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European Court of Justice declares that an Italian tax law does not violate EU law.
The European Court of Justice (ECJ) has declared Article 3(2bis) of Decree-Law N° 40/2010 (GURI No 71, 26 March 2010) to not contravene Art. 4(3) TEU which compels all Member states to take any appropriate measure to ensure the fulfilment of obligations of EU treaties and/or Acts. The obligation in question is one which relates to ensuring the collection of VAT in conformity with Arts. 2 and 22 of the EU VAT directive - Sixth Directive 1977/388/EEC (the Sixth Directive).
PRELIMINARY CASE FACTS
An Italian construction company, Belvedere Costruzioni, in its annual VAT return for 1982, deducted a tax credit from 1981. The Ufficio IVA di Piacenza declared the deduction to be invalid and accordingly, sent an adjustment note back to the company.
Belvedere Costruzioni commenced proceedings against the Ufficio IVA at the Tax Court of First Instance, Piacenza; contesting the VAT amount in dispute which was €11,500 (22,264,000 ITL). The Court ruled in favour of the construction company in October 1986. The Ufficio IVA appealed the ruling but failed to secure a victory, when the judgement was subsequently confirmed at the Tax Court of Second Instance in 1990.
The Ufficio IVA proceeded to file their second appeal against the decisions to the Commissione Tributaria Centrale, Bologna (CTCB). According to the Italian law above (Art. 3 (2 bis) Decree-Law No. 40/2010) the Court was bound to automatically conclude the appeal, therefore making the decision of the court of second instance final and binding. The CTCB, considering that this action may violate EU law, decided to stay the proceedings in order to obtain a preliminary ruling from the ECJ in order to clarify whether the Italian law violated EU law, specifically Art. 4(3) TEU and Arts. 2 and 22 of the Sixth Directive.
Note: Although the Commissione Tributaria Centrale was abolished in 1993, it continued to hear any cases which were before it before this date.
THE LAW IN QUESTION
Art. 3 (2 bis) Decree-Law No. 40/2010 states that in order to ensure that judicial proceedings in tax matters are kept within a reasonable time as per the reasonable time requirement in Art. 6(1) ECHR, any pending tax disputes which arise from actions lodged at first instance more than 10 years before the date of entry into force of this Decree, in which the State Tax Authority has been unsuccessful at both first and second instance, shall be concluded in accordance with set rules. Under (a), it follows that any disputes pending before the Commissione Tributaria Centrale, except relating to reimbursement, shall be concluded automatically.
The above law entered into force on 26 May 2010, meaning that any disputes lodged at first instance before 26 May 2000, and fit the circumstances set above, were concluded automatically without being tried at third instance, therefore extinguishing the debt claimed by the authorities.
Art. 2 of the Sixth Directive says that the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such and the importation of goods are to be subjected to VAT.
Meanwhile, the relevant parts of Art. 22 of the Sixth Directive states that;
• Every taxable person shall submit a return with an interval to be determined by each Member State.
• Every taxable person shall pay the net amount of the (VAT) when submitting the return. The Member States may, however, fix a different date for the payment of the amount or may demand an interim payment.
• … Member States may impose other obligations which they deem necessary for the correct levying and collection of the tax and for the prevention of fraud.
Art. 4(3) TUE, as already described above, binds Member States to take all appropriate measures to effect any obligations set by the EU, which in this case, is that of the payment and collection of VAT.
The ECJ reiterated the obligation which Member States have to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory. Although Member States have the freedom to achieve this obligation as they see fit, this freedom however is limited by the obligation to not create significant differences in the manner in which taxable persons are treated, whether it be within one Member State, or across different ones. Despite all of the above however, the ECJ stated that none of these principles can run counter to compliance with the principle that judgement should be given within a reasonable time as under Art. 6(1) ECHR.
The ECJ, in its conclusion, ruled that the Italian tax law in question was not in violation of EU law. The main reasoning behind this judgement can be broken down into the following;
a) Art. 3(2 bis) Decree-Law No 40/2010 is clearly in pursuit of the objective of reasonable time under Art. 6(1) ECHR .
b) Decree-Law No 40/2010 entered into force more than 14 years after the last date on which appeals could be brought before the Commissione Tributaria Centrale, meaning that all proceedings pending before that Court have in fact lasted for over 14 years,
c) The current case against Belvedere Costruzioni dates back to approx. 30 years, which shows that some proceedings have lasted much longer than the 14 years. The ECJ stated that “Such a length of proceedings is a priori capable in itself of infringing the reasonable time principle”
d) The Decree-Law No 40/2010 did not constitute a general waiver of the collection of VAT for a certain period, but was in actual fact, an exceptional provision concluding the oldest proceedings pending before the tax court of third instance
e) The Decree-Law No 40/2010 has a specific and limited nature, only applicable under certain circumstances, and so does not create significant differences in the way in which taxable persons are treated, either within Italy, or between other Member States.
The ECJ left the decision on costs to the Italian Court.
Avv. Gabriele Giambrone, Senior Partner of Giambrone Law ILP commented, “The Commissione Tributaria Centrale, Bologna were correct to submit this question to the ECJ. A law which obliges the automatic conclusion of a case, effectively taking away a third recourse, is something to take note of. I agree with the ECJ’s judgement in this case, particularly considering the age of not only the Belvedere Costruzioni dispute, but also the fact that none of the pending cases would be less than 14 years older than the Decree in question.” If you are in need to advice concerning a tax dispute, contact our experienced team at Giambrone Law ILP.
Iain James Buchan
Avv. Gabriele Giambrone
Giambrone Law ILP
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