6 July 2017 (*1)

‛Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 183 — Principle of fiscal neutrality — Deduction of input tax — Refund of overpaid VAT — Investigation procedure — Fine imposed on the taxable person in the course of such a procedure — Extension of the period within which the refund must be made — Exclusion of payment of default interest’

In Case C‑254/16,

REQUEST for a preliminary ruling under Article 267 TFEU from the Fővárosi Közigazgatási és Munkaügyi Bíróság (Administrative and Labour Court, Budapest, Hungary), made by decision of 24 March 2016, received at the Court on 3 May 2016, in the proceedings

THE COURT (Seventh Chamber),

composed of A. Prechal, President of the Chamber, A. Rosas and E. Jarašiūnas (Rapporteur), Judges,

Advocate General: M. Wathelet,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

—the Hungarian Government, by M.Z. Fehér and G. Koós and by A.M. Pálfy, acting as Agents,

—the Czech Government, by J. Vláčil and M. Smolek, acting as Agents,

—the European Commission, by L. Lozano Palacios and by L. Havas, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Legal context

EU law

Hungarian law

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

9. On 13 November 2013, the tax authority paid Glencore HUF 1858301000 (approximately EUR 5.9 million) as a partial refund of the overpaid VAT. Glencore requested that authority to pay it HUF 411910990 (approximately EUR 1.3 million) as default interest for the period from 4 December 2011, the date on which, according to Glencore, the period for refunding the overpaid VAT expired, to 13 November 2013.

10. The tax authority rejected the request on the ground that Glencore was fined for obstruction of the investigation of the legality of the claim for a refund and that, consequently, under the applicable Hungarian legislation, the period for a refund of the overpaid VAT and, if applicable, any default interest were to be calculated from the date of the delivery of the formal report containing the findings of the investigation. Accordingly, that authority took the view that there had not been any late payment and, since it was as a result of failure to disclose the data requested that the conduct of the investigation and the refund of overpaid VAT had been obstructed, Glencore was not entitled to default interest.

13. The tax authority maintained that Glencore’s action should be dismissed on the ground that the imposition of the fines for the late disclosure of documents necessary to a tax investigation was a result of the wrongful conduct of Glencore and that it is due to Glencore’s negligence that the period for the refund of the overpaid VAT was extended.

14. The referring court notes that the Court has previously held that the principle of neutrality precludes Member States from making refunds of overpaid VAT subject to conditions which impose an additional burden on taxable persons by affecting their financial situation, that the Member States must ensure that a refund is made within a reasonable period of time and that the conditions governing the refund do not themselves give rise to any financial risk for the taxable person. According to the referring court, the Court has also held that taxable persons who were refunded overpaid VAT after a period which could not be described as reasonable are entitled to default interest and that it is for the legal order of each Member State to lay down the conditions under which such interest must be paid, whilst adhering to the principles of equivalence and effectiveness.

15. However, the referring court takes the view that the Court’s case-law does not contain sufficiently clear indications, in particular, as to the consequences of fines imposed by a tax authority, such as that at issue in the main proceedings. It considers that to refund Glencore the overpaid VAT within an approximately two-year period, rather than within the normal period of 45 days, infringes the principle of proportionality and, consequently, that Glencore’s claim for default interest must be upheld. The referring court also considers that the fact that the tax authority, by an abusive literal interpretation of the relevant national law, may, by imposing a fine on a taxable person for non-compliance with a duty of disclosure, continue tax investigations without any time limit and without being required to pay default interest amounts to an infringement of that principle.

‘(1) Must Article 183 of [the VAT Directive] be interpreted as precluding national legislation under which the period within which overpaid VAT must be refunded is to be extended up to the date on which the report drawn up following an investigation is delivered in the case where, in the course of a tax investigation procedure initiated within 30 days from the receipt of the application for a refund, a fine is imposed on the taxable person for non-compliance with an obligation?

(2) Having regard to the principles of fiscal neutrality and proportionality, does Article 183 of [the VAT Directive] preclude national legislation under which, in the event of late payment of a sum, payment of default interest is excluded in the case where, in the context of an investigation concerning the refund of that sum, the taxable person was fined by the authority in connection with the obligation to cooperate, even though the investigation, which lasted several years, was significantly delayed for reasons which cannot principally be attributed to the taxable person?

(3) Must Article 183 of [the VAT Directive] and the principle of effectiveness be interpreted as meaning that a claim for payment of interest in connection with tax withheld or not allocated contrary to EU law is a substantive right which flows directly from EU law itself, such that an infringement of EU law is sufficient for a right to interest to be claimed before the courts and other authorities of the Member States?

(4) If, in the light of the answers given to the preceding questions, the referring court should conclude that the domestic legislation of the Member State is incompatible with Article 183 of the VAT Directive, would it be acting in accordance with EU law if it were to take the view that the refusal, in the decisions of the Member State’s authorities, to pay default interest was incompatible with Article 183 of the VAT Directive?’

Consideration of the questions referred

19. It follows from the Court’s case-law that some specific rules must be complied with by the Member States in implementing the right to a refund of overpaid VAT arising from Article 183 of the VAT Directive, interpreted in the light of the general context and principles governing VAT (see judgment of 24 October 2013, Rafinăria Steaua Română, C‑431/12, EU:C:2013:686).

paragraph 21 and the case-law cited).

21. That period of time may, as a general rule, be extended in order to carry out a tax investigation and there is no need for such an extended period to be regarded as unreasonable provided that the extension does not go beyond what is necessary for the successful completion of the investigation (judgment of 12 May 2011, Enel Maritsa Iztok 3, C‑107/10, EU:C:2011:298, paragraph 53).

22. Where the refund of the overpaid VAT to the taxable person is not made within a reasonable period, the principle of fiscal neutrality of the VAT system requires that the financial losses incurred by the taxable person owing to the unavailability of the sums of money at issue should be compensated through the payment of default interest (judgment of 24 October 2013, Rafinăria Steaua Română, C‑431/12, EU:C:2013:686, paragraph 23).

23. It also follows from the Court’s case-law that the calculation of the interest payable by the Treasury which does not take as its starting point the date on which the overpaid VAT would have had to be repaid in the normal course of events in accordance with the VAT Directive is, in principle, contrary to the requirements of Article 183 of that directive (judgments of 12 May 2011, Enel Maritsa Iztok 3, C‑107/10, EU:C:2011:298, paragraph 51, and of 24 October 2013, Rafinăria Steaua Română, C‑431/12, EU:C:2013:686, paragraph 24).

24. In addition, legislation which empowers the tax authorities to instigate a tax investigation at any time, including at a date close to that on which the period for refunding overpaid VAT expires, thus making it possible to extend considerably the period in which the refund is to be made, not only exposes the taxable person to financial disadvantages, but also places the taxable person in a position in which he is unable to predict the date from which funds corresponding to the overpaid VAT will be available to him, which entails an additional burden for that person (see order of 21 October 2015, Kovozber, C‑120/15, not published, EU:C:2015:730, paragraph 27).

26. Since the referring court raises, in that regard, the issue of the implications of the conduct of a taxable person whose negligence during a tax investigation procedure was penalised by several fines, it should be noted that, indeed, as the Hungarian Government claims, it cannot be accepted that a taxable person who, by refusing to cooperate with a tax authority and by thus impeding the conduct of the investigation procedure, caused the delay in the refund of overpaid VAT, may claim default interest for that delay.

27. Nevertheless, national legislation or practices according to which the mere fact that a taxable person has been fined due to his negligence during a tax investigation to which he was subject allows the tax authority to extend that investigation over a period not justified by that negligence, without having to pay him default interest, cannot be considered to be compatible with the requirements arising from the principle of fiscal neutrality.

28. Accordingly, in a situation such as that at issue in the main proceedings, for the purposes of determining whether default interest is due and, where relevant, the point in time from which the right to such interest arises, the proportion of the duration of the tax investigation procedure which can be attributed to the conduct of the taxable person must be ascertained.

29. In the present case, according to the documents in the case-file before the Court, the first partial refund of the overpaid VAT, corresponding to September 2011, took place only on 13 November 2013, that is to say almost two years after the expiry of the period of time ordinarily laid down for the payment in the Hungarian legislation.

30. Glencore states, in its written observations, that the tax authority initiated the investigation procedure concerning the legality of its application for a refund of overpaid VAT at a date very close to the expiry of the time period laid down in the Hungarian legislation for that refund. Glencore also notes that the tax authority imposed on it an initial fine 41 days after it had lodged its VAT return, whereas the first partial payment, at issue before the referring court, was made 755 days after that tax return had been lodged and that the formal report containing the findings of the tax investigation conducted was delivered 539 days after the last request of the tax authority for the taxable person to disclose certain documents to it.

31. The referring court states that the Hungarian legislation does not provide for the actual impact on the duration of the tax investigation procedure of the conduct of a taxable person who has been fined to be taken into account for the purposes of determining whether default interest is payable. It also states that the tax authority may, where relevant, continue such a procedure for a long time without being required to pay the taxable person default interest.

32. It is clear that such national legislation may, in the event of initiation of an investigation procedure and the imposition of a fine on a taxable person, have the effect, during that procedure, of depriving the taxable person of funds corresponding to the overpaid VAT for a long time, preventing him from predicting the date at which those funds will be available to him and precluding his right to default interest.

33. Such legislation is not in conformity with the requirements arising from the principle of fiscal neutrality, set out in paragraphs 20 to 22 above, according to which overpaid VAT must be refunded within a reasonable period and, if that is not the case, the financial loss thereby caused to the detriment of the taxable person must be compensated by the payment of default interest.

34. As regards the obligations of the referring court, it should be noted that when national courts apply domestic law they are bound to interpret that law, so far as possible, in the light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive and, consequently, to comply with the third paragraph of Article 288 TFEU. This obligation to interpret national law in conformity with EU law is inherent in the system of the Treaty on the Functioning of the European Union, since it permits national courts, for the matters within their jurisdiction, to ensure the full effectiveness of EU law when they determine the disputes before them (see, inter alia, judgment of 11 April 2013, Rusedespred, C‑138/12, EU:C:2013:233, paragraph 37 and the case-law cited).

35. In accordance with equally settled case-law, being called upon, within the exercise of its jurisdiction, to apply provisions of EU law, a national court must give full effect to those provisions, if necessary refusing of its own motion to apply any conflicting provision of national law, and it is not necessary for that court to request or to await the prior setting aside of that provision of national law by legislative or other constitutional means (judgment of 5 July 2016, Ognyanov, C‑614/14, EU:C:2016:514, paragraph 34 and the case-law cited).

36. Having regard to all of the foregoing considerations, the answer to the questions referred is that EU law must be interpreted as precluding national legislation, such as that at issue in the main proceedings, under which, where a tax investigation procedure is initiated by a tax authority and where a taxable person is fined for failure to cooperate, the date of the refund of overpaid VAT may be delayed until the formal report on that investigation is delivered to the taxable person and the payment of default interest may be refused, even where the duration of the tax investigation procedure is excessive and cannot be attributed entirely to the conduct of the taxable person.

Costs

37. Since 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.

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

EU law must be interpreted as precluding national legislation, such as that at issue in the main proceedings, under which, where a tax investigation procedure is initiated by a tax authority and where a taxable person is fined for failure to cooperate, the date of the refund of overpaid value added tax may be delayed until the formal report on that investigation is delivered to the taxable person and the payment of default interest may be refused, even where the duration of the tax investigation procedure is excessive and cannot be attributed entirely to the conduct of the taxable person.

[Signatures]

(*1) Language of the case: Hungarian.