On September 7, 2016 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Wathelet in Case C‑453/15 (A and B) (ECLI:EU:C:2016:639) was published.
In the reference for a preliminary ruling from the Bundesgerichtshof (Federal Court of Justice, Germany), received by the Court on 24 August 2015, the Court is asked about the interpretation of Article 56(1)(a) of Directive 2006/112/EC with respect to greenhouse gas emission allowances. The reference was made in criminal proceedings brought in Germany against A and B for being accessories to tax evasion.
In short, the question arises whether a greenhouse gas emission allowance under Article 3(a) of Directive 2003/87/EC — which confers a right to emit one tonne of carbon dioxide equivalent during a specified period — is a ‘similar right’ within the meaning of Article 56(1)(a) of the VAT Directive.
The dispute in the main proceedings and the question referred for a preliminary ruling
· A and B, who work for a large tax advice business, were ordered by the Landgericht Hamburg (Regional Court, Hamburg) to pay fines for being accessories to tax evasion in a case concerning a value added tax (VAT) evasion scheme run by another co-defendant, G, from April 2009 to March 2010, which was aimed at evading VAT in greenhouse gas emission allowance trading.
· Several companies were involved in the tax evasion scheme. Company E, which was resident in Germany and controlled in practice by G, acquired greenhouse gas emission allowances abroad, exempt from VAT, and transferred them to company I, which was resident in Luxembourg and also controlled by G. I issued invoices in the form of credit notes to E which included the VAT applicable in Germany and sold the allowances to company C, which was resident in Germany; the credit notes issued for that transaction also included the VAT applicable in Germany.
· In its provisional VAT returns for the second, third and fourth quarters of 2009, E declared the turnover from the sale of the allowances to I, claiming an input VAT deduction on the basis of false invoices from fictitious domestic suppliers. For January and March 2010 it did not submit provisional returns. It thus evaded payment of a total of EUR 11 484 179.12. I declared the supplies to C for the periods April to July 2009, September 2009 to January 2010 and March 2010 as taxable turnover and incorrectly claimed as input tax the VAT shown in the credit notes issued to E, thus evading payment of a sum of EUR 10 667 491.10.
· From the end of May 2009, A and B provided tax advice to I and were instructed by G to provide a summary report on that company’s VAT position. In that report they stated that I could invoice VAT applicable in Germany and claim it as input tax only if it had a place of business in Germany and carried out the relevant transactions from there and that the invoices issued before the establishment of a place of business in Germany had to be corrected.
· On the basis of a backdated contract for the lease of offices in Germany from 1 April 2009, A and B, who had no knowledge of I’s role in the tax evasion scheme, completed corrected provisional VAT returns for I for April and May 2009, which they sent to the tax office on 12 August 2009. In those returns they claimed the VAT shown in the credit notes issued to E as input tax, amounting to EUR 147 519.80 for April 2009 and EUR 1 146 788.70 for May 2009, even though they believed it to be ‘highly probable’ that I did not have any place of business in Germany.
· Hearing appeals on a point of law brought against the judgment of the Landgericht Hamburg (Regional Court, Hamburg) by A and B and by the Staatsanwaltschaft (State Prosecutor’s Office), the Bundesgerichtshof (Federal Court of Justice) states that the question whether the defendants have committed the offence of being an accessory to tax evasion under German criminal law depends on whether they intentionally submitted incorrect provisional VAT returns to the tax office in which claims were wrongly made to deduct input tax on the basis of credit notes for supplies by E. Since A and B did not have any knowledge of the involvement of E and I in the VAT evasion scheme run by G, this could only be the case, continues the referring court, if the reason the credit notes issued to E did not give any right to claim input tax was that they were not allowed to contain any reference to VAT. It states, however, that as regards invoices issued to I, which was resident in Luxembourg, this was the case only if the place of supply for the transfer of the emission allowances was not in Germany. It was inadmissible for E to give I an invoice which showed VAT only if, pursuant to Article 56(1)(a) of the VAT Directive, the place of supply was not at the supplier’s, E, but at the recipient’s, I, so that the supply was not taxable in Germany.
· The Bundesgerichtshof (Federal Court of Justice) notes that for this latter condition to be met, it is necessary that in 2009 the place of supply of transfers of greenhouse gas emission allowances within the meaning of Paragraph 3a(4) of the UStG, in the version applicable to the main proceedings, based on Article 56(1)(a) of the VAT Directive, was the place where the recipient had established his business or had a fixed establishment, and it is therefore necessary to determine whether trading in such allowances is a ‘similar right’ within the meaning of those provisions.
· The referring court considers in this regard that the interpretation of ‘similar rights’ within the meaning of Article 56(1)(a) of the VAT Directive is not so obvious that there is no reasonable doubt about it. Nonetheless, it tends to the view that those allowances are ‘similar’ within the meaning of that provision, the term ‘similar’ meaning ‘corresponding in certain characteristics’ or ‘comparable to the thing specified’, in so far as the rights mentioned in that provision are characterised by the fact that the holder is granted an absolute right by the legislature such that he has the exclusive authority to use and exploit it, and to exclude others from doing so. In this sense, emission allowances are comparable to intellectual property rights.
· In those circumstances, the Bundesgerichtshof (Federal Court of Justice) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Is Article 56(1)(a) of [the VAT Directive] to be interpreted as meaning that an allowance under Article 3(a) of [Directive 2003/87] which confers a right to emit one tonne of carbon dioxide equivalent during a specified period is a “similar right” within the meaning of [Article 56(1)(a)]?’
Conclusion
While noting that the general rule is now that the place where services are supplied is the place where the recipient is established, the Advocate General proposes that the Court answer the question asked by the Bundesgerichtshof (Federal Court of Justice, Germany) as follows:
The term ‘similar rights’ in Article 56(1)(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as also covering allowances as defined in Article 3(a) of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC.
For further information click here to be forwarded to the text of the opinion as published on the website of the CJEU, which will open in a new window.
Did you know that in our section CJEU Rulings we have made a selection of rulings of the CJEU? We have organized these rulings based on the subject they relate to (e.g. Freedom of establishment, Free movement of capital, Indirect taxes on the raising of capital, etc).
Copyright – internationaltaxplaza.info
and
Stay informed: Subscribe to International Tax Plaza’s Newsletter! It’s completely FREE OF CHARGE!
