Federal Fiscal Court asks ECJ re input VAT deduction from an accomodation address

(1)

As per: July 19, 2016 | All contributions are made to the best of our knowledge | No liability is assumed for the content | © KÜFFNER MAUNZ LANGER ZUGMAIER

2. German Federal Fiscal Court questions The questions submitted are as follows:

 Does "full address" require an address at which economic activity is being carried out?

 May a VAT deduction be refused merely because all formal conditions have not been met?

 Is it permissible, under European law, to refer taxpay- ers, acting in good faith, to seek VAT refund by means of the equitable procedure?

3. Facts

In both cases, the claimant operated a car dealership and purchased vehicles from other car dealers. The point at issue was whether the supplier address provided on the invoices was sufficient. In the case before the Fifth Senate, it was unclear what activities the supplier was engaged in at the given address. In the case before the Eleventh Senate, the supplier address was a postal address only; the actual business was operated at a different address.

Federal Fiscal Court asks ECJ re input VAT deduction from an accommodation address

1. Background

On 6 April 2016, the two VAT senates of the German Fed- eral Fiscal Court (the Fifth and the Eleventh Senates) submitted to the ECJ almost identical references for a prelimi- nary ruling (V R 25/15 and XI R 20/14). These relate to VAT deduction from invoices only identifying the supplier’s accommodation address or a PO Box address. In the view of the German Federal Fiscal Court, a suppli er must engage in an actual economic activity at the invoice’s address, and it recently confirmed and tightened this interpretation. This poses difficulties for businesses whose invoices state PO box addresses (see Newsletter 23/2015). A recent ruling by the ECJ in the case PPUH Stehcemp has raised doubts, on the part of the German Federal Fiscal Court, as to its interpretation of the law (ECJ ruling of 22 October 2015, C-277/14). There is reason to be optimistic that the ECJ will in fact contradict the German Federal Fiscal Court’s strict interpretation.

Federal Fiscal Court doubts own judgements

What does "full address" actually mean? According to the German Federal Fiscal Court, it must be an address at which an "economic activity" takes place. VAT deduction is therefore not possible if an invoice only provides an accommodation address or a PO Box address. The ECJ’s recent judgment, in a Polish case, appears to indicate that it does not set similarly strict requirements. The Fifth and Eleventh Senates of the German Federal Fiscal Court have thus now referred their interpretation to the ECJ.

KMLZ VAT

NEWSLETTER

19 | 2016

(2)

As per: July 19, 2016 | All contributions are made to the best of our knowledge | No liability is assumed for the content | © KÜFFNER MAUNZ LANGER ZUGMAIER

5. Implications for the practice

The Fifth Senate appears simply to be seeking confirmation of its (strict) interpretation from the ECJ. The question su b- mitted by the Eleventh Senate, however, is more open.

There is no clear and definitive indication of how the ECJ will rule, as the Court is particularly reticent on matters of procedure.

Many businesses (and public authorities) in Germany use PO box addresses and, as a result, the aforementioned judgment by the German Federal Financial Court has creat- ed huge difficulties for these businesses. It would therefore be helpful were the ECJ at least to reject the strict interpr e- tation of "full address". There are indeed grounds for hope : the ECJ does not usually place strict demands on compliance with formal conditions. However, this only applies where there is no question of fraud. If turnover is connected to fraud, the ECJ applies formal conditions extremely strict- ly. In the cases in question here, however, there is no sug- gestion of VAT fraud. There is, therefore, an expectation that the ECJ will find for the claimants.

Those who have had VAT deductions rejected by the tax authorities as a result of the relevant invoices stating accommodation or PO box addresses are t herefore advised to contest the decision (by appeal or complaint). They should also apply to have proceedings suspended until the ECJ judgment is handed down.

4. Arguments of the German Federal Fiscal Court The German Federal Fiscal Court considered three questions: the formal conditions for the invoice address, the good faith of the invoice recipient and the VAT deduction for the invoice recipient in the equitable procedure.

The German Federal Fiscal Court maintains that the address stated in the invoice must be the one at which the taxable person conducts their economic activities, this being the only way in which the tax authorities can simply and easily check compliance with invoice conditions. However, the German Federal Fiscal Court does concede that the ECJ accepted the registered office as the invoice a ddress in its judgment in PPUH Stehcemp.

The German Federal Fiscal Court has concerns about allow- ing VAT deduction in cases that do not meet all formal i n- voice conditions. In its view, there is a danger of statutory requirements “losing all meaning". Taxable persons must, affirms the court, at the very least be obliged to take all reasonable measures to check the accuracy of the details on the invoice. It remains unclear whether this is also re- quired when there is no question of fraud.

Currently, equitable processes are the only means open to entrepreneurs who acted in good faith but who find themelves having to bring claims for the refund of VAT from invoices with errors. The German Federal Fiscal Court sees this as reconcilable with European law, as the Member States are, in principle, able to regulate the form of proceedings themselves. However, requiring the entrepreneur to have recourse to a two-stage procedure could be contrary to the principle of effectiveness.

Contact: Matthias Luther LL.M. Tax., Lawyer Phone: +49 (0) 211 / 540953 - 95

matthias.luther@kmlz.de

D-40221 Düsseldorf | Speditionstraße 21 | Tel.: +49 (0) 211 / 54 09 53 – 20 | Fax: +49 (0) 211 / 54 09 53 – 99