The European Court of Justice (ECJ) issued a decision on December 11, 2008, in a case involving the failure of a state to comply with Article 10 of the EC and Directive 2006/112/EC, also known as the Sixth VAT Directive. The case specifically focused on the obligations of Member States under their domestic VAT regimes, particularly in relation to the control of taxable transactions and the amnesty article in the EU VAT Directive.
Article 2(1) and (2) of the Sixth Directive stated that deliveries of goods and services, carried out for consideration within the country by a taxable person acting as such, are subject to value-added tax (VAT). Additionally, imports of goods are also subject to VAT. Furthermore, Article 22 of the Sixth Directive outlined the obligations of taxable persons, including the submission of a declaration within a specified time limit and the payment of the net amount of VAT when submitting the periodic declaration. Member States were given the option to set alternative deadlines for payment or charge installments. They were also permitted to establish other obligations to ensure the accurate collection of tax and prevent fraud.
The case in question involved Italian Law Article 9 of Law No 289/2002, which pertained to the “Automatic settlement for previous years.” This provision allowed for the automatic settlement of VAT for specific taxable periods, resulting in the extinction of administrative tax sanctions, the exclusion of certain criminal sanctions, and exemption from tax audits for eligible taxpayers. Circular No. 12/2003 of the Agenzia delle Entrate – Direzione centrale normativa e contentioso (Tax Agency – General Directorate of Regulation and Litigation) further clarified that the purpose of this automatic payment was not to declare additional taxable amounts but to provide data necessary for determining the amounts to be paid to obtain the benefit of amnesty. However, certain categories of taxable persons were excluded from this automatic payment.
Law No. 350/2003, specifically Article 2(44), extended the tax amnesty provided by Law No. 289/2002 to the year 2002. This extension resulted in a general and undifferentiated waiver of the verification of taxable transactions carried out during the 2002 tax period. The European Commission sent a formal notice to the Italian Republic, claiming that the application of Law No. 289/2002 to the 2002 tax period was incompatible with certain Community regulations on VAT. The Italian Republic initially contested this incompatibility but later challenged the existence of such incompatibility after receiving a reasoned opinion from the Commission. As a result, the Commission initiated legal proceedings against the Italian Republic.
The Commission argued that the Italian Republic had failed to fulfill its obligations under Directive 2006/112 and that it was admissible to establish a failure to comply with obligations stemming from the original version of a Community act that had been maintained by new provisions. The Advocate General did not provide an opinion on the case.
The ECJ ultimately ruled that the Italian Republic’s extension of the tax amnesty to the 2002 tax period, through Law No. 350/2003, violated Articles 2 and 22 of the Sixth Council Directive 77/388/EEC and Article 10 EC. The Court ordered the Italian Republic to bear the costs of the proceedings.
This case highlighted the importance of Member States’ compliance with EU regulations on VAT and the need to ensure the accurate collection of tax while preventing fraud. The decision of the ECJ set a precedent for similar cases and provided clarity on the obligations of Member States in relation to VAT.
