C-712/17 EN.SA.

JUDGMENT OF THE COURT (First Chamber)

8 May 2019 ( *1 )

(Reference for a preliminary ruling — Value added tax (VAT) — Fictitious transactions — Impossibility of deducting the tax — Obligation on the issuer of an invoice to pay the VAT indicated thereon — Fine in an amount equal to the amount of the improperly deducted VAT — Whether compatible with the principles of VAT neutrality and proportionality)

In Case C‑712/17,

REQUEST for a preliminary ruling under Article 267 TFEU from the Commissione tributaria regionale di Lombardia (Regional Tax Court, Lombardy, Italy), made by decision of 9 October 2017, received at the Court on 20 December 2017, in the proceedings

EN.SA. Srl

v

Agenzia delle Entrate — Direzione Regionale Lombardia Ufficio Contenzioso,

THE COURT (First Chamber),

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

Advocate General: J. Kokott,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

the Italian Government, by G. Palmieri, acting as Agent, and by M. Capolupo and G. De Bellis, avvocati dello Stato,

the European Commission, by N. Gossement and F. Tomat, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 17 January 2019,

gives the following

Judgment

Legal context and the dispute

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

2The request has been made in the course of proceedings between EN.SA. Srl and the Agenzia delle Entrate — Direzione Regionale della Lombardia (the Italian Tax Authority — Lombardy Regional Department Disputes office) (‘the Tax Authority’) concerning a revised assessment to tax to which that company was made subject, establishing a tax liability for additional value added tax (VAT), together with interest and penalties.

Legal context

EU law

3Article 63 of the VAT Directive provides:

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

4Article 167 of that directive provides:

‘A right of deduction shall arise at the time the deductible tax becomes chargeable.’

5According to Article 168 of that directive:

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

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

…’

6Article 203 of the VAT Directive states:

‘VAT shall be payable by any person who enters the VAT on an invoice.’

7According to Article 273 of the VAT Directive:

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

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

Italian law

8The Decreto del Presidente della Repubblica n. 633 — Istituzione e disciplina dell’imposta sul valore aggiunto (Decree No 633 of the President of the Republic establishing and regulating value added tax) of 26 October 1972, in the version applicable to the main proceedings (‘DPR No 633/1972’), provides in Article 17(1):

‘Tax is payable by persons supplying taxable goods or providing taxable services, who must pay that tax to the tax authorities, cumulatively for all transactions carried out and net of the deduction provided for in Article 19, in accordance with the detailed rules and the terms laid down in Title II.’

9Under Article 19(1) of DPR No 633/1972:

‘In order to calculate the tax payable pursuant to Article 17(1) or the surplus referred to in Article 30(2), the amount of tax paid or payable by the taxable person or charged to him in respect of goods and services imported or purchased in the course of a business, artistic activity or profession shall be deductible from the amount of tax on the transactions carried out. The right to deduct the tax on the goods and services purchased or imported shall arise at the time when the tax becomes chargeable and may be exercised, at the latest, in the tax return for the second year following the year in which the right to deduct arose and subject to the conditions applying at the time when the right itself arose.’

10Article 21 of DPR No 633/1972 provides:

‘If invoices for non-existent transactions are issued, or if in the invoice the revenue arising from the transactions or the related taxes is stated to be higher than it is in reality, tax shall be due for the whole amount indicated or corresponding to the particulars of the invoices.’

11Article 6(6) of Decreto legislativo n. 471 (Decree Law No 471) of 18 December 1997, in the version applicable at the time of the facts at issue in the main proceedings, provided:

‘Anyone unlawfully deducting tax paid, due or charged to him in return for the right to pass it on to another party shall incur an administrative penalty equal to the amount deducted.’

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

12EN.SA. is an Italian company that produces and distributes electricity. Its tax returns for the 2009 and 2010 tax years were corrected by the Tax Authority. That authority rejected, pursuant to Article 19 of DPR No 633/1972, the deduction of VAT relating to transactions for the purchase of electricity which it considered to be non-existent because there was no actual transmission of energy, and imposed on EN.SA., pursuant to Article 6(6) of the Decree Law referred to in paragraph 11 above, a fine equal to the amount of the improperly deducted VAT.

13By contrast, the Tax Authority did not find that EN.SA. had failed to meet its obligation to pay the VAT due for each of its transactions for the sale of electricity.

14According to that authority, those different transactions form part of a circular mechanism for the sale of the same quantities of energy at the same prices between companies forming part of the same group. They were, it found, carried out with the sole intention of allowing the ‘Green Network’ group to demonstrate robust accounts in order to be able to benefit from bank financing.

15The Tax Authority issued EN.SA. with two assessment notices each corresponding to a tax liability for additional VAT, together with interest and penalties, in the respective amounts of EUR 47618491 for 2009 and EUR 22001078 for 2010.

16EN.SA. brought actions against those notices before the Commissione Tributaria Provinciale di Milano (Provincial Tax Court, Milan, Italy). After those actions had been dismissed, the company appealed against the judgment handed down by that court to the Commissione Tributaria Regionale per la Lombardia (Regional Tax Court, Lombardy, Italy).

17The referring court stresses the fact that the transactions involving the fictitious sale of electricity at issue in the main proceedings conferred no tax benefit on the companies carrying out those transactions, owing to the circular nature of the transactions, and that no financial loss was incurred by the Treasury. The referring court is unsure whether, in the present case, in regard to fictitious transactions, it is consistent with the principles of EU law to make the trader bear the VAT burden. The referring court takes the view that, if there is no tax fraud, the principle of the neutrality of VAT should prevail and that refusal to deduct VAT duly paid and the imposition of an additional fine equal to the amount of the improperly deducted VAT are not proportionate to the infringement consisting in the issuing of invoices for fictitious transactions.

18In those circumstances, the Commissione tributaria regionale di Lombardia (Regional Tax Court, Lombardy) stayed the proceedings and referred the following question to the Court for a preliminary ruling:

‘In the event of transactions found to be non-existent, which did not cause harm to the Treasury and did not confer any tax benefit on the taxpayer, are national rules resulting from the application of Article 19 (Deduction) and 21(7) (Invoicing of transactions) of [DPR No 633/1972] and of Article 6(6) of Decreto Legislativo No 471 of 18 December 1997 (Breach of obligations relating to documentation, registration and detection of transactions) consistent with the EU law principles on VAT laid down by the Court of Justice, when their simultaneous application brings about a situation in which:

the tax paid on purchases by the transferee is not deductible for any of the transactions at issue which relate to the same person and the same taxable amount;

the tax is levied on the corresponding parallel sale transactions, which are also regarded as non-existent, and paid by the transferor (and a recovery of sums unduly paid is excluded);

a penalty is levied that is equal to the amount of tax deemed non-deductible?’

Consideration of the question referred

19Although, formally, the referring court has limited its questions to the interpretation of the ‘EU law principles on VAT laid down by the Court of Justice’, specifically mentioning the principles of proportionality and of neutrality, that fact does not preclude the Court from providing the referring court with all the elements of interpretation of EU law that may be of assistance in adjudicating in the case pending before it, whether or not the referring court has referred to them in the wording of its questions. In that regard, it is for the Court of Justice to extract from all the information provided by the referring court, in particular from the grounds for the order for reference, the points of that law which require interpretation, having regard to the subject matter of the dispute in the main proceedings (see, to that effect, judgments of 4 October 2018, L.E.G.O., C‑242/17, EU:C:2018:804, paragraph 43; of 7 February 2019, Escribano Vindel, C‑49/18, EU:C:2019:106, paragraph 32, and of 12 February 2019, TC, C‑492/18 PPU, EU:C:2019:108, paragraph 37).

The first two parts of the question

20By the first two parts of its question, the referring court asks, in essence, whether, in a situation such as that at issue in the main proceedings, in which fictitious circular sales of electricity made between the same traders for the same amounts did not cause tax losses, the VAT Directive must be interpreted as precluding national legislation which excludes the right to deduct VAT relating to fictitious transactions while requiring the persons who enter VAT on an invoice to pay that tax, including in respect of a fictitious transaction.

21As a preliminary remark, it must be noted that the two rules of national law cited above reflect analogous provisions of the VAT Directive.

22First, the non-deductibility of VAT relating to fictitious transactions follows from Article 168 of that directive.

23It follows from that article that a taxable person may deduct the VAT charged on goods and services which he uses for the purposes of his taxed transactions. In other words, the right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the output transactions that gave rise to the right to deduct (see, to that effect, judgment of 6 September 2012, Portugal Telecom, C‑496/11, EU:C:2012:557, paragraph 36).

24However, when the purchase of goods or services is fictitious, it cannot be connected in any way to the taxable person’s output transactions. As a result, when there is no actual delivery of goods or performance of services, no right to deduct can arise (judgment of 27 June 2018, SGI and Valériane, C‑459/17 and C‑460/17, EU:C:2018:501, paragraph 36).

25It is therefore inherent in the VAT scheme that a fictitious transaction cannot give rise to an entitlement to deduct that tax.

26Second, the obligation on any person who enters VAT on an invoice to pay that tax is expressly set out in Article 203 of the VAT Directive. In that regard, the Court has stated that the VAT indicated on an invoice is payable by the issuer of the invoice even in the absence of an actual taxable transaction (see, to that effect, judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 38).

27In principle, the two rules mentioned above do not apply to the same trader. It is the person who issues an invoice who is liable for the payment of the VAT shown on that invoice, while the non-deductibility of the VAT relating to fictitious transactions is enforceable against the recipient of that invoice.

28However, in the specific situation at issue in the main proceedings, the requirements set out in Articles 168 and 203 of the VAT Directive apply jointly to the same trader. The same quantities of electricity were fictitiously resold at the same price between companies of the same group in a circular manner, in such a way that those companies sold and re-purchased those quantities at the same price. In this way, each trader was both the issuer of an invoice indicating VAT payable and the recipient of another invoice, relating to the purchase of the same amount of electricity at the same price and indicating the same amount of VAT. As the issuer of an invoice and in application of the rule set out in Article 203 of the VAT Directive, EN.SA. was thus liable to pay to the Treasury the amount of VAT indicated on that invoice. By contrast, in view of the fictitious nature of the transactions in question, that company was not permitted, in accordance with the requirement resulting from Article 168 of that directive, to deduct the tax in the same amount as that indicated on the invoice which it received relating to the re-purchase of the electricity.

29For those reasons, the referring court asks whether the combined application of those requirements, resulting from national law and taken from the VAT Directive, to a trader in a situation such as that of EN.SA. is contrary to the principle of VAT neutrality.

30It is true that the VAT deduction system, as provided for in Article 167 et seq. of the VAT Directive, seeks to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities, so long as these are subject to VAT. As a result, the common system of VAT ensures complete neutrality of taxation of all economic activities, provided that they are themselves subject in principle to VAT (see, to that effect, judgments of 29 October 2009, NCC Construction Danmark, C‑174/08, EU:C:2009:669, paragraph 27, and of 22 December 2010, RBS Deutschland Holdings, C‑277/09, EU:C:2010:810, paragraph 38).

31However, the prevention of possible tax evasion, avoidance and abuse is also an objective recognised and encouraged by the VAT Directive (judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 46). The risk of loss of tax revenue is, however, not, in principle, completely eliminated as long as the recipient of an invoice incorrectly showing VAT might still use it for the purposes of obtaining a deduction of that tax (judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 31).

32From that point of view, the obligation set out in Article 203 of the VAT Directive seeks to eliminate the risk of loss of tax revenue which the right of deduction might entail (judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 32).

33However, in accordance with the principle of proportionality, that obligation must not go beyond what is necessary to achieve that objective and, in particular, must not have an excessive adverse effect on the principle of VAT neutrality. In a situation such as that at issue in the main proceedings, in which the fictitious nature of the transactions precludes deductibility of the tax, compliance with the principle of VAT neutrality is ensured by the possibility, to be provided for by the Member States, of correcting any tax improperly invoiced in the case where the issuer of the invoice shows that he acted in good faith or where he has, in sufficient time, wholly eliminated the risk of any loss of tax revenue (judgment of 31 January 2013, Stroy trans, C‑642/11, EU:C:2013:54, paragraph 43).

34In the present case, it follows from the explanations provided to the Court by the referring court that EN.SA. knowingly issued invoices that did not relate to any real transaction. In those circumstances, that company cannot claim that it was acting in good faith. However, as the referring court also states, the fictitious sales of electricity between the companies concerned did not give rise to any loss of tax revenue. As the Advocate General has stated in point 47 of her Opinion, this follows from the fact that the companies involved duly paid the VAT charged on their sales of electricity and that, having subsequently re-purchased the same quantities of electricity at the same price, they deducted an amount of VAT identical to the amount that they had paid.

35In those circumstances, it is apparent from paragraph 33 above that the VAT Directive, read in the light of the principles of neutrality and proportionality, requires the Member States to allow the issuer of an invoice relating to a fictitious transaction to recover the tax indicated on that invoice, which he had to pay, in the case where he has, in sufficient time, wholly eliminated the risk of any loss of tax revenue.

36In the light of the foregoing, the answer to the first two parts of the question referred is that, in a situation, such as that at issue in the main proceedings, in which fictitious circular sales of electricity made between the same traders and for the same amounts did not cause tax losses, the VAT Directive, read in the light of the principles of neutrality and proportionality, must be interpreted as not precluding national legislation which excludes the right to deduct VAT relating to fictitious transactions while requiring the persons who enter VAT on an invoice to pay that tax, including for a fictitious transaction, provided that national law allows the tax liability arising from that obligation to be adjusted when the issuer of that invoice, who was not acting in good faith, has, in sufficient time, wholly eliminated the risk of any loss of tax revenue, this being a matter for the referring court to ascertain.

The third part of the question

37By the third part of its question, the referring court asks whether the principle of proportionality must be interpreted as precluding, in a situation such as that at issue in the main proceedings, a rule of national law under which the unlawful deduction of VAT is penalised by a fine equal to the amount of the deduction made.

38Under Article 273 of the VAT Directive, the Member States may adopt measures to ensure the correct collection of VAT and to prevent evasion. In particular, in the absence of provisions of EU law on that matter, the Member States have the power to choose the sanctions which seem to them to be appropriate in the event that conditions laid down by EU legislation for the exercise of the right to deduct VAT are not observed (see, to that effect, judgments of 15 September 2016, Senatex, C‑518/14, EU:C:2016:691, paragraph 41, and of 26 April 2017, Farkas, C‑564/15, EU:C:2017:302, paragraph 59 and the case-law cited).

39They must, however, exercise that power in compliance with EU law and its principles, inter alia the principles of proportionality and of VAT neutrality (see, to that effect, judgment of 26 April 2017, Farkas, C‑564/15, EU:C:2017:302, paragraph 59 and the case-law cited). Thus, the penalties must not go beyond what is necessary to attain the objectives referred to in Article 273 of the VAT Directive and must not undermine the neutrality of that tax (see, to that effect, judgment of 9 July 2015, Salomie and Oltean, C‑183/14, EU:C:2015:454, paragraph 62).

40In the first place, in order to assess whether a penalty is consistent with the principle of proportionality, account must be taken of, inter alia, the nature and the degree of seriousness of the infringement which that penalty seeks to sanction, and of the means of establishing the amount of that penalty (judgment of 26 April 2017, Farkas, C‑564/15, EU:C:2017:302, paragraph 60 and the case-law cited).

41In that regard it should be noted that, in the present case, for the purpose of ensuring the correct collection of VAT and preventing evasion, national law provides for the imposition of a fine, the amount of which, rather than being calculated according to the taxable person’s tax liability, is equal to the amount of tax which he has improperly deducted. Since the tax liability of a person subject to VAT is equal to the difference between the output tax payable on the goods and services supplied and the deductible input tax relating to the goods and services received, the amount of tax improperly deducted does not necessarily correspond to that liability.

42That is particularly the case in the dispute in the main proceedings. As the Advocate General noted in point 63 of her Opinion, since EN.SA. bought and sold, fictitiously, the same quantities of electricity at the same price, its VAT liability for those transactions was zero. In that situation, a fine equal to the full amount of the input tax improperly deducted, imposed without taking account of the fact that the same amount of output VAT had been duly paid and that the Treasury had not, as a result, lost any tax revenue, constitutes a penalty that is disproportionate to the objective which it pursues.

43In the second place, in a situation such as that at issue in the main proceedings, the principle of VAT neutrality also precludes the imposition of a penalty such as that provided for by national law. In that situation, as has been stated in paragraph 33 above, compliance with the principle of VAT neutrality is ensured by the possibility, to be provided for by the Member States, of correcting any tax improperly invoiced in the case where the issuer of the invoice shows that he acted in good faith or where he has, in sufficient time, wholly eliminated the risk of any loss of tax revenue.

44However, as the Advocate General has stated in point 57 of her Opinion, the imposition of a fine equal to the full amount of the tax improperly deducted leads to the possibility of adjustment in respect of the tax liability under Article 203 of the VAT Directive being redundant. Even if, in the absence of a risk of loss of tax revenue, that liability can be adjusted, an amount equal to the tax improperly deducted remains due by reason of that fine.

45Consequently, the answer to the third part of the question referred is that the principles of proportionality and VAT neutrality must be interpreted as precluding, in a situation such as that at issue in the main proceedings, a rule of national law under which the unlawful deduction of VAT is penalised by a fine equal to the amount of the deduction made.

Costs

46Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

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

In a situation, such as that at issue in the main proceedings, in which fictitious circular sales of electricity made between the same traders and for the same amounts did not cause tax losses, Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in the light of the principles of neutrality and proportionality, must be interpreted as not precluding national legislation which excludes the right to deduct value added tax (VAT) relating to fictitious transactions while requiring the persons who enter VAT on an invoice to pay that tax, including for a fictitious transaction, provided that national law allows the tax liability arising from that obligation to be adjusted when the issuer of that invoice, who was not acting in good faith, has, in sufficient time, wholly eliminated the risk of any loss of tax revenue, this being a matter for the referring court to ascertain.

The principles of proportionality and neutrality of value added tax (VAT) must be interpreted as precluding, in a situation such as that at issue in the main proceedings, a rule of national law under which the unlawful deduction of VAT is penalised by a fine equal to the amount of the deduction made.

Signatures

[Signatures]

( *1 ) Language of the case: Italian.

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 17 January 2019 ¹

(Request for a preliminary ruling — Value added tax (VAT) — Fictitious transactions — Refusal to allow the deduction — Occurrence of tax liability through the issue of an invoice — Additional penalty equal to the full amount of the refused deduction — Compatibility with the principle of neutrality — Compatibility with the principle of proportionality)

I. Introduction

1This is another case ² concerning the issue of the ‘punitive character’ of VAT law. The Court is very strict on prevention of VAT fraud: deduction (and exemption) may be refused not only where tax evasion is committed by the taxable person himself, but also where a taxable person knew, or should have known, that, by his purchase, he was taking part in a transaction connected with the evasion of VAT. ³

2Does this strict approach (refusal to allow deduction at every stage of a supply chain) apply even where VAT fraud is ruled out, but other undue advantages are sought by means of fictitious transactions? Can those concerned — notwithstanding criminal penalties — be ‘penalised’ under VAT law by refusing deduction for each of the participants in a long supply chain, but at the same time establishing a tax liability and additionally applying an administrative penalty equal to the full amount of the refused deduction?

II. Legal framework

A. EU law

3The framework of the case in EU law is provided by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax ⁴ (‘the VAT Directive’).

4Point (a) of the first paragraph of Article 168 of that directive provides:

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

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

5Article 203 of the VAT Directive states:

‘VAT shall be payable by any person who enters the VAT on an invoice.’

B. Italian law

6In Italian law the provisions of the VAT Directive have been transposed in a number of decrees of the President of the Republic.

7Article 19 of decreto del Presidente della Repubblica n. 633 (Decree 633 of the President of the Republic of 26 October 1972 (‘Decree 633/72’)) provides that ‘the amount of tax paid or payable by the taxable person or charged to him in respect of goods and services imported or purchased in the course of a business, artistic activity or profession shall be deductible from the amount of tax on the transactions carried out’.

8On the other hand, Article 21(7) of Decree 633/72 provides that ‘if invoices for non-existent transactions are issued, or if in the invoice the revenue arising from the transactions or the related taxes is stated to be higher than it is in reality, tax shall be due for the whole amount indicated or corresponding to the particulars of the invoices’.

9Where a transaction for which an invoice has been issued and recorded is not performed, in whole or in part, in accordance with Article 26 of Decree 633/72, in the cases and within the period prescribed therein, the supplier has the right to register and to deduct VAT, whilst the purchaser must seek repayment of the tax paid from the supplier, in set-off.

10According to the referring court, Article 6(6) of Legislative Decree 471 of 18 December 1997 (Breach of obligations relating to documentation, registration and detection of transactions) permits the tax authorities to apply a penalty equal to the full amount of the deduction disregarded.

III. Main proceedings

11The background to the main proceedings, as described by the referring court, is as follows.

12The appellant in the main proceedings (EN.SA. S.r.l., ‘EN.SA’) is an electricity trader and trades in electricity outside the Piattaforma dei Conti Energia (Energy Accounts Platform, PCE) on the basis of forward agreements.

13In the tax years 2009 and 2010, EN.SA sold large quantities of electricity to companies in the ‘Green Network’ group, which it also purchased back from them in a ‘circular’ manner. For accounting purposes the transactions were entered in the correct amounts. Invoices were also duly issued for these transactions.

14It is unclear whether EN.SA is part of the ‘Green Network’ group of undertakings or an independent undertaking. It is also unclear whether EN.SA bought back the same quantities of electricity promptly and at the same price. Similarly, it is unclear what was the purpose of buying from and selling to the same persons. The tax office presumes that it was to set out significant sums in the accounts of the companies involved so that they could gain (better) access to bank financing channels. This is disputed by EN.SA, however.

15It is certain, on the other hand, that the VAT entered on the invoices for those transactions in electricity was duly paid in good time and claimed as deductible by the recipient in question. It is also certain that no prejudice was caused to the Treasury with regard to VAT. In particular, according to the referring court, so-called ‘carousel fraud’ is excluded here. It is clear from the question it has referred, however, that the national court considers that the transactions in electricity in the relevant years, 2009 and 2010, are to be regarded as non-existent.

16In a notice the tax authorities refused to allow EN.SA deduction on the input side (in so far as it purchased the electricity) for those non-existent transactions. As regards the non-existent transactions on the output side (in so far as EN.SA sold the electricity), however, a corresponding tax liability was established, as VAT was entered separately in the invoices issued by EN.SA. This resulted in a tax liability being established (for additional VAT, interest and penalties) in the amount of EUR 47 618 491.00 for 2009 and EUR 22 001 078.00 for 2010.

17EN.SA brought an action against that notice, which was dismissed by the Commissione Tributaria Provinciale di Milano (Provincial Tax Court, Milan, Italy). The referring court must rule on the appeal lodged by EN.SA.

IV. Request for a preliminary ruling and procedure before the Court

18By decision of 9 October 2017, received on 20 December 2017, the Commissione Tributaria Regionale per la Lombardia (Regional Tax Court, Lombardy, Italy) referred the following question to the Court for a preliminary ruling pursuant to Article 267 TFEU:

‘In the event of transactions found to be non-existent, which did not cause harm to the Treasury and did not confer any tax benefit on the taxpayer, are national rules resulting from the application of Article 19 (Deduction) and Article 21(7) (Invoicing of transactions) of Decreto de Presidente della Repubblica 633/72 of 16 October 1972 and Article 6(6) of Decreto Legislativo 471 of 18 December 1997 (Breach of obligations relating to documentation, registration and identification of transactions) consistent with the Community principles on VAT laid down by the Court of Justice, when their simultaneous application bring about a situation in which:

the tax paid on purchases by the transferee is not deductible for any of the transactions at issue which relate to the same person and the same taxable amount;

the tax is levied on the corresponding parallel sale transactions, which are also regarded as non-existent, and paid by the transferor (and a recovery of sums unduly paid is excluded);

a penalty is levied that is equal to the amount of input tax deemed non-deductible.’

19In the proceedings before the Court, the Italian Republic and the European Commission have submitted written observations.

V. Assessment

A. Preliminary remarks regarding the facts and the question referred

20In answering the question referred, it must be assumed from the actual question that the transactions in electricity at issue are non-existent (fictitious) transactions (sham transactions) which did not take place as such.

21Nevertheless, the presence of existent (genuine) transactions cannot necessarily be ruled out on the basis of the facts presented. Because transactions in electricity among electricity traders never involve a physical transmission of electricity, but rights to draw electricity are merely bought and sold (as a rule electronically), no specific delivery documents are necessary. If these rights were in fact transferred with legal effect, it cannot necessarily be inferred solely from the fact that the transactions were possibly intended merely to inflate the balance sheet artificially that there are non-existent transactions. ⁵ It could also be assumed that this aim indeed requires that actual transactions be carried out. In so far as the transaction costs in (electronic) energy trading are quite marginal, there is no reason to replace genuine transactions with fictitious transactions.

22The referring court should therefore examine closely whether or not existent transactions are in fact present. The problem would then arise, in relation to those transactions, of the possible refusal of deduction in the case of conduct which is fraudulent, but permitted by VAT law, although the Court has not been asked about this point.

B. Legal assessment

23However, the question referred for a preliminary ruling includes three other aspects, which I will examine separately. First, the referring court wishes to know, in essence, whether it follows from Article 168 of the VAT Directive that in the case of a supply chain with non-existent transactions deduction may be refused repeatedly (see under 1.). Second, the referring court would like to know whether it nonetheless follows from Article 203 of the VAT Directive that non-existent resales entail the levy of a tax (and the preclusion of recovery of sums unduly paid) (see under 2.). Third, the referring court wishes to know, in essence, whether in such a case an additional penalty equal to the amount of non-deductible tax is proportionate (see under 3.).

1. Refusal of deduction in respect of non-existent transactions

24Article 168 of the VAT Directive allows the taxable person a right to deduct only under certain conditions. First of all, the taxable person must himself carry out transactions and, second, he may deduct only the VAT due or paid in respect of supplies of goods to him carried out by another taxable person. Under Article 15(1) of the VAT Directive, electricity is to be treated as tangible property.

25A right to deduct thus requires that a supply of electricity actually took place. ⁶ Deduction is not therefore possible when there is no actual delivery of the goods. ⁷

26As the Commission and Italy submit, it is immaterial that the person making the fictitious supply owes tax pursuant to Article 203 of the VAT Directive because he has issued an invoice for the fictitious supply which shows VAT separately. The Court has already stated a number of times that the exercise of the right to deduct does not extend to a tax which is due solely because it appears on an invoice. ⁸

27It follows that EN.SA does not have a right to deduct if no supply was made to it. This conclusion is also not affected if there are a number of fictitious supplies in succession in a long supply chain. Article 168 of the VAT Directive does not distinguish between a single supply or several supplies made in succession or in a circular manner.

28In the absence of entitlement to deduct, the question does not therefore arise here of a refusal to allow deduction on the basis of fraudulent conduct.

2. Tax liability as a result of the issue of an invoice

29The next point to be examined is whether, despite a fictitious supply on the input side — which is not deductible — VAT can be assessed for the fictitious supply on the output side. In a long supply chain this would generate a very high tax revenue for the State concerned, even though the basic requirement under VAT law (Article 2(1) — supply of goods or services for consideration by a taxable person) is not satisfied.

(a) Tax liability of the issuer of the invoice for fictitious transactions

30Articles 193 and 203 of the VAT Directive are crucial to the answer to this question. Article 193 of the VAT Directive provides that VAT is payable, first of all, by any taxable person carrying out a taxable supply of goods. According to the referring court, there is no supply. In addition, however, under Article 203 of the VAT Directive, VAT is also payable by any person who enters the VAT on an invoice. This is the situation in the case of EN.SA.

(1) Spirit and purpose of Article 203 of the VAT Directive

31The spirit and purpose of Article 203 of the VAT Directive is to eliminate the risk of loss of tax revenue which might be entailed by an unjustified deduction being claimed by the recipient of an invoice on the basis of that invoice. ⁹ This risk is illustrated by the situation in the present case.

32The right to deduct may be exercised only in respect of taxes corresponding to a transaction subject to VAT. ¹⁰ However, there is a risk of loss of tax revenue as long as the addressee of an invoice incorrectly mentioning VAT could still use it for the purposes of such deduction under Article 168 of the VAT Directive, ¹¹ as it cannot be ruled out that the tax authorities will not be able to determine in good time that substantive grounds preclude the exercise of the right to deduct which exists formally.

33Article 203 of the VAT Directive thus seeks a comparable parallelism between the deduction by the recipient of the invoice and the tax liability of the issuer of the invoice, as would normally exist in the case of a genuine supply for the supplier and the recipient of the supply. According to the wording of Article 203 of the VAT Directive, it is not necessary that a deduction has been made by the recipient of the invoice.

34Consequently, the issuer of the invoice is strictly liable for the risk (that is, abstractly) of the recipient of the invoice being able to make an unjustified deduction on the basis of that (incorrect) invoice. There is abstract liability for risk on the part of the issuer of the invoice. It applies both in the case of an error as to the correct rate of tax (the invoice mentions the statutory rate of tax rather than the reduced rate) and, in particular, in the case of billing for fictitious transactions.

(2) No application in the case of billing for a fictitious supply?

35However, in one decision the Court ruled that because the underlying supplies are not subject to VAT, the amount wrongly invoiced as VAT also cannot be classified as VAT. ¹²

36As a logical extension of this case-law, this would mean in the present case that billing for fictitious transactions — as they are also not subject to VAT (see above, point 24 et seq.) — would not trigger the legal consequences of Article 203 of the VAT Directive. Article 203 of the VAT Directive would then be applicable only to the case of overstated VAT for a (real) supply of goods or services. However, neither the wording nor the spirit and purpose, as abstract liability for risk, give any indication of such a restriction.

37Furthermore, the Court held in that same decision and in one further decision ¹³ that the Sixth Directive ¹⁴ does not make express provision for the case where the VAT is mentioned in error on an invoice where it is not due. In the final analysis, however, those judgments relate to adjustments of such invoices, which are not actually provided for by Article 203 of the VAT Directive. ¹⁵ In addition, those judgments do not concern deliberate billing of fictitious transactions, but errors concerning status as a taxable person and the place of the transactions.

38In particular, the Court confirmed in another case that Article 21(1)(c) of the Sixth Directive (which corresponds to Article 203 of the VAT Directive) also covers fictitious invoices (that is, invoices for fictitious transactions). ¹⁶

39Lastly, it is not a matter of only the issuer of the invoice who makes an error regarding the rate of tax or deliberately enters VAT for an exempt transaction, but not one who deliberately bills for fictitious transactions, being held liable for the materialised (abstract) risk of loss of tax revenue. In both cases the risk of loss of tax revenue through an unjustified deduction by the recipient of the invoice is the same. ¹⁷ Both the Commission and Italy therefore consider Article 203 of the VAT Directive to be applicable in the present case.

40Article 203 of the VAT Directive therefore also covers the situation in the present case, in which VAT is deliberately entered on an invoice even though it is not owed in the absence of transactions. EN.SA thus owes, in essence, the VAT which it entered on the invoices for the fictitious transactions.

(b) Correction of tax liability under Article 203 of the VAT Directive

41It must still be examined whether that tax liability must be able to be corrected at least where no risk of loss of tax revenue has actually materialised. This question arises in particular because in its question the referring court indicates that recovery of unduly paid VAT is precluded.

42In this regard, however, the Court has already ruled that the Sixth Directive (the same holds for the currently applicable VAT Directive) does not contain any provisions relating to the adjustment by the issuer of the invoice of VAT which has been improperly invoiced. ¹⁸ Accordingly, so long as this lacuna has not been filled by the EU legislature, it is for the Member States to provide a solution in that regard. ¹⁹

(1) Duty to provide a possibility of adjustment

43In this connection it is for the Member States, first of all, to provide for the possibility in their internal legal systems, in order to guarantee the neutrality of VAT, of correcting any tax improperly invoiced where the person who issued the invoice shows that he acted in good faith. ²⁰

44Furthermore, the principle of the neutrality of VAT requires that VAT which has been improperly invoiced can be adjusted where the issuer of the invoice has, in sufficient time, wholly eliminated the risk of any loss of tax revenue; it is not possible for such an adjustment to be made conditional by the Member States upon the issuer of the relevant invoice having acted in good faith. ²¹ In addition, that refund cannot be dependent upon the discretion of the tax authorities. ²²

45Moreover, the measures that the Member States may adopt 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. They may not therefore be used in such a way that they would have the effect of undermining VAT neutrality, which is a fundamental principle of the common system of VAT. ²³ This applies in particular to an abstract strict liability offence (see above, points 34 and 35).

46Consequently, if reimbursement of the VAT becomes impossible or excessively difficult as a result of the conditions under which applications for reimbursement of tax may be made, those principles may require that the Member States provide for the instruments and the detailed procedural rules necessary to enable the taxable person to recover the unduly invoiced tax. ²⁴

47According to the referring court, there is no risk of loss of tax revenue. This follows from the fact that the VAT arising was duly paid by the companies involved and consequently, on account of the parallelism of VAT and input tax, the Italian State did not pay out any VAT to any of those concerned, without first being able to collect the amount. In this regard, the objective of ensuring that a parallelism of deduction and tax liability is observed (see point 32 et seq. above) has not been prejudiced.

48It is also clear from the description of the facts and from the question referred that the tax authorities are aware of all those involved and have refused to allow the unjustified deduction for all of them. From this point of view too, a risk of loss of tax revenue is ruled out. If there is no risk of loss of tax revenue from billing for fictitious transactions, an adjustment of that tax pursuant to Article 203 of the VAT Directive must be possible, even if EN.SA did not act in good faith with regard to the fictitious transactions.

(2) Time of adjustment

49The appropriate time of adjustment is the time when it is established that there is no risk of loss of tax revenue. In this case, this could be, for example, the time when the tax authorities become aware that the recipient of the invoice is not entitled to deduct and effectively refuses to allow it the deduction.

50In addition, given the lack of good faith ²⁵ on the part of the ‘Green Network’ group which is involved here, there is no need to answer the question whether a repayment of the amount to the recipient of the invoice is a condition for an adjustment of the tax liability under Article 203 of the VAT Directive, where the recipient assumed in good faith that it was entitled to deduct.

(3) Conclusion

51In conclusion, EU law (in particular the principles of proportionality and neutrality of VAT) requires a possibility of correcting a VAT liability under Article 203 of the VAT Directive, in the form of an abstract liability for risk, at the time when a risk of loss of tax revenue is ruled out.

52As the Court has already ruled, however, EU law does not prevent Member States from treating the issuing of bogus invoices (for fictitious transactions) improperly mentioning VAT as a criminal offence and from imposing, in such a case, the penalties prescribed by their domestic law. ²⁶

3. Proportionality of a penalty equal to the full amount of the wrongly claimed deduction

53Lastly, it is necessary to answer the question raised in the third part of the request for a preliminary ruling whether in a case like the present one an additional penalty equal to the full amount of the wrongly claimed deduction is proportionate.

54In the absence of harmonisation of EU legislation in the field of sanctions applicable where conditions laid down by arrangements under that legislation are not complied with, Member States remain empowered to choose the sanctions which seem to them to be appropriate. Nevertheless, the Member States must exercise that power in accordance with EU law and its general principles and, consequently, in accordance with the principle of proportionality. ²⁷

55Thus, such penalties must not go beyond what is necessary to attain the objectives of ensuring the correct levying and collection of the tax and preventing fraud. In order to assess whether a penalty is consistent with the principle of proportionality, account must be taken inter alia of the nature and the degree of seriousness of the infringement which the penalty seeks to sanction, and of the means of establishing the amount of the penalty. ²⁸

56As regards the possibilities for the Member States to apply financial penalties under VAT legislation, the Court has delivered a number of decisions from which it is clear that penalties are permitted. However, they may not have the effect of frustrating the approach taken by VAT law and in particular of undermining the neutrality of VAT. ²⁹

57In the present case, the penalty equal to the full amount of the wrongly made deduction leads to the necessary possibility of adjustment in respect of the tax liability under Article 203 of the VAT Directive being redundant. Even if, in the absence of a risk of loss of tax revenue, the tax liability under Article 203 of the VAT Directive is adjusted, there is still a financial debt of a comparable amount. If the purchase price and the selling price are the same, there is still even a financial debt of the same amount.

58The Court has already ruled that a penalty of 50% — where the conduct did not cause the tax authority any loss of revenue and showed no evidence of fraud — appears to be disproportionate, this being a matter for the referring court to determine. ³⁰ This applies a fortiori to a penalty equal to the full amount in a case where loss of tax revenue and tax fraud are ruled out. ³¹

59Furthermore, as the Court has ruled in another context, ³² other — less onerous — means are also conceivable. Thus, in the present case the application of a fine or a financial penalty proportionate to the degree of seriousness of the infringement and the degree of seriousness of the damage is conceivable. It is apparent, however, that under the rule at issue in the main proceedings the penalty applies in any event without taking into consideration the specific circumstances and the specific danger to or loss of VAT revenue. As the Commission rightly observes, however, this exceeds what is necessary to ensure the correct levying and collection of the tax and to prevent fraud (see, with regard to these objectives, Articles 273 and 131 of the VAT Directive).

60For the same reason, the penalty at issue also cannot be regarded as a proportionate penalty in respect of the wrongly issued invoices (with regard to this possibility, see above, point 53), especially since it is not linked to the amount of the tax liability shown there or a risk, but to the previously wrongly claimed deduction.

61It should also be borne in mind that the wrongly made deduction (on the basis of the fictitious supplies on the input side) corresponds to the likewise wrongly paid VAT from the fictitious supplies on the output side. Both ‘payments’ relate to the same object of supply and for that reason cannot be seen in isolation. Both were made wrongly and must therefore be returned.

62Moreover, as the scheme of the VAT Directive clearly shows (see Article 206 of the VAT Directive), the tax liability of the taxable person is always composed of the tax owed from the outputs minus the deductible tax in respect of the inputs from the same tax period. Account should also be taken of this idea in assessing the appropriateness of a penalty for fictitious transactions.

63If the two claims are offset, this produces a specific amount payable for EN.SA (and thus a loss of tax revenue for Italy) of EUR 0 if the purchase price and the selling price were the same, as is suggested by the referring court’s statements. The application of a penalty equal to the full amount of the deduction wrongly claimed to the detriment of the Italian State without consideration of the amount of VAT also wrongly paid, but to the benefit of Italian State, is disproportionate on account of the closely linked substance of the two claims.

64Italy nevertheless remains free to pay interest on the tax liability arising under Article 203 of the VAT Directive (abstract liability for risk) until it is adjusted and also — as has already been stated above — to apply a criminal penalty to the issue of invoices for fictitious transactions.

VI. Conclusion

Conclusion

65I propose that the Court answer the question asked by the Commissione Tributaria Regionale per la Lombardia (Regional Tax Court, Lombardy, Italy) as follows:

Articles 168 and 203 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax do not preclude, in the case of fictitious transactions, a concurrent tax liability based on the issue of an invoice and a refusal to allow the deduction of input tax (even repeatedly within a circular supply chain). It is a condition that the tax liability under Article 203 of Directive 2006/112 can be corrected as soon as a risk of loss of tax revenue is ruled out. In such a case, a penalty may be applied in respect of the issue of an incorrect invoice, but a penalty equal to the full amount of the non-deductible input tax for the fictitious inputs is disproportionate if the corresponding value added tax for the fictitious outputs has been paid and there was therefore no risk of loss of tax revenue.

¹ Original language: German.

² Without any claim to exhaustivity, see judgments of 20 June 2018, Enteco Baltic (C‑108/17, EU:C:2018:473); of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719); of 18 December 2014, Schoenimport Italmoda Mariano Previti (C‑131/13, C‑163/13 and C‑164/13, EU:C:2014:2455); of 9 October 2014, Traum (C‑492/13, EU:C:2014:2267); of 13 February 2014, Maks Pen (C‑18/13, EU:C:2014:69); of 6 December 2012, Bonik (C‑285/11, EU:C:2012:774); of 6 September 2012, Mecsek-Gabona (C‑273/11, EU:C:2012:547); of 21 June 2012, Mahagében (C‑80/11 and C‑142/11, EU:C:2012:373); and of 6 July 2006, Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446).

³ Judgments of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraph 48); of 20 June 2018, Enteco Baltic (C‑108/17, EU:C:2018:473, paragraph 94); of 13 February 2014, Maks Pen (C‑18/13, EU:C:2014:69, paragraph 27); of 6 September 2012, Mecsek-Gabona (C‑273/11, EU:C:2012:547, paragraph 54); of 6 December 2012, Bonik (C‑285/11, EU:C:2012:774, paragraph 39); and of 6 July 2006, Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446, paragraph 56); with regard to the resulting problem of overcompensation for the damage arising, see my Opinion in Vetsch Int. Transporte (C‑531/17, EU:C:2018:677, point 39 et seq.).

⁴ OJ 2006 L 347, p. 1.

⁵ Even the mere fact that conduct amounts to an offence does not entail exemption from tax, as is expressly stated in judgments of 6 July 2006, Kittel and Recolta Recycling (C‑439/04 and C‑440/04, EU:C:2006:446, paragraph 50); of 12 January 2006, Optigen and Others (C‑354/03, C‑355/03 and C‑484/03, EU:C:2006:16, paragraph 49); and of 29 June 2000, Salumets and Others (C‑455/98, EU:C:2000:352, paragraph 19).

⁶ Judgments of 27 June 2018, SGI and Valériane (C‑459/17 and C‑460/17, EU:C:2018:501, paragraph 35); of 31 January 2013, LVK (C‑643/11, EU:C:2013:55, paragraph 34); of 26 May 2005, António Jorge (C‑536/03, EU:C:2005:323, paragraphs 24 and 25); of 29 April 2004, Terra Baubedarf-Handel (C‑152/02, EU:C:2004:268, paragraph 31); and of 8 June 2000, Breitsohl (C‑400/98, EU:C:2000:304, paragraph 36).

⁷ As was expressly stated, recently, in judgment of 27 June 2018, SGI and Valériane (C‑459/17 and C‑460/17, EU:C:2018:501, paragraph 36).

⁸ Judgments of 27 June 2018, SGI and Valériane (C‑459/17 and C‑460/17, EU:C:2018:501, paragraph 37); of 31 January 2013, LVK (C‑643/11, EU:C:2013:55, paragraph 34); of 15 March 2007, Reemtsma Cigarettenfabriken (C‑35/05, EU:C:2007:167, paragraph 23); and of 13 December 1989, Genius (C‑342/87, EU:C:1989:635, paragraph 19).

⁹ As is expressly stated in the judgments of 31 January 2013, LVK (C‑643/11, EU:C:2013:55, paragraphs 35 and 36); of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 28 et seq.), with reference to the judgment of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraphs 57 and 61); and of 6 November 2003, Karageorgou and Others (C‑78/02 to C‑80/02, EU:C:2003:604, paragraph 50).

¹⁰ Judgment of 13 December 1989, Genius (C‑342/87, EU:C:1989:635, paragraph 13).

¹¹ As is expressly stated in the judgment of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 28 et seq.), with reference to judgment of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 57).

¹² Judgment of 6 November 2003, Karageorgou and Others (C‑78/02 to C‑80/02, EU:C:2003:604, paragraph 53).

¹³ Judgments of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 35), and of 6 November 2003, Karageorgou and Others (C‑78/02 to C‑80/02, EU:C:2003:604, paragraph 49).

¹⁴ 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 1997 L 145, p. 1.

¹⁵ As is correctly recognised in the judgment of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 48): ‘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’.

¹⁶ Judgment of 15 October 2002, Commission v Germany (C‑427/98, EU:C:2002:581, paragraph 41).

¹⁷ See also, in essence, judgment of 31 January 2013, LVK (C‑643/11, EU:C:2013:55, paragraph 42); tax liability under Article 203 of the VAT Directive regardless of whether a taxable transaction actually exists.

¹⁸ As is expressly stated in judgment of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 48). Cited in judgments of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 35), and of 6 November 2003, Karageorgou and Others (C‑78/02 to C‑80/02, EU:C:2003:604, paragraph 49), which nevertheless mention that the directive does not make express provision for the case where the VAT is mentioned in error on an invoice.

¹⁹ Judgments of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 35); of 6 November 2003, Karageorgou and Others (C‑78/02 to C‑80/02, EU:C:2003:604, paragraph 49); and of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 49).

²⁰ Judgments of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 36), and of 13 December 1989, Genius (C‑342/87, EU:C:1989:635, paragraph 18).

²¹ Judgments of 31 January 2013, LVK (C‑643/11, EU:C:2013:55, paragraph 37); of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 37); of 6 November 2003, Karageorgou and Others (C‑78/02 to C‑80/02, EU:C:2003:604, paragraph 50); and of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 58).

²² Judgments of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 38), and of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 68).

²³ Judgment of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 39), and see by way of analogy judgment of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 59 and the case-law cited).

²⁴ Judgment of 18 June 2009, Stadeco (C‑566/07, EU:C:2009:380, paragraph 40); see, to that effect and by way of analogy, judgment of 15 March 2007, Reemtsma Cigarettenfabriken (C‑35/05, EU:C:2007:167, paragraph 41).

²⁵ If fictitious transactions are considered to exist within the group of undertakings, this also rules out, in principle, good faith within the group.

²⁶ See to that effect judgment of 19 September 2000, Schmeink & Cofreth and Strobel (C‑454/98, EU:C:2000:469, paragraph 62).

²⁷ Judgment of 26 April 2017, Farkas (C‑564/15, EU:C:2017:302, paragraph 59); see to that effect, inter alia, judgments of 6 February 2014, Fatorie (C‑424/12, EU:C:2014:50, paragraph 50), and of 7 December 2000, de Andrade (C‑213/99, EU:C:2000:678, paragraph 20).

²⁸ Judgment of 26 April 2017, Farkas (C‑564/15, EU:C:2017:302, paragraph 60); see to that effect judgments of 20 June 2013, Rodopi-M 91 (C‑259/12, EU:C:2013:414, paragraph 38), and of 8 May 2008, Ecotrade (C‑95/07 and C‑96/07, EU:C:2008:267, paragraphs 65 to 67).

²⁹ Judgment of 15 September 2016, Senatex (C‑518/14, EU:C:2016:691, paragraph 41); see to that effect judgment of 9 July 2015, Salomie and Oltean (C‑183/14, EU:C:2015:454, paragraph 62).

³⁰ See judgment of 26 April 2017, Farkas (C‑564/15, EU:C:2017:302, paragraphs 65 and 66).

³¹ Similarly — albeit in a different context — judgment of 17 July 2014, Equoland (C‑272/13, EU:C:2014:2091, paragraph 47).

³² Judgment of 15 September 2016, Senatex (C‑518/14, EU:C:2016:691, paragraph 42); see to that effect judgment of 9 July 2015, Salomie and Oltean (C‑183/14, EU:C:2015:454, paragraph 63).