus deferred with respect either to the internal system or to importation.

It observes that the Sixth VAT Directive certainly contains rules regarding the length of the tax period, but that period is merely one factor in the comparison drawn by the first question and, in any event, the Member States are empowered, within their own territory, to lay down different tax periods for different transactions.

The Commission therefore considers that the only reply which can be given to the first question is that the Sixth VAT Directive does not preclude the laying down of tax periods and periods for payment which differ according to whether the tax relates to imported goods or to goods subject to the internal system.

3.3. As regards the second question, the Commission considers that the reply must be that for the interpretation of the provisions of the Sixth VAT Directive requested in the first question no significance whatsoever is.to be attached to the fact that a relationship of the kind described in the question exists between, on the one hand, the calculation and payment of import VAT and, on the other, the average period of credit granted to buyers by sellers within the country. It states that, since the Sixth VAT Directive allows Member States full latitude to determine the period within which payment must be made, the reasons for which a Member State chooses one particular period rather than another is entirely without relevance to the interpretation of the Sixth VAT Directive with respect to the first question.

3.4. As regards the third question, which it regards as the most important part of the order for reference, the Commission states that, far from being confined to the particular circumstances envisaged by the national court, the application of the VAT system to goods crossing a frontier, with its inherent

2670 differences of treatment, is a question of general interest.

It refers in that regard to its Proposal for a Fourteenth Council Directive on the harmonization of the laws of the Member States relating to turnover taxes — Deferred payment of the tax payable on importation by taxable persons (Official Journal C 201, of 5. 8. 1982, p. 5), and observes that, as appears from the explanatory memorandum to that proposal, it is perfectly aware of the fact that the operation of the VAT system tends to place imported goods at a disadvantage, adversely affecting cash-flow. It states that, being aware of those disparities, which, however, it considers difficult to quantify any more precisely, it proposed a legislative solution whereby the payment of import VAT would be incorporated in the normal internal machinery for payment and deduction, as is the case in the Benelux countries and the ' United Kingdom. The Commission considers nevertheless that the disadvantage regarding cash-flow which tends to be associated with imported goods cannot be considered an infringement of Article 95.

The Commission states that, in view of the case-law of the Court on the relationship between Articles 95 and 99 of the Treaty, if it had had the slightest doubt on the matter, it would have taken the necessary measures to eliminate any such discrimination by seeking the opinion of the Court as to the correct interpretation to be given to Article 95 in that respect.

The Commission considers that this question may be approached from three different standpoints: a formal point of view, which is confined to the functioning and fiscal procedures of the VAT system, and two economic points of view, each of which is based on different premises.

3.4.1. It observes that, in order to assess whether from the formal point of view Article 95 precludes Member States from laying down tax periods and time limits for payment which are different for imports, on the one hand, and transactions under the internal system, on the other, reference should be made to the case-law of the Court, which makes clear that, in fiscal matters, the comparison must relate to the same marketing stage.

It considers that the consequence of the existence of tax frontiers is that the tax periods and time-limits for payment in question cannot technically be regarded as concerning the same marketing stage. It considers that the obligations which the Sixth VAT Directive and, therefore the Member States, impose upon taxable persons regarding transactions under the internal system consist in the making of a return and the payment of tax in respect of sales, whereas in the case of imports the return and the payment of tax relate to purchases. Consequently, the marketing stage is not the same and a comparison on that basis cannot therefore satisfy the strict condition governing the application of Article 95.

Thus, the Commission considers that the reply to the third question must be that Article 95, does not preclude the laying down of different tax periods and time limits for payment for import VAT, on the one hand, and transactions under the internal system on the other.

3.4.2. With regard to the first economic viewpoint, which is that the real economic circumstances show that there is an infringement of Article 95 of the Treaty, the Commission considers that the correct criterion for assessing the tax burden to which a product is subject is connected with the time when the buyer actually has to pay the VAT to which his transaction gives rise and it is therefore on Iy from that time that the question of discrimination may arise.

In that respect, the Commission considers that the tax periods and time limits for payment laid down by law and the periods of credit allowed in trade, which are fixed contractually between individuals, cannot be used as the basis of a comparison enabling compatibility with Article 95 of the Treaty to be assessed, and to have recourse to those factors would be tantamount to comparing matters which are not comparable. Accordingly, the precondition for the correct application of Article 95 is again not satisfied. Moreover, according to the Commission, it is clear that it is not possible to give a practicable and certain estimate of the duration of the period of credit, which is entirely a matter of chance dependent upon agreements between individuals and consequently is not comparable with a period laid down by a law.

For those reasons the Commission considers that no assessment in the light of Article 95 is possible.

According to the Commission, the most that can be said in the light of the requirements of Article 95 in these circumstances is that, in view of the tendency for the present VAT system to operate to the detriment of imported goods, the Member States have a clear duty to define the obligations imposed on importers, taking reasonable account of the practices normally followed regarding credit terms in the national market. The Commission states that it is not however, in a position to judge whether Danish legislation takes reasonable account of those practices.

3.4.3. As regards the second economic point of view, with regard to Article 95 of the Treaty the Commission observes that it might be claimed that the comparison which should be made is a comparison of the obligations imposed, on the one hand, on the importer and, on the other, on the taxable person under the internal system, regardless of the fact that those persons, in the terminology of the Sixth VAT Directive, are at different marketing stages. It may be claimed that from this point of view there exists a manifest advantage for the internal market which constitutes discrimination, by reason of the fact that the importer has a maximum of 59 days' credit whereas the taxable person under the internal system has a maximum credit period of four months and 20 days.

The Commission nevertheless considers that that comparison is based on an incorrect calculation. It points out that the period of four months and 20 days under the internal systems is obtained by adding the tax period of three months and the payment period of one month and 20 days.

According to the Commission, it is generally acknowledged that the tax period of three months ensures, in general terms, neutrality between taxable persons under the internal system because they are parties to a transaction simultaneously as buyer and seller.

The Commission therefore considers that, in order to be correct, the comparison should be made between the payment period of one month and 20 days for internal transactions and the total duration of the period of credit in respect of imports, because it seems correct, as far as the real economic situation is concerned, to assimilate the tax period to a period of credit, since it is a period which is of direct benefit to the importer and, by contrast with the case of the tax period under the internal system, that benefit is not cancelled out.

2672 Moreover the Commission observes, as a subsidiary point, that the assessment of the length of the periods of credit granted to taxable persons under the internal system and to importers is distorted, and indeed rendered impossible, by the fact that an importer may deduct the import VAT before he actually pays it (unless the transaction is for the purpose of final consumption), because when an import transaction has taken place the VAT to which it is subject is regarded as input tax, which can then be deducted without the need to wait for the subsequent declaration and payment of the tax. It is possible therefore, according to the circumstances, that an import transaction taking place on a particular day may appear in a return under the internal system relating to a period expiring on the next day, whereas the tax has to be paid only on the 57th day thereafter.

The Commission therefore maintains that no discrimination can be inferred from facts which are so uncertain.

3.5. As regards the fourth question, the Commission considers that, in view of the reply which it proposes for the third question, there is no need to answer it.

3.6. The Commission therefore proposes that the replies to be given to the court making the reference should be as follows :

" Question 1 : The provisions of the Sixth VAT Directive do not preclude the laying down of different tax periods and time-limits for payment for imported goods on the one hand and goods under the internal system on the other.

Question 2: Since the provisions of the Sixth VAT Directive leave the Member States the power to lay down tax periods and time limits for payment which are different for imported goods and for goods supplied under the internal system, tax payable under the internal system the reasons underlying those differences and the value-added tax payable on are not relevant to the interpretation of importation.

its provisions.

A reply was given to this question within Question J/Article 95 of the EEC Treaty the specified period.

does not preclude Member States from laying down rules for the collection of VAT by virtue of which different tax periods and time-limits for payment

IV — Oral procedure apply to imported goods on the one

hand and to goods supplied under the At the sitting on 25 January 1984 oral internal system on the other." argument was presented and the questions put by the Court were answered by the plaintiff in the main Ill — Reply given to the ques proceedings, represented by K. Dyekjær-tion put by the C o u rt Hansen, by the defendant in the main proceedings and the Danish Govern The Commission of the European ment, both represented by M. Gregers Communities was invited by the Court to Larsen, and by the Commission of the state in writing before 15 December 1983 European Communities, represented by whether the legislation of the other F. Dahl.

Member States provides — and if so to what extent — for different accounting The Advocate General delivered his periods and time-limits for payment in opinion at the sitting on 28 February respect of the net amount of value-added 1984.

Decision

1 By order of 2 March 1983, which was received at the Court on 17 March 1983, the Østre Landsret [Eastern Division of the Danish High Court] referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty several questions on the interpretation of Article 95 of the EEC Treaty and of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes (Official Journal L 145, p. 1, hereinafter referred to as "the Sixth Directive") in order to enable it to decide whether the Danish legislation on value-added tax is compatible with those provisions.

2 The questions were raised in proceedings brought against the Danish Ministry for Fiscal Affairs by Dansk Denkavit ApS, which is registered as an importer and therefore pays import V AT in accordance with the national legislation applicable to persons who import by way of trade.

3 The national court's order indicates that, under Article 29 of the Danish Law on value-added tax, the codified version of which was published on 1 July 1982 under No 369, import VAT is paid on goods at the time of their importation; it is calculated in accordance with the rules contained in Chapter 8 of the Danish Customs Law (Articles 69 to 95). Article 85 of that Law, the codified version of which was published on 15 December 1982 under No 659, prescribes an accounting period of one month for taxes on consumption in respect of goods imported with a view to profit by consignees registered in accordance with Article 82 of the Law. The tax on consumption in respect of goods cleared through customs during the accounting period must be paid to the customs administration before the end of the month following the accounting period.

4 As regards VAT on domestic transactions, undertakings subject to VAT must, by virtue of Article 20 (1) of the Law on value-added tax, notify the authorities of the amount of input and output tax which they have borne and charged during each tax period, which, by virtue of Article 20 (2), is usually a quarter. Article 22 of the Law provides that the tax debt resulting from the difference between the input tax and the output tax during the tax period (net tax liability) is due one month after the end of the tax period and must be paid no later than 20 days thereafter.

s According to the national court's order, it is apparent from the aforementioned provisions that, in the case of internal VAT, undertakings enjoy an average credit period of two and a half months, plus 20 days, as from the delivery or invoicing of goods sold domestically; in the case of import VAT, the average credit period is one and a half months as from clearance of the imported goods through customs.

6 Having noted that difference, Dansk Denkavit asked the defendant in the main proceedings to allow it to pay import VAT on the basis of the same accounting and credit periods as those available to persons required to pay internal VAT. The refusal of that request, by decision of 27 July 1981, on the ground that Danish national legislation did not allow otherwise, gave rise to the proceedings before the national court.

7 In those proceedings, Dansk Denkavit claimed that the Danish legislation was incompatible with Community law on the ground that it was contrary to the Sixth Directive to prescribe different accounting and payment periods for internal VAT and import VAT, since the provisions of that directive could not be interpreted as requiring or allowing a difference between the periods in question.

s Moreover, Dansk Denkavit maintained that, if such a difference were permitted by the provisions of the directive, those provisions would have to be considered invalid as being incompatible with Article 95 of the EEC Treaty, because the difference between the periods in question gives rise to a difference in the actual burden to which the goods are subject as a result of those taxes, by reason of their economic effects in terms of interest.

9Before the national court, the Danish administration submitted that the national legislation in force is compatible with the directive and with Article 95 of the Treaty. It contended that the directive provides for taxes which are different by reason of their nature and the stage of marketing of the products on which they are charged and therefore authorizes different periods for internal VAT and import VAT.

io In order to resolve the conflict between those divergent interpretations of the provisions of Community law in question, the Østre Landsret submitted the following questions to the Court;

"1. Must the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes, in particular Articles 10, 22 and 23 thereof, be interpreted in such a way that the directive precludes a Member State from laying down accounting periods and periods within which payment must be made in respect of value-added tax chargeable on the importation of goods from another Member State (import VAT) which are in conformity with the periods prescribed by Article 22 (4) of the directive but which mean that registered importers obtain a shorter average period of credit for making payment of that tax to the revenue authorities than the average period of credit which the same Member State generally permits registered undertakings, including importers, in respect of payment to the revenue authorities of the net amount of value-added tax on the general turnover (net tax liability) ?

2 What significance must be attached in deciding Question 1 to the fact that the provisions of the Member State in question on the rendering of accounts and payment of import VAT may be regarded as entailing an average period of credit for importers which constitutes a reasonable counterpart to the average period of credit which purchasers at the same commercial and industrial stage can obtain from suppliers, for the payment of the purchase price, inclusive of value-added tax, when they purchase products manufactured in the Member State in question?

3 Must Article 95 of the EEC Treaty be interpreted in such a way that it precludes a Member State from laying down, in respect of import VAI, accounting periods and periods within which payment must be made in the manner described in Questions 1 and 2?

4 If the answer to Question 3 is in the affirmative, must the provisions of ' the Sixth Council Directive (77/388/EEC) of 17 May 1977 be treated as inapplicable in the judgment in the case before the Danish Court, and il so to what extent?"

The common system of VAT

„ In order to answer the questions submitted, it is necessary briefly to review the characteristics of turnover tax, as embodied in the common system ol VAT, in so far as they are relevant to this case.

,2 That common system was created, on the basis of Articles 99 and 100 of the Treaty by the First Council Directive (67/227/EEC) of 11 April 1967 on the harmonization of legislation of Member States concerning turnover taxes (Official Journal, English Special Edition 1967, p. 14). It was supplemented by the Second Council Directive (67/228/EEC) of the same date, which was replaced by the Sixth Directive.

13By virtue of Article 2 of the First Directive, the principle of the common system consists in charging on goods and services, up to and including the retail stage, a general tax on consumption which is exactly proportional to the price of the goods and services, irrespective of the number of transactions involved in the production and distribution process before the stage ot taxation. However, on each transaction, VAT is payable only after deduction of the amount of VAT charged directly on the cost of the various price components. By virtue of Article 17 (2) of the Sixth Directive the machinery for such deductions allows taxable persons to deduct from the VAT owed by them the input VAT already charged on the goods.

14That is the general framework for the operation of Article 2 of the Sixth Directive, which subjects to value-added tax, on the one hand, "the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such" (paragraph 1) and, on the other hand, "the importation of goods" (paragraph 2). "Supply of goods" is defined in Article 5 as "the transfer of the right to dispose of tangible property as pwner", whereas "the importation of goods" is defined, in Article 7, as "the entry of goods into the territory of the country".

is The Sixth Directive also harmonizes the concepts of "chargeable event" and "chargeability" of the tax; in the case of internal VAT these occur "when the goods are delivered or the services are performed" (Article 10 (2)); in the case of imported goods, however, they occur "at the time when the goods enter the territory of the country" (Article 10 (3)).

i6 As regards the obligations of taxable persons in connection with tax periods, accounting periods and time-limits for payment, paragraphs (4) and (5) of Article 22 of the Sixth Directive provide as follows with regard to internal VAT:

"4. Every taxable person shall submit a return within an interval to be determined by each Member State. This interval may not exceed two months following the end of each tax period. The tax period may be fixed by Member States as a month, two months or a quarter. However, Member States may fix different periods provided that these do not exceed a year.

5. Every taxable person shall pay the net amount of the value-added tax when submitting the return. A Member State may, however, fix a different date for the payment of the amount or may demand an interim payment."

i7 With respect to import VAT, Article 23 of the Sixth Directive provides as follows :

"As regards imported goods, Member States shall lay down the detailed rules for the making of the declarations and payments.

In particular, Member States may provide that the value-added tax payable on importation of goods by taxable persons or persons liable to tax or certain categories of these two need not be paid at the time of importation, on condition that the tax is mentioned as such in a return to be submitted under Article 22 (4)".

The first question

is In the first question, the Østre Landsret asks, essentially, whether, within the framework laid down by its provisions, the Sixth Directive allows national legislation to distinguish between internal VAT and import VAT by prescribing different accounting periods as the basis for the tax liability and different periods for payment of the tax.

i9 As is apparent from the provisions of Article 22 (4) and (5) and Article 23 of that directive, the framework within which Member States may exercise their legislative power in order to fix the periods within which the tax must be paid following the chargeable event is different for import VAT and tor internal VAT. It cannot therefore be inferred either from those provisions or from its other provisions that the Sixth Directive requires national legislation to make the periods in question either uniform or different; on the contrary, the directive leaves the Member States free to formulate, within the .framework which it lays down, the detailed arrangements regarding the periods in question.

20 Consequently, the provisions of the directive do not preclude a Member State from laying down, in respect of import VAT, accounting periods and periods for payment which are different from the periods which apply to the payment of the net tax liability under the internal system.

The second question

21 In view of the answer given to the first question, an answer to the second question submitted by the Østre Landsret is unnecessary.

The third question

22 In this question the national court asks whether, notwithstanding the provisions of the Sixth Directive, Article 95 of the EEC Treaty prohibits the fixing of different accounting and payment periods.

23 The plaintiff in the main proceedings considers that the difference in treatment is contrary to Article 95 of the Treaty because the difference between the periods in question favours domestic products, in particular because, inasmuch as the credit periods are longer for sellers under the internal system, those sellers are able during that period to use the liquid funds corresponding to the amount of the tax, which gives them an advantage in terms of interest and enables them to reduce the sale price of their products.

24 In addition, the plaintiff in the main proceedings maintains that domestic products are also favoured by the fact that, by virtue of the very principle of VAT, a domestic product is not actually taxed until the final moment when the product is supplied to the consumer because, until that moment, the VAT paid to the revenue authority by each of the successive sellers, is simultaneously offset by the deduction made by the taxable person who purchases the product from him, whereas import VAT must be paid within an average period of 45 days, even though the deduction is not made until the importer discharges his net tax liability, for which he has an average period of 95 days It concludes from this that the imported product must bear the interest on the import VAT for an average period of 50 days, whereas the domestic product does not bear any similar burden.

25 The Danish Government maintains that the decisive criterion for compatibility with Article 95 of the Treaty is the actual incidence of each tax on domestic and imported products which are in a comparable situation as regards the transactions concerned. That however, is not the position in the case of products subject to the systems of internal and import VAT, because import VAT, being a compensating charge which is necessary at the present stage of development of Community law, has no equivalent in the internal system, having regard in particular to the purchaser's obligation to pay the VAT to the revenue authorities and to the fact that the tax is calculated on the total sale value of the goods. According to the Danish Government, import VAT represents a special situation since, whilst it is an element of the internal tax system of the State, it is nevertheless impossible to find any comparable situation within the framework of a marketing transaction under the internal system, since import VAT is linked to the crossing of a frontier.

26 The Commission maintains that Article 95 of the Treaty cannot be applied in this case because import VAT and internal VAT do not relate to the same stage of marketing, since the transactions under the internal system relate to sales whereas in the case of imports they relate to purchases; moreover, for economic reasons, the two taxes differ in several respects; consequently, a comparison of the two situations with a view to ensuring the correct application of Article 95 would be hazardous, if not impossible.

27 It must be stated, in the first place, that the fact that the Sixth Directive provides for partial harmonization of the national tax laws does not exclude the application of Article 95 of the Treaty.

28 It must be added that, under the scheme of the Treaty, the provisions of Article 95, in conjunction with those on the abolition of customs duties and charges having equivalent effect, are intended to ensure the free movement of goods within the Community under normal conditions of competition, by removing all forms of protection which may result from the application of discriminatory internal taxes to products coming from other Member States.

29 In numerous previous cases the Court has held that the application of Article 95 of the Treaty is based essentially on a comparison of the internal taxes imposed on imported products with those which are imposed directly or indirectly on similar domestic product's and that, with a view to ensuring the correct application of that provision, a comparison must be made of the tax burden imposed on those products, by taking into consideration, at each stage of production or marketing, the rate of the tax, its basis of assessment and the detailed rules for its collection.

30 It is therefore possible that differences in time-limits laid down by national legislation regarding the taxation of imports and taxation of domestic transactions may, in certain circumstances, constitute an infringement of Article 95 of the Treaty, as thè Court held in its judgment of 27 February 1980 (Case 55/79, Commission v Ireland, [1980] ECR 481).

3i As regards domestic transactions, Article 22 (4) of the Sixth Directive provides that so-called "tax periods" are to be laid down, by reference to which the net tax liability of the taxable person is to be established, account being taken of the often numerous transactions to which the VAT machinery gives rise during the period in question. At the end of each tax period, taxable persons have a further period in which to prepare their return and a period within which payment must actually be made. The tax periods cannot however be assimilated to such periods for collection or payment of the tax, but constitute solely a reference period for calculating the net tax position of each taxable person.

32 In those circumstances, imported products are, as regards tax periods, in a position which cannot be compared with that of products subject to the internal system, since their tax position is net as from the time of importation.

33 Consequently, the Court considers that such tax periods need not, as Community legislation stands at the present time, be taken into consideration in the comparison of the payment and collection periods granted in respect of imports and in respect of domestic transactions.

34 The reply to the question submitted must therefore be that differences in time-limits laid down by national legislation with regard to the taxation of imports and taxation of domestic transactions may, in certain circumstances, constitute an infringement of Article' 95 of the Treaty. Nevertheless, tax periods which serve as a basis for calculating the net tax position of each taxable person under the internal system need not, as Community legislation stands at the present time, be taken into consideration in the comparison of the periods for payment. Thus, there is nothing in legislation such as that described by the national court which is capable of constituting discrimination within the meaning of Article 95 of the Treaty.

The fourth question

35 In view of the reply to the third question, no reply to the fourth question submitted by the Østre Landsret is necessary.

Costs

Costs

36 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT,

in reply to the questions submitted to it by the Østre Landsret by order of 2 March 1983, hereby rules:

1. The Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes does not prevent a Member State from laying down in respect of VAT on imports accounting periods and periods for payment which are different from the periods allowed for payment of the net tax liability under the internal system.

2. Differences in time-limits laid down by national legislation with regard to the taxation of imports and taxation of domestic transactions may, in certain circumstances, constitute an infringement of Article 95 of the Treaty. Nevertheless, tax periods which serve as a basis for calculating the net tax position of each taxable person under the internal system need not, as Community legislation stands at present, be taken into consideration in the comparison of the periods for payment. Thus, there is nothing in legislation such as that described by the national court which is capable of constituting discrimination within the meaning of Article 95 of the Treaty.

Mackenzie Stuart Koopmans Bahlmann Galmot

Pescatore O'Keeffe Bosco Due Kakouris

Delivered in open court in Luxembourg on 10 July 1984.

D. Louterman

A. J. Mackenzie Stuart Administrator

President

OPINION OF MR ADVOCATE GENERAL MANCINI DELIVERED ON 28 FEBRUARY 1984 »

Mr President, Treaty and the secondary law relating to Members of the Court, value-added tax (VAT) the Member States may lay down accounting and In these proceedings the Court is payment periods for VAT on imports requested to determine, by way of pre which are different from those prescribed liminary ruling, whether under the EEC for VAT under the internal system.

— Translated from the Italian.

OPINION OF MR ADVOCATE GENERAL MANCINI

DELIVERED ON 28 FEBRUARY 1984 ¹

Mr President,

Members of the Court,

In these proceedings the Court is requested to determine, by way of preliminary ruling, whether under the EEC Treaty and the secondary law relating to value-added tax (VAT) the Member States may lay down accounting and payment periods for VAT on imports which are different from those prescribed for VAT under the internal system.

Dansk Denkavit ApS, the plaintiff in the main proceedings, imports animal feeding-stuffs into Denmark from the Netherlands. At its request, it was registered as an importer and therefore is subject to the obligations attaching to persons liable to pay VAT on imports. The Danish rules, like those of certain other States, lay down a time-limit for the payment of VAT on imports which is different from that for internal VAT. On 3 June 1981, Dansk Denkavit, considering that system to be discriminatory, requested the Ministeriet for Skatter og Afgifter [Ministry for Fiscal Affairs, hereinafter referred to as “the Ministry”] to allow it to calculate its VAT liability on the basis laid down for internal VAT; since its request was refused, it brought an action before the Østre Landsret [Danish High Court], claiming that the rules in question were incompatible with Community law. By order of 2 March 1983, the Twelfth Chamber of the Østre Landsret stayed the proceedings and referred to the Court for a preliminary ruling four questions on the interpretation of the Sixth Council Directive of 17 May 1977 (77/388/EEC, Official Journal L 145, p. 1) and of Article 95 of the EEC Treaty.

2I shall now turn to the Danish rules. Most of them are contained in the Law on VAT, promulgated on 1 July 1982 under No 369, and the Customs Law, promulgated on 15 December 1982 under No 659. Article 20 (1) of the Law on VAT lays down the procedures for payment of the internal tax. The taxable person must, no later than one month and 20 days after the end of each tax period (which is normally one quarter), declare to the revenue authorities the amount of tax which it has charged on its taxable turnover (the so-called “output tax”) and the tax invoiced to it by its supplier (“input tax”). The difference between those two amounts constitutes the net tax position; the tax becomes chargeable one month after the end of the tax period and, if there is a net liability, payment must be made within the 20 days following.

In the case of goods imported from another Member State, the calculation and payment procedures are laid down by the Customs Law. Article 85 thereof provides that each return is to cover a period of one month and that the tax on the goods cleared through customs during that period is to be paid by the end of the month following the expiry of that period.

According to the calculations made by the national court, under the internal system undertakings are allowed, for the purpose of discharging the net tax liability, an average credit period of two and a half months as from the date when the goods or services are supplied or invoiced. To this must be added the period of 20 days for payment. In the case of VAT on imports, however, the average credit period is one and a half months as from clearance of the goods through customs.

3I shall now consider the questions submitted to the Court by the Østre Landsret. The national court asks in the first place whether the Sixth Directive, and in particular Articles 10, 22 and 23 thereof, must “interpreted in such a way that the directive precludes a Member State from laying down accounting periods and periods within which payment must be made in respect of value-added tax chargeable on the importation of goods from another Member State ... which are in conformity with the periods prescribed by Article 22 (4) of the directive but which mean that registered importers obtain a shorter average period of credit for making payment of that tax to the revenue authorities than the average period of credit which the same Member State generally permits registered undertakings, including importers, in respect of payment to the revenue authorities of the net amount of value-added tax on the general turnover (net tax liability)”.

I shall examine the provisions to which the Danish court refers. After defining the terms “chargeable event” and “chargeability of tax”, Article 10 distinguishes the times when they occur according to whether the tax is charged on internal transactions or on imports. In the case of imports, the chargeable event occurs and the tax becomes chargeable when the goods are brought into the country. In the case of internal transactions, the chargeable event occurs and the tax becomes chargeable when the goods are delivered or the services are performed. If they involve successive statements of account or payments, the transactions are deemed to have been completed upon the expiry of the periods to which such statements of account or payments pertain.

Articles 22 to 24 relate to the taxable person's obligations and they too make a distinction between internal VAT and VAT on imports. For internal trade, Article 22 (4) provides that every taxable person is to submit a return within a period to be determined by each Member State; however, the period must not end later than two months after the end of each tax period. The tax period may be fixed at one month, two months, a quarter or longer periods not exceeding a year. Paragraph (5) goes on to provide that: “Every taxable person shall pay the net amount of the value-added tax when submitting the return;” Member States may however “fix a different date for the payment of the amount or may demand an interim payment”.

As regards VAT on imports, Article 23 provides that “the detailed rules for the making of the declaration and payments” are to be laid down by the Member States; it authorizes the Member States to “provide that the value-added tax payable on importation of goods by taxable persons or persons liable to tax ... need not be paid at the time of importation”, provided that the tax “is indicated as such in a return to be submitted under Article 22 (4)”.

These rules appear to me to be absolutely clear. In the case of the internal system, the directive identifies three phases for the discharge of the obligations incumbent upon taxable persons. The first is the tax period, and the obligation which is imposed upon the Member States in connection with that period concerns its maximum duration: it may not exceed one year. The second phase is the period within which the return is to be made and here also Member States may not go beyond a certain limit: the return is to be made within the two months following the end of the tax period. The third phase is the period within which the net liability must be discharged or the periodical payments must be made, and as a rule the end of that period must coincide with the submission of the return. However, Member States retain the power to extend the period and the directive does not even limit the time for which they may allow payment to be deferred in such a case.

With respect to tax on imports, on the other hand, the basic principle is that the VAT is to be paid when the goods are imported. However, if the Member States exercise their right to prescribe a different date for payment, the VAT is to be mentioned “in a return to be submitted under Article 22 (4)”, that is to say in accordance with the rules laid down for the internal system.

Thus, the directive leaves the Member States a wide margin of discretion regarding the phasing of the obligations attaching to taxable persons. In particular, none of its provisions requires the time-limits for returns and payments in full or interim payments to be the same for internal tax as for tax on imports. Moreover, the reference in Article 23 to Article 22 (4) does nothing to change that facts. It seems to me to be obvious that that reference relates not to the abovementioned time-limits (which are governed by Article 22 (5) in any case), but only to the manner in which the returns are to be drawn up. That aspect is in fact dealt with in the second subparagraph of Article 24 (2).

4The Østre Landsret asks the Court in the second place “what significance must be attached in deciding Question 1 to the fact that the provisions of the Member State in question on the rendering of accounts and payment of value-added tax on imports may be regarded as entailing an average period of credit for importers which constitutes a reasonable counterpart to the average period of credit which purchasers at the same commercial and industrial stage can obtain from suppliers for the payment of the purchase price, inclusive of value-added tax, when they purchase products manufactured in the Member State in question”.

As I have just said, as far as time-limits for the payment of VAT and the collection of interim payments in respect of imports are concerned, the Sixth Directive leaves the Member States a considerable degree of discretion. The reasons for which the Member States may consider it necessary to prescribe periods which are longer or shorter than, or even the same as, those applied under the internal system cannot therefore be taken as a criterion for interpretation of the directive.

5In its third question, the national court asks whether the laying down of different accounting periods and periods within which payment must be made in respect of VAT under the internal system and VAT on imports is contrary to Article 95 of the Treaty. I would point out that, under the first two paragraphs of that article, “no Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products ... [or] any internal taxation of such a nature as to afford indirect protection to other products”.

Within the scheme of the Treaty, those rules supplement the provisions on the abolition of customs duties and charges having equivalent effect; in other words, they are intended to ensure free movement of goods by removing any protectionist measures resulting from the imposition of internal taxes which discriminate against goods originating in other Member States. Such discrimination will of course be evident from a comparison between the internal taxes levied on imponed goods and those charged on similar domestic goods. As the Court has held, in order to apply Article 95 correctly it is necessary to compare the taxation treatment accorded to the products “taking into account at each production or marketing stage the rate of tax, its basis of assessment and the procedures for levying it” (cf. most recently the judgment of 5. 5. 1982 in Case 15/81, Schul v Inspecteur der Invoerrechten en Accijnzen, [1982] ECR 1409, paragraph 27 of the decision).

In that statement, it seems to me that particular importance attaches to the phrase “at each production or marketing stage”; in other words, the comparison between the tax burdens must be made with reference to the same marketing stage. However, is it possible to do that in this case? I think not and therefore I do not consider that the problem referred to the Court by the Østre Landsret can be resolved by reliance upon the precedent laid down in the judgment of 27 February 1980 in Case 55/79 (Commissions Ireland [1980] ECR 481). It is true that in that judgment the Court held that a State discriminates against imported products where, in the case of a tax on consumption, its laws provide for a deferment of payment available only to domestic producers; but in that case the precondition laid down by this Court for the application of Article 95 was satisfied.

Here, as I have said, that is not the case; that is because Community harmonization of the rules on VAT is incomplete or, in other words, the continuity of a tax system which is in itself neutral at domestic and international level is broken by the existence of tax frontiers between the Member States. It is well known that those frontiers are intended to be abolished; however, until they are abolished and whilst “VAT on imports” continues to exist, that tax will necessarily be sui generis and will be governed by its own rules. In particular, it will not be possible to ask the Member States to make the time-limits for payment of VAT on imports uniform with those for domestic transactions; it will not be possible to ask them to do so — and this is the important point — because the two different time-limits relate to different marketing stages. Under the internal system the payment of VAT relates to a sale and in the case of imports it relates to a purchase.

6That response will be criticized as being formalistic. Dansk Denkavit rejects it and emphasizes the financial benefits accruing to undertakings on the domestic market from the difference between the time-limits for payment of the tax. The latter, it states, retain for a longer period the funds required to discharge their tax liability and thereby derive an advantage in terms of interest which enables them to charge lower prices. How in those circumstances can it be denied that there is discrimination of the kind prohibited by Article 95 ?

The argument is attractive but is not convincing. Let us accept the premise on which it is based: in other words, let us disregard the various marketing stages to which the time-limits laid down for VAT on imports and internal VAT relate and compare two similar situations, namely that of the importer and that of the purchaser on the Danish market. I have already pointed out (in paragraph 2 above) that there are legally prescribed time-limits for the importer to make his return and his payment in respect of VAT which correspond to an average period of credit of one and a half months. As regards the purchaser, however, it is necessary to take account of commercial practice and in particular the periods of credit which, in his capacity as collector of the tax, the supplier grants to the purchaser. The Commission and the defendant government have shown (and the Østre Landsret confirms in the second question) that in Denmark those periods are on average 45 days. The result is that, even if the non-formalistic approach preferred by Denkavit is adopted, there can be no question of any discrimination.

7The last question submitted by the national court concerns the repercussions for the Sixth Directive in the event of systems such as the Danish system being held to be incompatible with Article 95 of the Treaty. Since I do not believe that such systems are incompatible (cf. paragraphs 5 and 6 above), the question is, as far as I am concerned, devoid of purpose.

Conclusion

8In view of the foregoing considerations, I suggest that the Court should reply as follows to the questions submitted by the Twelfth Chamber of the Østre Landsret by judgment of 2 March 1983 in the proceedings between Dansk Denkavit ApS and the Ministeriet for Skatter og Afgifter:

1The Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes (in particular Articles 10, 22 and 23) is to be interpreted as not prohibiting Member States from laying down, in respect of VAT on imports, return and payment periods which are different from those applicable to goods under the internal system.

2Because under the provisions of the Sixth Directive the Member States retain the power to lay down, in respect of VAT on imports, return and payment periods which are different from those applicable to goods under the internal system, the reasons which influence the Member States in deciding upon those time-limits do not affect the interpretation of the directive.

3Article 95 of the EEC Treaty does not prohibit Member States from laying down return and payment periods which are different for VAT on imports and internal VAT.

¹ Translated from the Italian.