C-454/98 Schmeink & Cofreth and Strobel

JUDGMENT OF THE COURT 19 September 2000 *

In Case C-454/98,

REFERENCE to the Court under Article 177 of the EC Treaty (now Article 234 EC) by the Bundesfinanzhof (Germany) for a preliminary ruling in the proceedings pending before that court between

Schmeink & Cofreth AG & Co. KG

and

Finanzamt Borken, and between

Manfred Strobel

and

Finanzamt Esslingen,

on the interpretation of Article 21(1)(c) of the Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1),

* Language of the case: German.

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, J.C. Moitinho de Almeida (Rapporteur) and L. Sevón (Presidents of Chambers), P.J.G. Kapteyn, J.-P. Puissochet, P. Jann, H. Ragnemalm, M. Wathelet and V. Skouris, Judges,

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

after considering the written observations submitted on behalf of:

— Schmeink & Cofreth AG & Co. KG, by J. Hartmann and A. Schiller, Tax Advisers,

— the German Government, by W.-D. Plessing, Ministerialrat in the Federal Ministry for Economic Affairs, and C.-D. Quassowski, Regierungsdirektor in the same Ministry, acting as Agents,

— the Commission of the European Communities, by E. Traversa, Legal Adviser, and A. Buschmann, national civil servant seconded to the Legal Service, acting as Agents,

having regard to the report of the Judge-Rapporteur, after hearing the Opinion of the Advocate General at the sitting on 13 April 2000,

gives the following

Judgment

Legal context and the dispute

1By order of 15 October 1998, received at the Court on 11 December 1998, the Bundesfinanzhof (Federal Finance Court) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty (now Article 234 EC) three questions on the interpretation of Article 21(1)(c) of the Sixth Council Directive 77/388/ EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, 'the Sixth Directive').

2The questions were raised in two sets of proceedings between (i) Schmeink & Cofreth AG & Co. KG ('Schmeink') and the Finanzamt (Tax Office), Borken, and (ii) Mr Strobel and the Finanzamt, Esslingen, concerning the refusal of the Finanzamt to exempt Schmeink and Mr Strobel on grounds of equity from paying value added tax ('VAT') which had been improperly mentioned on an invoice. The Sixth Directive

3Article 21 of the Sixth Directive provides:

'The following shall be liable to pay value added tax:

1. under the internal system:

(c) any person who mentions the value added tax on an invoice or other document serving as invoice;

...'

National legislation relating to VAT

4Paragraph 14(2) of the Umsatzsteuergesetz 1991 (Turnover Tax Law; 'UStG'), which deals with the settlement of VAT in cases where the amount of tax mentioned on the invoice is incorrect, provides:

'If in an invoice in respect of a supply or other service a trader mentions separately a higher amount of tax than he owes under this Law in respect of the transaction, then he shall also be liable for the higher amount. If he adjusts the amount of tax vis-à-vis the recipient of the service, Paragraph 17(1) shall apply correspondingly. '

5Paragraph 14(3) of the UStG provides, in relation to the settlement of VAT in cases where the tax mentioned on the invoice cannot be justified:

'Where a person mentions an amount of tax separately in an invoice, and he is not entitled to mention the tax separately, he shall be liable to pay the amount mentioned. The same shall apply where a person mentions an amount of tax separately in any other document which he uses to make out a bill, in the manner of a trader making a supply or providing a service, even though he is not a trader or is not making a supply or providing any other service.'

6Paragraph 17(1) of the UStG provides:

'When the basis of calculation in respect of a taxable transaction is modified for the purposes of Paragraph 1(1)(1) to (3):

1. the economic operator who carried out the transaction must adjust correspondingly the amount of tax due in respect of the transaction,

2. the economic operator who is the recipient in relation to the transaction must adjust correspondingly the deduction of input tax which he has claimed in respect of the transaction ...'

7Paragraph 190(3) of the Umsatzsteuer-Richtlinien (Turnover-Tax Guidelines) provides:

'Unlike Paragraph 14(2) of the UStG, Paragraph 14(3) thereof does not provide for adjustment. However, if collecting the tax which has been wrongly mentioned results in a situation involving material hardship, it is accepted that, on grounds of equity, the issuer of an invoice may correct it by analogous application of Paragraph 14(2) of the UStG... It should be noted that a situation of material hardship exists, for example, where a service in respect of which an invoice has been issued has been provided by the person who issued the invoice and it may reasonably be claimed that it was merely as a result of error that the name of the recipient of the service was incorrect or that the service was wrongly described.'

8Paragraph 227 of the Abgaberordnung (Tax Code, 'AO') provides:

'The tax authorities may waive, in whole or in part, claims arising from a liability to tax where it would be inequitable to pursue them in the circumstances of the particular case; in such circumstances, amounts which have already been paid may be reimbursed or taken into account.'

The disputes in the main proceedings and the questions submitted for a preliminary ruling

Schmeink

9Schmeink acquired 50% of the shares in a GmbH (a German-law limited liability company, 'the GmbH') for which it paid DEM 3 781 220. On 31 December 1991 it issued to the GmbH a statement of account including an invoice mentioning that sum in respect of advisory services which it had, however, never provided. Schmeink expressly included on that statement of account a sum of DEM 529 370.80 in respect of VAT.

10The pro forma invoice was one of the matters used by the GmbH in support of an application for an investment grant.

11Following a special VAT investigation in March 1993, the Finanzamt, Borken, by a revised notice of 14 April 1993, assessed the VAT payable by Schmeink at the amount shown separately in the statement of account.

12The GmbH did not claim any right to a deduction by virtue of the statement of account and returned it to Schmeink on 19 July 1993.

13On 1 July 1994, Schmeink sent an application to the Finanzamt, Borken, seeking a waiver of the VAT on grounds of equity under Paragraph 227 of the AO.

14By decision of 12 September 1994, the Finanzamt, Borken, dismissed the application.

15Schmeink appealed against the decision of the Finanzamt, Borken, to the Finanzgericht (Finance Court), Münster, which, by judgment of 23 November 1995, confirmed the Finanzamts decision.

16On 24 March 1997 Schmeink appealed on a point of law ('Revision') to the Bundesfinanzhof (Federal Finance Court) against the judgment of the Finanzgericht.

Strobel

17During 1992 and 1993, when he was running an office-appliances business, Mr Strobel issued several leasing undertakings with invoices relating to deliveries which had never taken place.

18Mr Strobel was using these bogus invoices to try to disguise losses in one of his subsidiaries and make profitability appear better than it was. The invoices were paid by the leasing undertakings. Subsequently, Mr Strobel repaid the undertakings concerned the amounts which they had paid him.

19Mr Strobel made the sums in question subject to VAT. For their part, the leasing undertakings deducted the amount of VAT shown on the relevant invoices on account of input tax.

20In 1994 Mr Strobel voluntarily filed a declaration setting out the true position with the Public Prosecutor's Office and with the Finanzamt, Esslingen, informing them of the bogus invoices and their addressees. The Finanzamt, Esslingen, passed this information to the tax offices responsible for the addressees of the invoices so that they could proceed to regularise the position regarding the deduction of input tax.

21Following Mr Strobel's declaration, an investigation was carried out by the tax authorities and the Finanzamt, Esslingen, assessed Mr Strobel for VAT in an amount equal to the amounts mentioned separately on the invoices, namely DEM 519 346.36 for 1992 and DEM 653 156.51 for 1993.

22On 24 August 1995, Mr Strobel applied to the Finanzamt, Esslingen, for waiver of the VAT on grounds of equity under Paragraph 227 of the AO.

23By decision of 15 November 1995, the Finanzamt, Esslingen, dismissed the application.

24Mr Strobel appealed against the decision of the Finanzamt, Esslingen, to the Finanzgericht (Finance Court), Baden-Württemberg, which, by judgment of 9 July 1997, confirmed the Finanzamts decision.

25On 19 August 1997 Mr Strobel appealed on a point of law ('Revision') to the Bundesfinanzhof (Federal Finance Court) against the judgment of the Finanzgericht.

26The Bundesfinanzhof joined the two cases. It observed that the determination of VAT in accordance with the second alternative of the second sentence of Paragraph 14(3) of the UStG was justified since Schmeink and Mr Strobel had issued invoices mentioning this tax separately and had delivered them to the addressees of the invoices without having provided the services described therein.

27The Bundesfinanzhof observed that the objective of Paragraph 14(3) of the UStG is to prevent fraud in cases where invoices are issued showing a separate amount for tax and where the transactions in question are not carried out. In the case of Paragraph 14(3) of the UStG, the legislature has not, as it has in the case of Paragraph 14(2) thereof, provided for any possibility of adjustment in order not to undermine the deterrent effect of Paragraph 14(3).

28According to a judgment of the Bundesfinanzhof of 21 February 1980 (BStBl II 1980, p. 283), equitable measures are called for in cases in which the issuer of the invoice has wholly, and in sufficient time, eliminated the risk of loss of tax revenues. In such cases Paragraph 14(3) of the UStG does not have a deterrent effect, particularly where the issuer of the invoice succeeds in retrieving and destroying the invoices issued before they are used by their recipients for tax-deduction purposes or where the issuer of the invoice, although he has not managed to retrieve the invoice, eliminates the risk to tax revenue by taking alternative measures in good time, by, inter alia, making a declaration to his local Tax Office or to the Tax Office of the addressee of the invoice.

29The Bundesfinanzhof referred, however, to paragraph 18 of the judgment in Case C-342/87 Genius Holding v Staatssecretaris van Financiën [1989] ECR 4227 which states that, in order to ensure the application of the principle of neutrality of VAT, it is for the Member States to provide in their internal legal systems for the possibility of correcting any tax improperly invoiced where the issuer of the invoice shows that he acted in good faith. The Bundesfinanzhof also referred to a judgment of the Bundesgerichtshof (Federal Court) of 23 November 1995, IX ZR 225/94 (Neue Juristische Wochenschrift 1996, p. 842), in which that court held that, taking into account the fact that Paragraph 14(3) of the UStG did not provide for any possibility of adjustment, the way to comply with Genius Holding was by a waiver of tax under Paragraph 227 of the AO.

30The Bundesfinanzhof observed that it is not possible to infer from the scheme of Paragraph 14(3) that good faith is a prerequisite for adjustment. Such a requirement, which emerges from the case-law of the Court, does not arise from the principle of neutrality. Restricting the right of the issuer of the invoice to a remission of VAT to cases involving good faith is neither adequate nor compatible with the scheme of the VAT system. Instead, a more appropriate criterion for the purposes of disallowing adjustment of the amount of the tax mentioned in the invoice would be to take into account the fact that the corresponding tax deduction may actually have been obtained by the addressee of the invoice. If it were to transpire that it was no longer possible to cancel a deduction already granted to the addressee of an invoice, the issuer of the invoice would be held liable for the shortfall in tax revenues in order to ensure tax neutrality.

31If adjustment were made dependent on proof of the good faith of the issuer of the invoice, Article 21(1)(c) of the Sixth Directive would as a result come to resemble a provision of criminal law. The question of who ultimately bears the burden of the tax mentioned would depend solely on the existence of 'culpable conduct', namely acting in bad faith. That legal position would give rise to some constitutional difficulties.

32Therefore the Bundesfinanzhof decided to stay proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

'1. Does Community law require that provision be made to allow adjustment of an improperly invoiced tax as part of the procedure for determining the tax or is it sufficient for the Member States to permit adjustment only in a later procedure for determining whether payment of the tax is equitable (on "objective" grounds)?

2. Is it an imperative prerequisite for adjusting an improperly invoiced tax that the issuer of the invoice should demonstrate good faith or are there other circumstances in which an invoice may be adjusted (and, if so, what are those circumstances)?

3. What conditions must be satisfied for the issuer of an invoice to be acting in good faith?'

Admissibility

33The German Government disputes the admissibility of the first and third questions on the ground that answers to those questions would not assist in deciding the case in the main proceedings.

34As regards the first question, the German Government claims that in the main proceedings the procedure for determining tax has ended and that appeals may no longer be brought in respect of the notices of assessment, with the result that adjustment of amounts wrongly determined as part of the assessment procedure is no longer possible. The disputes in the main proceedings are concerned solely with the dismissal of the application for equitable remission under Paragraph 227 of the AO of sums to be paid by way of VAT and not with the tax assessment notices issued in accordance with the second alternative of the second sentence of Paragraph 14(3) of the UStG.

35As to the third question, the German Government submits that, in the present case, there are no grounds for considering the concept of good faith. According to the Government, issuing the invoices was an abuse, and not an error, since Schmeink and Mr Strobel knew that they had no right to show VAT as a separate entry on the invoices.

36In that regard, it must be observed that the procedure provided for by Article 177 of the Treaty is an instrument of cooperation between the Court of Justice and the national courts, by means of which the Court of Justice provides the national courts with the points of interpretation of Community law which they need in order to decide the disputes before them (see, inter alia, the order in Case C-361/97 Nour v Burgenländische Gebietskrankenkasse [1998] ECR I-3101, paragraph 10).

37It is settled case-law that it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (see, in particular, Case C-415/93 Union Royale Belge des Sociétés de Football Association and Others v Bosman and Others [1995] ECR I-4921, paragraph 59; Case C-200/97 Ecotrade v AFS [1998] ECR I-7907, paragraph 25; and Case C-254/98 Schutzverband gegen unlauteren Wettbewerb v TK-Heimdienst Sass [2000] ECR I-151, paragraph 13).

38In the present case, it is not obvious that the interpretation of Community law that the national court seeks by its first question bears no relation to the subject-matter of the cases in the main proceedings.

39In the event that Community law should be interpreted as meaning that Member States are obliged to make it possible under their national law to adjust VAT which has been improperly invoiced, adjustment could be effected, inter alia, as part of a later procedure initiated on equitable grounds, such as the procedure provided for in Paragraph 227 of the AO.

40In addition, the objection raised by the German Government goes to the substance of the question rather than its admissibility, in that it is based on the premiss that the adjustment concerned may not form part of a later procedure initiated on equitable grounds but should have been part of the procedure for determining tax.

41Similarly, as regards the third question, the German Government's argument that the concept of good faith should not be considered in the present case, since the issuing of invoices by taxpayers who, as in the case in the main proceedings, know that they have no right to mention VAT as a separate entry constitutes an abuse, in fact has to do with what is meant by good faith and therefore also goes to the substance of the question.

42It follows that the first and third questions are admissible.

The questions referred for a preliminary ruling

The second question

43By its second question, which it is appropriate to consider first, the national court is asking essentially whether the issuer of an invoice must have acted in good faith in order to obtain adjustment of VAT which has been improperly invoiced.

44The German Government submits that, in the absence of any Community rules on the subject, it is for the Member States to lay down the detailed rules on adjustment of VAT which has been improperly invoiced.

45According to the German Government, the requirements of Community law resulting from Genius Holding are met by the fact that it is possible under German law for a person who has issued an invoice in good faith, but who has committed an excusable error, to adjust on objective grounds improperly invoiced VAT by means of equitable measures.

46The German Government further submits that, where VAT has been improperly mentioned not in good faith but abusively by the issuer of the invoice because he knows either that he is not a taxable person or that the supply of goods or services in respect of which the invoice has been issued has not been carried out, the principle of neutrality of VAT does not require there to be any possibility of adjusting the VAT improperly invoiced. In such cases, the rule of national law that a person who mentions an amount in respect of VAT separately on an invoice is liable for that amount operates as a penalty and a deterrent.

47It should first be observed that, under Article 21(1)(c) of the Sixth Directive, any person who mentions VAT on an invoice or other document serving as invoice is liable to pay VAT under the internal system.

48Secondly, it should be observed that the Sixth Directive does not contain any provisions relating to the adjustment by the issuer of the invoice of VAT which has been improperly invoiced. The Sixth Directive merely defines, in Article 20, the conditions which must be complied with in order that deduction of input taxes may be adjusted at the level of the person to whom goods or services have been provided.

49In those circumstances, it is for the Member States to lay down the conditions in which improperly invoiced VAT may be adjusted.

50The national court has pointed out that, according to Genius Holding, an issuer of an invoice is not entitled to adjust VAT which has been improperly invoiced unless he can show that he acted in good faith.

51It should be noted in that regard that in Genius Holding the plaintiff in the main proceedings had deducted VAT in respect of which he had been invoiced by two of his subcontractors. This was an infringement of the applicable national law under which the subcontractors were not liable to pay VAT in respect of services provided to the principal contractor, the tax being due only by the latter on the amount which he invoiced to the person who had placed the order. The tax authorities had taken the view that VAT had been improperly invoiced to the plaintiff and that it could not therefore deduct it. The authorities had therefore reassessed the taxable amount.

52Following the plaintiff's claim that Article 17(2) of the Sixth Directive allowed any tax mentioned on the invoice to be deducted, the national court decided to refer to the Court of Justice the question whether Article 17(2) was to be interpreted in that way.

53In answering that question, the Court held in Genius Holding that the right to deduct provided for in the Sixth Directive did not apply to tax which is due solely because it is mentioned on the invoice. The Court explained in paragraph 13 of its judgment that the right to deduct could be exercised only in respect of taxes actually due, that is to say, the taxes corresponding to a transaction subject to VAT or paid in so far as they were due.

54As the Court observed in paragraph 17 of its judgment in Genius Holding, if any tax which has been invoiced could be deducted, even though it does not correspond to taxes legally due, tax evasion would be made easier.

55In Genius Holding the deductions which had been made initially by the plaintiff had therefore to be adjusted in accordance with Article 20(1)(a) of the Sixth Directive.

56That was the context in which the Court held in paragraph 18 of its judgment in Genius Holding that, in order to ensure the application of the principle of neutrality of VAT, it was for the Member States to provide in their internal legal systems for the possibility of correcting any tax improperly invoiced where the issuer of the invoice shows that he acted in good faith.

57It should be observed that, unlike the situation in Genius Holding, in the cases in the main proceedings the risk of any loss in tax revenues has been completely eliminated in sufficient time either because the issuer of the invoice has retrieved and destroyed the invoice before its recipient used it or because, although the invoice has been used, the issuer of the invoice has settled the amount shown separately on the invoice.

58In such circumstances, where the issuer of the invoice has in sufficient time wholly eliminated the risk of any loss in tax revenues, the principle of the neutrality of VAT requires that VAT which has been improperly invoiced can be adjusted without such adjustment being made conditional by the Member States upon the issuer of the relevant invoice having acted in good faith.

59It should be noted in that respect that the measures which the Member States may adopt under Article 22(8) of the Sixth Directive in order to ensure the correct levying and collection of the tax and for the prevention of fraud must not go further than is necessary to attain such objectives (Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others v Agencia Estatal de Administración Tributaria [2000] ECR I-1577, paragraph 52). They may not therefore be used in such a way that they would have the effect of undermining the neutrality of VAT, which is a fundamental principle of the common system of VAT established by the relevant Community legislation.

60It must be noted that the requirement that the issuer of the invoice should demonstrate his good faith when he has in sufficient time wholly eliminated any risk of lower tax yields is not necessary to ensure the collection of VAT or to prevent tax evasion (see, to this effect, Case C-361/96 Grandes Sources d'Eaux Minérales Françaises v Bundesamt für Finanzen [1998] ECR I-3495, paragraphs 29 and 30).

61By contrast, as was the case in Genius Holding, where the risk of any loss of tax revenues has not been wholly eliminated, the Member States may make the possibility of adjusting VAT which has been improperly invoiced conditional upon the issuer of the relevant invoice having acted in good faith. As the national court has stated, if it transpires that it is no longer possible to cancel a deduction granted in respect of the addressee of the invoice and the issuer of the invoice has not acted in good faith, he may be held responsible for the shortfall in tax revenues in order to ensure tax neutrality.

62Finally it should be noted that, as the Commission has rightly submitted, Community law does not prevent Member States from treating the issuing of bogus invoices improperly mentioning VAT as attempted tax evasion and from imposing, in such a case, fines or penalty payments prescribed by their domestic law.

63The answer to the second question must therefore be that where the issuer of the invoice has in sufficient time wholly eliminated the risk of any loss in tax revenues, the principle of the neutrality of VAT requires that VAT which has been improperly invoiced can be adjusted without such adjustment being made conditional upon the issuer of the relevant invoice having acted in good faith.

The first question

64By its first question, which it is appropriate to consider in the second place, the national court is asking essentially what type of procedure is appropriate as regards the adjustment of VAT which has been improperly invoiced.

65As is apparent from paragraphs 47 to 49 above, it is for the Member States to lay down the conditions in which improperly invoiced VAT may be adjusted.

66The Member States may therefore decide, in particular, whether such adjustment should take place as part of the procedure for determining the tax payable or in the course of a subsequent procedure.

67As the Advocate General has observed in point 20 of his Opinion, a Member State may take the view that an adjustment of improperly invoiced VAT should take place during a later procedure in order to allow the tax authorities to verify that any risk of loss of revenue has been removed, especially where a deduction has been made in respect of the VAT in question.

68Nevertheless, when such a risk has been eliminated, adjustment in respect of improperly invoiced VAT cannot be dependent upon the discretion of the tax authorities.

69It follows from the answer to the second question that, in such a situation, the principle of the neutrality of VAT requires that improperly invoiced VAT can be adjusted.

70The answer to be given to the first question must therefore be that it is for the Member States to lay down the procedures to apply as regards the adjustment of improperly invoiced VAT, provided that such adjustment is not dependent on the discretion of the tax authorities.

The third question

71Taking account of the answers given to the first and second questions, it is not necessary to reply to the third question.

Costs

72The costs incurred by the German Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, 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 answer to the questions referred to it by the Bundesfinanzhof by order of 15 October 1998, hereby rules:

1. Where the issuer of the invoice has in sufficient time wholly eliminated the risk of any loss in tax revenues, the principle of the neutrality of VAT requires that VAT which has been improperly invoiced can be adjusted without such adjustment being made conditional upon the issuer of the relevant invoice having acted in good faith.

2. It is for the Member States to lay down the procedures to apply as regards the adjustment of improperly invoiced VAT, provided that such adjustment is not dependent on the discretion of the tax authorities.

Rodriguez Iglesias Moitinho de Almeida Sevón

Kapteyn Puissochet Jann

Ragnemalm Wathelet Skouris

Delivered in open court in Luxembourg on 19 September 2000.

R. Grass G.C. Rodríguez Iglesias

Registrar President

OPINION OF ADVOCATE GENERAL FENNELLY delivered on 13 April 2000 *

Introduction

1In this preliminary reference the Court is asked to consider the circumstances in which the Sixth VAT Directive obliges or permits Member States to provide for the remission of liability incurred in respect of VAT wrongly mentioned on invoices regarding transactions that have never taken place. Essentially, this involves consideration of the scope of the principle enunciated in Genius Holding v Staatssecretaris van Financiën and, in particular, of whether an incorrect invoice must have been issued in good faith for the issuer later to seek its rectification.

I — The legal and factual background

A — The legal context

2Under Article 2(1) of the Sixth Directive 'the supply of goods and services effected

* Original language: English.

for consideration ... by a taxable person acting as such' is subject to VAT. Under Article 17(2)(a) a right to make a deduction will arise in respect of VAT 'due or paid' by a taxable person 'in respect of goods or services supplied or to be supplied to him by another taxable person'. Article 20 permits Member States to adjust '[t]he initial deduction' allowed to a taxable person in certain circumstances. Article 21 is concerned with the '[p]ersons liable for payment of VAT'. Article 21(1) provides, in relevant part, that:

'The following shall be liable to pay value added tax:

1. under the internal system:

(c) any person who mentions the value added tax on an invoice or other document serving as invoice.'

3In German law, the Umsatzsteuergesetz (Turnover Tax Law) 1991 (hereinafter the 'UStG') distinguishes between VAT that is incorrectly mentioned on invoices (see subparagraph 2 of Paragraph 14 of the UStG) and that which is improperly mentioned (see subparagraph 3 of Paragraph 14 of the UStG), the latter being relevant in the present case. Those provisions are worded, respectively, as follows:

'If in an invoice in respect of a supply or other service an entrepreneur mentions separately a higher amount than he owes for the transaction under this Law, then he shall also be liable for the higher amount. If he rectifies the amount of tax vis-à-vis the recipient of the service, subparagraph 1 of Paragraph 17 shall apply correspondingly';

'Where a person mentions an amount of tax separately in an invoice, and he is not entitled to mention the tax separately, he shall be liable to pay the amount mentioned. The same shall apply where a person mentions an amount of tax separately in any other document which he uses to make out a bill, in the manner of an entrepreneur making a supply or providing a service, even though he is not an entrepreneur or is not making a supply or providing any other service.'

4Paragraph 190, subparagraph 3 of the German Umsatzsteuer-Richtlinien (Turn over-Tax Instructions) provides that, if the imposition of liability of even an improperly mentioned tax results in material hardship, the tax authorities — in derogation from the statutory rules — may, on grounds of equity, allow the issuer to rectify the invoice by analogous application of the more generous provision of subparagraph 2 of Paragraph 14 of the UStG. In this respect, under Paragraph 227 of the Abgabenordnung (Tax Code, hereinafter 'AC·'), it is provided that:

'The tax authorities may waive, in whole or in part, claims arising from a liability to tax where it would be inequitable to pursue them in the circumstances of the particular case ... .'

B — The facts and main proceedings

5The main proceedings concern two cases joined by the referring court.

6Schmeink & Cofreth, the plaintiff and appellant in the first action (hereinafter 'Schmeink'), issued, on 31 December 1991, to a company whose shares it was acquiring a pro forma invoice mentioning the sum of DEM 529 370.80 in respect of VAT on the charges made for advice which was never actually provided. The invoice was apparently used a year later by the latter company to assist it in an application for an investment grant. Following a special investigation by the defendant, the Finanzamt (Tax Office), Borken, Germany (hereinafter 'the first defendant'), into Schmeink's VAT position, the first defendant, on 14 April 1993, assessed Schmeink for VAT as shown on the relevant invoice, in accordance with subparagraph 3 of Paragraph 14 of the UStG.

7In a subsequent application pursuant to Paragraph 227 of the AO, Schmeink sought unsuccessfully to have the relevant VAT remitted by the defendant on grounds of equity. Its appeal against that refusal to the Finanzgericht (Finance Court), Münster was also rejected. It appealed to the Bundesfinanzhof (Federal Finance Court), relying upon an earlier judgment of 21 February 1980 of that court (hereinafter 'the 1980 judgment') to the effect that it would suffice for the grant of equitable relief under Paragraph 227 of the AO if the issuer of the invoice wholly and in good time eliminated the exposure to risk of tax revenues.

8Mr Strobel, the plaintiff and appellant in the second action, ran a data-technology, office-appliances business during the relevant years, 1992 and 1993. He issued fictitious invoices to various leasing undertakings relating to supplies which were never made in order to disguise losses and boost the profitability of one of his subsidiaries. The leasing undertakings paid the invoices and deducted the turnover tax mentioned therein as input tax. Mr Strobel made the consideration in each case subject to VAT, but agreed to repay the purchase price to the leasing undertakings by instalments. In 1994 Mr Strobel voluntarily informed the local Public Prosecutor's Office and the Finanzamt Esslingen, Germany (hereinafter 'the second defendant') of the incorrect declarations. Mr Strobel was assessed, in accordance with the second alternative of the second sentence of subparagraph 3 of Paragraph 14 of the UStG, for the VAT mentioned in the r e l e v a nt i n v o i c e s, n a m e ly DEM 519 3 4 6 . 36 for 1992 and DEM 653 156.51 for 1993.

9On 24 August 1995 Mr Strobel applied for remission of those (and of other) amounts of VAT on grounds of equity under Paragraph 227 of the AO. This was rejected by the second defendant. Mr Strobel then appealed unsuccessfully to the Finanzgericht, Baden-Würtemberg. He further appealed to the Bundesfinanzhof alleging that Paragraph 227 of the AO was applicable because, although he did not demand the return of the fictitious invoices, he had acted in sufficient time to prevent risk to tax revenues.

10In their appeals, both plaintiffs have essentially contended that, to benefit from the possibility of remission on equitable grounds, it should suffice that the issuer of the relevant invoices eliminates the risk of loss to the tax authorities, whether by retrieving the invoices issued from the addressee(s) before they are used for tax-deduction purposes, or by discharging the tax declared thereon and then ensuring that the addressees repay the authorities any inputs improperly deducted on the basis of the fictitious invoices.

11In the order for reference, the Bundesfinanzhof points out that, according to the 1980 judgment, equitable relief under Paragraph 227 of the AO is available if the issuer of the false invoice either retrieves it before it is used or otherwise takes steps to remove the risk to tax revenues, for example by informing the relevant fiscal authorities. However, in a judgment of 23 November 1995, the Bundesgerichtshof (Federal Court of Justice), relying upon Article 20(1)(a) of the Sixth Directive and Genius Holding, held that, for remission of tax liability occurring under Paragraph 14(3) of the UStG to be permissible under Paragraph 227 of the AO, it was necessary, in addition to the removal of risk of loss to the tax authorities, for there to have been 'an excusable error' on the part of the issuer of the invoice. The Bundesfinanzhof, in its present order for reference, appears inclined, on the basis of its own case-law, to reject the imposition of such a condition. As the errors of both plaintiffs in the present proceedings were not unintentional, it questions, inter alia, whether the VAT principle of fiscal neutrality requires that the issuer of an invoice establish its 'good faith' in order to be allowed remission of liability arising on foot of an invoice in circumstances where all risk of loss of revenue has been eliminated. It suggests that such an interpretation could give rise to constitutional difficulties in Germany, because the national provision implementing Article 21(1)(c) of the Sixth Directive would approximate to a penal provision under which the burden of tax mentioned on invoices would be imposed on issuers, even where their conduct did not threaten the principle of tax neutrality.

12The following questions have been referred to the Court by the Bundesfinanzhof for a preliminary ruling:

'1. Does Community law require that provision be made to allow rectification of an improperly invoiced tax as part of the procedure for determining the tax or is it sufficient for the Member States to permit rectification only in a later procedure for determining whether payment of the tax is equitable (on "objective" grounds)?

2. Is it an imperative prerequisite for rectifying an improperly invoiced tax that the issuer of the invoice should demonstrate good faith or are there other circumstances in which an invoice may be rectified (and, if so, what are those circumstances)?

3. What conditions must be satisfied for the issuer of an invoice to be acting in good faith?'

III — Observations

13Written observations only were submitted by Schmeink, Germany and the Commission. 4 It is clear from the observations that the questions referred raise two distinct issues; namely what type of rectification procedure should be available and whether bona fides must be proved by a taxable person seeking a remission. Only if an affirmative answer is given on the latter point does the Court need to consider the nature of the requisite good faith.

IV — Analysis

A — Required rectification procedures

14Schmeink, supported on this point by the Commission, suggests that it is not sufficient for Member States merely to allow rectification of VAT unjustifiably mentioned on invoices pursuant to an 'equitable procedure' subsequent to the fixing of the taxpayer's initial tax liability. It claims that the principle of neutrality, as interpreted, inter alia, in Gibbs v Commissioners of Customs and Excise 5 and Molenheide and Others v Belgian State, requires that all unduly levied VAT must be rectifiable. To permit to national administrations discretion in this regard would render impossible or excessively difficult the exercise of Community-law rights, contrary to the Fantask line of case-law.

15Germany proposes that it is unnecessary to answer the first question since the main proceedings concern appeals against lower-court decisions rejecting applications brought under Paragraph 227 of the AO in circumstances where the tax liability of the plaintiffs has been established. In the alternative, it submits that the principle of neutrality only requires Member States to ensure that VAT levied in error be rectifi able. As the Sixth Directive does not establish any specific provisions regarding rectification, Member States are free to determine the applicable procedures.

16I do not agree that it is unnecessary to answer the first question. It is true that the plaintiffs' appeals in the main proceedings concern the equitable procedure available under Paragraph 227 of the AO where the tax has been paid. However, it is clear from the order for reference that this occurred because there is no autonomous possibility of rectification under Paragraph 14(3) of the UStG in cases where the VAT in question is improperly mentioned on the relevant invoice. Thus, it is clear that if a wider possibility of rectification is required by Community law it will benefit the plaintiffs, particularly as the Bundesfinanzhof seems quite willing to interpret Paragraph 227 of the AO more broadly. In any event, it is for that court alone to assess the relevance, for the proceedings before it, of the questions which it submits to the Court. The Court is, in principle, bound to answer such questions unless it is quite obvious that the interpretation of Community law sought is entirely irrelevant for the resolution of the dispute before the national court.

17It is therefore necessary to consider whether the limited possibility of rectification now apparently available in German law is compatible with Community law. It is important to recall that the Sixth Directive does not exhaustively harmonise the VAT systems of the Member States. On the contrary:

'... it is intended to establish a uniform basis so as to guarantee the neutrality of the system and, as indicated in the 12th recital in its preamble, to harmonise the rules governing deductions "to the extent that they affect the actual amounts collected" and to ensure that the deductible proportion [is] calculated in a similar manner in all the Member States.' 9

18This is particularly true in respect of invoices. In Jeunehomme and Others v Belgian State, the Court confirmed that Member States are entitled, in addition to the minimum information required by Article 22(3)(b) of the Sixth Directive, to specify the information to be contained in invoices grounding the exercise of the right to deduct. Thus, I would reiterate the view that I expressed in Molenheide that Member States enjoy both 'a wide discretion in implementing the provisions of the VAT system' and, '[m]ore generally, the responsibility for managing the entire VAT system...'. It is in this light that the adequacy of the rectification possibilities available in German law must be assessed.

19The Sixth Directive is silent regarding the possibility of rectification. It must, consequently, be for the Member States, as the Court acknowledged explicitly in Genius Holding, to provide, in their respective national laws, for the possibility of rectifying tax liabilities arising on the face of issued invoices.

20It would, however, be incompatible with the principle of fiscal neutrality if national law were to make no provision for rectification. Although the Court confirmed in Molenheide that, in exercising powers in respect of matters falling outside the scope of the Sixth Directive, Member States must ensure that rights derived by taxable persons under the Directive are not infringed or rendered excessively difficult to invoke, I am not satisfied that the fact that a Member State, in cases of improperly mentioned VAT, provides for the possibility of rectification only subsequent to the determination of the relevant tax liability infringes the principle of proportionality. Indeed, it follows in my opinion from the express requirement of Article 21(1)(c) of the Sixth Directive to the effect that persons who mention VAT on invoices are liable to pay it that a Member State may legitimately take the view that an ex post facto reimbursement system provides adequate protection against the risk of loss of revenue posed by incorrect or fictitious invoices, especially where a deduction has been made in respect of the VAT in question. A system of retroactive rectification may also act as a deterrent to the misuse of invoices. B — The conditions for rectification

21The question whether good faith on the part of the issuer of the invoice constitutes in Community law a prerequisite for rectification is, in reality, the principal issue raised by this reference.

22Where the invoice issued has not given rise to a deduction and has been returned to its issuer, Schmeink contends that the principle of fiscal neutrality requires that a claim for rectification be accorded without the necessity of proving good faith. It also asserts that to require bona fides in the absence of any possibility of abusive claims for deduction being made would infringe the principle of proportionality.

23Germany submits that the principle of fiscal neutrality requires that rectification be permitted only under the precise conditions laid down in Genius Holding, i.e. where good faith has been demonstrated. In the alternative, it contends that good faith may exist only where the issuer of the invoice has committed an excusable error, such as a clerical oversight or an error of law or any other similar mistake.

24The Commission submits that denial of rectification to taxable persons who have not acted in good faith, even where there is no danger of any loss of VAT revenues, would infringe the principle of neutrality. It would disadvantage them by comparison with other taxable persons who are only liable to pay VAT in respect of concrete transactions. In its view, Genius Holding, which is based on Article 21(1)(c) of the Sixth Directive, concerns only those cases where invoices are issued in error. More generally, it follows, both from the fact that, under Article 2, VAT liability is predicated on the occurrence of a taxable transaction and from the principle of neutrality, that no VAT liability arises where no such transaction occurs.

25It is common case in the observations submitted to the Court that the possibility of rectification presupposes that all appropriate steps have been taken by the taxable person to ensure that no deduction of the VAT mentioned therein occurs. Thus, in the main proceedings, Schmeink was able to recover the relevant invoice before a deduction was made while Mr Strobel discharged the VAT due and later sought its remission through rectification. In my opinion, the elimination of all risk to the VAT yield of the relevant Member State is the essential precondition for any rectification claim. In order to assess whether a Member State may require the issuer also to demonstrate bona fides, it is necessary to analyse the case-law concerning invoices.

26Jeunehomme, decided 17 months before Genius Holding, concerned a claim made by a taxable person who objected to the disallowance of a deduction which had been based on invoices received from certain suppliers. The tax administration took the view that the relevant invoices contained insufficient information. The case thus concerned the right of deduction, which is expressly recognised by Articles 17 and 18 of the Sixth Directive and which, pursuant to Article 20(1)(a), is subject to adjustment whenever the deduction made is 'higher or lower than that to which the taxable person was entitled'. The Court held that the Member States' competence to regulate the information which may be required to appear on invoices was 'limited to what is necessary to ensure the correct levying of value-added tax and permit supervision by the tax authorities'. It is clear that the Court was concerned to ensure that Member States have sufficient but not unlimited latitude to apply rules designed to verify, as Advocate General Sir Gordon Slynn put it in his Opinion in Jeunehomme, 'the genuineness of the transaction' in respect of which the input was claimed; i.e. to check that the supplier in question has actually 'accounted for the VAT'.

27In Genius Holding the question of rectification arose but only indirectly, as the case was essentially concerned with an adjustment made to a deduction that had initially been allowed. The need for adjustment arose because Genius Holding had deducted tax invoiced to it by certain subcontractors although the relevant Netherlands VAT rules at the time precluded such subcontractors from charging VAT. Genius Holding maintained, with the support of the Commission, that, if a taxable person who has paid invoices were unable to deduct VAT therein charged to it by its suppliers, this would result, contrary to the principle of neutrality, in double taxation. The Member States who submitted observations called for a strict interpretation whereby only VAT actually due could be deducted, although the Netherlands' position was 'less radical' in that the relevant Dutch administrative practice was first to look to the issuer of the invoice for payment of such VAT and '[i]t [wa]s only if that step appear[ed] to have no chance of producing a result that, under certain conditions, for example, in the absence of good faith on the part of the person who received the invoice, the tax deducted [wa]s later charged to the latter'. It is not, however, stated in the report of the case whether the suppliers — the subcontractors in that case — had actually paid the VAT mentioned on the invoices sent to Genius Holding, nor, indeed, whether Genius Holding had actually paid the invoices including the relevant VAT. It is, thus, not possible definitively to consider either that the former acted merely in error in invoicing the VAT in question to the latter or whether the latter was in collusion with the former. 8

28In Genius Holding the Court interpreted Article 17(2)(a) of the Sixth Directive, under which a taxable person may deduct VAT 'due or paid to in respect of goods or services supplied or to be supplied to him by another person', to mean that 'the right to deduct may be exercised only in respect of taxes actually due, that is to say, the taxes corresponding to a transaction subject to VAT or paid in so far as they were due'. Consequently, it held that national tax authorities are entitled, under Article 20(1)(a), to adjust a deduction 'even if it corresponds to the amount of the tax mentioned on the invoice or other document serving as invoice'. 0 It justified this construction by observing that it was 'best adapted to prevent tax evasion, which would be made easier if any tax invoiced could be deducted'.

29This is the context in which the Court then proceeded, effectively by way of an obiter dictum, to address the argument based on the principle of neutrality. Genius Holding, the recipient of the invoices in question, supported by the Commission, contended that to limit its right to deduct would infringe that principle. In response, the Court declared that it was for the Member States 'to provide in their internal legal systems for the possibility of correcting any tax improperly invoiced where the person who issued the invoice shows that he acted in good faith'. However, it seems clear that the issue of good faith did not arise on the facts of the case. First, the case concerned a recipient of invoices and, secondly, the Dutch practice, by reference to which it was presumably inspired (see paragraph 27 above), mentioned the absence of good faith on the part of invoice recipients as being only one possible basis upon which the tax deducted could be charged to the latter. Nevertheless, it is clear that the Court posited, in the interest of preventing tax evasion, good faith as a requirement for rectification of tax liability, though it left open the issue of the precise relationship between that requirement and the principle of fiscal neutrality where there is no risk of evasion.

30Before considering that relationship, it is helpful to refer to the more recent case-law in which the Court has considered the role of invoices or documents serving as invoices. To my mind, that case-law supports the view that I have expressed above (paragraph 25) that the concern to prevent tax evasion constitutes the foremost Com munity-law concern in respect of the exercise by Member States of their competence to administer their national VAT systems.

31In Reisdorf v Finanzamt Köln-West the Court was asked whether a taxable person may be absolved from the normal requirement of producing the original of an invoice where the right of deduction has been exercised in respect of the VAT therein mentioned. It held that 'the Sixth Directive gives Member States the power to determine the rules relating to the supervision of the exercise of the right to deduct input tax, in particular the manner in which taxable persons are to establish that right' and that this includes 'the power to require production of the original invoice when tax inspections are carried out and also, where a taxable person no longer holds it, to allow him to produce other cogent evidence that the transaction in respect of which the deduction is claimed actually took place'. The Court was clearly concerned, as it was in Jeunehomme, to ensure that the Member States may counter tax evasion by permitting deductions to be made only where the taxable person is able to demonstrate the genuineness of the claimed VAT input.

32The central importance of the fight against fraud also emerges from Langhorst. That case concerned certain credit notes issued by a livestock dealer to Mr Langhorst, a farmer, which were deemed to serve as invoices. They incorrectly mentioned a higher rate of VAT than that which Mr Langhorst was actually liable to pay. Referring to Article 21(1)(c) of the Sixth Directive and the objective of preventing fraud, the Court held that because Mr Langhorst, having agreed to the self-billing system operated by the dealer, could be regarded as the author of the notes, he was liable for the VAT therein mentioned.

33The Court's concern with fraud prevention is also evident in its decision in Grandes Sources d'Eaux Minérales Françaises v Bundesamt für Finanzen, where the plaintiff could only produce, as evidence of its entitlement to a reimbursement of VAT, a duplicate invoice, the original having been lost for reasons beyond its control. While satisfied that the requirement for originals 'reflect[ed] the general purpose of the Eighth Directive, which is stated in the sixth recital in the preamble as being that of preventing "certain forms of tax evasion or avoidance"' and, in particular, the re-use of invoices 'to make further applications for a refund', the Court, none the less, held that Article 3(a) of that Directive '[could] not be interpreted as precluding Member States from accepting such an application for a refund in exceptional circumstances where there is no doubt that the transaction which led to the application for a refund occurred ... and where it is established that, in view of the circumstances, there is no risk of further applications for a refund'. 9 Referring to the principle of proportionality, it then observed that 'exclusion of the possibility mentioned [was] not necessary in this case to prevent fraud or tax evasion'.

34The precise scope which the Court wished to attribute to the requirement of good faith by its dictum in Genius Holding is uncertain, given that, from the information on the case-file, it appears that the issuer acted merely in error in invoicing Genius Holding for the VAT in question. Having regard to the later case-law, where the concern with preventing straightforward tax evasion or the dishonest creation of VAT-deductible claims predominates, it seems likely, in my opinion, that the Court intended by its reference in Genius Holding to good faith to do no more than refer to a principle to be applied when relevant to the rules of Community law and, in particular, the Community VAT system. Accordingly, if it is established that the invoice was issued in good faith, it would manifestly infringe the principle of neutrality to prevent the taxable person from availing of a right of rectification where there has been no loss or risk of loss of tax revenue. I consider that, in such circumstances, Community law would require Member States to permit the rectification of VAT declarations affected by erroneous invoices, in accordance with national rules. To my mind, this interpretation effectively underlies the dictum in Genius Holding. However, I agree with the Commission that the same principle should logically also require that rectification be possible where, despite the occurrence of an inexcusable initial error or the presence of bad faith when an invoice was drawn up, appropriate and effective steps have been taken by the issuer to ensure that no loss of tax revenues occurred.

35This interpretation is not precluded by Article 21(1)(c) of the Sixth Directive, which refers to the issuer's liability for the VAT mentioned on the invoice. As the Commission points out, Community law would not preclude Member States from prescribing whatever measures they deem appropriate, such as fines or penalty payments, whether of a penal or administrative nature, to act as a deterrent to the issuance or attempted issuance of false or fictitious invoices. Community law would also, in my opinion, not preclude Member States from prescribing that the burden of proving the absence of any threat to VAT revenues rests upon the responsible taxable person. This would a fortiori be the case where good faith was initially lacking.

36If the Court accepted this interpretation, it would not need to consider what, for Community VAT law purposes, should be the substantive content of the notion of 'good faith'. In the light of the widely differing current practices in national law as to the meaning of that notion, and in the absence of any explicit provisions dealing with this issue in the Sixth Directive, it should, in my opinion, be left to the Community legislature, if it considers it appropriate, to develop a Community-law definition of 'good faith'. However, if the Court were to disagree with this recommendation, neither Genius Holding nor the later case-law concerning invoices, to my mind, provides support for the view that there is a Community-law obligation on Member States not to permit rectification save in those cases where good faith is demonstrated. In the relevant part of its judgment in Genius Holding, the Court held that 'it is for the Member States to provide in their internal legal systems' for rectification 'where the person who issued the invoice shows that he acted in good faith'. An ordinary interpretation of this passage does not suggest that the Court intended to impose stringent requirements on Member States. In particular, I do not think it supports the view that Member States would be precluded from permitting, within the framework of their own national VAT systems, the rectification of VAT liability arising from declarations based on erroneous or fictitious invoices. Moreover, I see no good policy reason for imposing such an obligation on Member States.

37I am conscious that Advocate General Léger, in his Opinion in Langhorst, has construed the principle underlying particularly Genius Holding as requiring that 'the person who issues the invoice mentioning excess tax must pay it, unless he is able to prove that there was no fraudulent intent behind the amount stated'. However, that case, unlike the present, did not raise the issue of rectification. I do not construe that passage as referring to fraud unrelated 38. On this interpretation of the Sixth to the VAT system. To my mind, the Directive, it is unnecessary to consider the principle mentioned in that passage should third question posed by the Bundesfinanz not deprive the Member States of the hof. Accordingly, I am of the view that autonomy, in applying their national VAT rectification of incorrect or false invoices systems, to grant rectification even where should not be discretionary but, rather, bona fides on the part of the taxpayer was should always effectively be possible provided the taxable person who is responsible wanting, provided there is no danger to for issuing them demonstrates that no loss VAT receipts.

of VAT revenue will occur.

IV — Conclusion

39In the light of the foregoing, I propose that the Court answer the questions referred as follows:

(1) Community law does not require that national law allow rectification of an improperly invoiced tax as part of the procedure during which the initial tax liability of a taxable person who has issued erroneous or fictitious invoices is determined, provided that it is effectively possible for that person later to seek rectification of the sum thereby levied and that the availability of such relief, where the appropriate conditions are satisfied, is not discretionary;

(2) The only condition imposed by Community law in respect of claims for the rectification of VAT mentioned erroneously or fictitiously on invoices is that the issuer of the invoice in question must be able to establish, to the satisfaction of the relevant national-tax authorities, that no loss of VAT revenue will occur. Community law precludes national VAT laws from rendering such claims subject to an additional requirement of good faith on the part of the issuer at the moment when the invoice was issued.

Notes

(1) Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (hereinafter 'the Sixth Directive'); OJ 1977 L 145, p. 1.

(2) Case C-342/87 [1989] ECR 4227 (hereinafter 'Genius Holding').

(3) IX ZR 225/95, Neue Juristische Wochenschrift 1996, 842. The case concerned an action for damages against a tax lawyer who had allegedly negligently failed to bring an action against the determination by the tax administration that his client was liable to pay certain VAT mentioned incorrectly by the latter on an invoice. In a judgment of

(8) March 1994, the Finanzgericht Münster, referring to Genius Holding, had held that rectification could occur where good faith was established; see 15 K 6635/91 U, Entscheidungen der Finanzgerichte 1994, p. 813.

(4) The Court dispensed with the necessity for an oral hearing in accordance with Article 104(4) of its Rules of Procedure.

(5) Case C-317/94 [1996] ECR I-5339, paragraph 28.

(6) Joined Cases C-286/94, C-341/95, C-401/95 and C-47/96 [1997] ECR I-7281, paragraph 42 (hereinafter 'Molenheide').

(7) Case C-188/95 Fantask and Others v Industriministeriet

(119) 97] ECR I-6783.

(8) See, inter alia, Case C-415/93 Union Royale des Sociétés de Football Association and Others v Bosman and Others [1995] ECR I-4921, paragraphs 59 and 61, confirmed recently in Case C-254/98 Schutzverband gegen unlauteren Wettbewerb v TK-Heimdienst Sass [2000] ECR I - 151, paragraph 13.

(9) Molenheide, op cit., paragraph 42.

(10) Joined Cases 123/87 and 330/87 [1988] ECR 4517 (hereinafter 'Jeunehomme').

(11) Op. cit., paragraph 41.

(12) See, in particular, paragraph 48.

(13) As one German author has aptly pointed out, given the ex ante risk, at the time when an incorrect invoice is issued, of such loss occurring, the good faith of the issuer should discharge its liability only where ex poste no actual loss occurs; see Reiss, Umsatzsteuer-Rundschau 1999, 170, p. 174.

(14) Paragraph 17.

(15) See [1988] ECR 4517, p. 4534.

(16) They were required under so-called 'transfer rules' to pass on the liability for paying the VAT due on services performed by them for the benefit of the recipient (principal) contractor to the latter, who would then include it in its own VAT declaration while simultaneously being entitled to claim a deduction in respect of it. The Netherlands had been authorised by the Council, pursuant to Article 27 of the Sixth Directive, to adopt those rules.

(17) See paragraph 15 of the Opinion of Advocate General Mischo (emphasis in original).

(18) Advocate General Mischo was clearly of the view that both hypotheses were possible; see paragraph 17 of his Opinion. The assumption made by the Commission in its observations in the present case that Genius Holding involved a mere error, although probably correct, is therefore not supported by the case-report.

(19) Paragraph 13.

(20) Paragraph 16.

(21) Paragraph 17.

(22) Genius Holding, paragraph 18 (emphasis added).

(23) Case C-85/95 [1996] ECR I-6257.

(24) Ibid., paragraph 29, where reference is made to paragraphs 26 and 27 of my Opinion in that case.

(25) Case C-141/96 Finanzamt Osnabrück-Land v Langhorst [1997] ECR I-5073 (hereinafter 'Langhorst').

(26) See, in particular, paragraph 28.

(27) Case C-361/96 [1998] ECR I-3495.

(28) The claim in that case was made by a French-registered taxable person in respect of German VAT paid in respect of the termination of an agreement with a German supplier. It was brought pursuant to the Eighth Council Directive

(79) /1072/EEC of 6 December 1979 on the harmonisation of the laws of the Member States relating to turnover tax — Arrangements for the refund of value added tax to persons not established in the territory of the country (OJ 1979 L 331, p. 11, hereinafter 'the Eighth Directive'), Article 3(a) of which requires explicitly the attachment to refund applications of the ‘originals of invoices ...'.

(29) Paragraphs 28 and 29.

(30) Paragraph 30.

(31) The fact that seemingly only some Member State laws at present permit rectification even where there was bad faith cannot affect the interpretation of the obligations flowing from the Sixth Directive, which is to be construed autonomously.

(32) It would appear that only in Austrian, Belgian, German, Portuguese and United Kingdom law has there been any consideration of what 'good faith' should mean for VAT purposes. Thus, in German law, for example, the case-law to which allusion is made in paragraph 11 and the accompanying footnote 3 above would require the error to be excusable, which would not be the case where the issuer acted with gross negligence or naivety. This view would appear to be implicit in United Kingdom law, where the right at least to issue a credit note in order to correct an earlier erroneous invoice is predicated on the existence of 'a genuine mistake or overcharge'; see British Machinery Co Ltd v Customs and Excise Commissioners [1977] VATTR 187. However, the Portuguese VAT system proceeds on the basis that the good faith of the issuer is presumed, while the proof of bad faith would appear to require an intention on the part of the issuer to defraud the State; see Article 19(3) of the CIVA (Value Added Tax Code). This latter view would also appear to be relevant in Austria, where an academic VAT commentator would permit rectification once the bad faith was not directed at evading VAT liability; see Ruppe, Umsatzsteuergesetz

(199) 4 — Kommentar, 1999, p. 918.

(33) Loc. cit., paragraph 18 (emphasis added).

(34) Paragraph 60.