Provisional text
OPINION OF ADVOCATE GENERAL
KOKOTT
delivered on 11 April 2024 (1)
Case C‑709/22
Syndyk Masy Upadłości A
v
Dyrektor Izby Administracji Skarbowej we Wrocławiu,
intervener:
Rzecznik Małych i Średnich Przedsiębiorców
(Request for a preliminary ruling from the Wojewódzki Sąd Administracyjny we Wrocławiu (Regional Administrative Court, Wrocław, Poland))
(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Combating of VAT fraud – Special measure – Split payment mechanism – VAT account belonging to the insolvent taxable person – Transfer of the funds held in the VAT account at the request of the insolvency administrator – Charter of Fundamental Rights of the European Union – Article 17(1) – Fundamental right to property – Article 51(1) – Implementation of EU law)
I. Introduction
1. In 2019, Poland introduced a special ‘split payment’ mechanism (‘the special measure’) in order better to be able to combat value added tax (VAT) fraud. That mechanism provides, in connection with the supply of certain goods and services, that the price owed under civil law is to be paid into two different accounts. While the net price is to be paid into an ordinary account belonging to the taxable supplier of goods or services (‘the taxable person’), the VAT is to be transferred to a separate VAT account belonging to the taxable person, which can be used only to pay tax liabilities.
2. The present request for a preliminary ruling concerns the effects of that special measure in the insolvency proceedings relating to the taxable person. May the tax authorities deny the insolvency administrator access to the funds held in the insolvent taxable person’s VAT account?
3. The answer to that question would have to be no, if the special measure were already intrinsically incompatible with EU law, in particular the provisions of Directive 2006/112/EC on the common system of value added tax (‘the VAT Directive’). (2) The refusal of access to the account would also be incompatible with EU law, however, if it disproportionately interfered with the taxable person’s fundamental right to property under Article 17(1) of the Charter of Fundamental Rights of the European Union (‘the Charter’). This in turn presupposes, however, that the special measure is an implementation of EU law within the meaning of Article 51(1) of the Charter.
4. It further falls to be clarified whether EU law contains any rules on the ranking of claims to VAT in the insolvency proceedings relating to the taxable person. Priority access on the part of the State might follow from the fact that the VAT, which the taxable person collects from the consumer, is to be passed on first and foremost to the State and is not meant to benefit the taxable person’s other creditors.
II. Legal framework
A. European Union law
1. The VAT Directive
5. Article 168(a) of the VAT Directive concerns the deduction of input tax and reads:
‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;’
6. Article 206 of the VAT Directive concerns the payment of VAT:
‘Any taxable person liable for payment of VAT must pay the net amount of the VAT when submitting the VAT return provided for in Article 250. Member States may, however, set a different date for payment of that amount or may require interim payments to be made.’
7. In accordance with Article 226 of the VAT Directive, invoices issued are required to contain only certain enumeratively listed details. An indication that the VAT is to be paid to a separate VAT account is not one of them.
8. In accordance with the first paragraph of Article 273 of the VAT Directive, Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.
9. Article 395(1) of the VAT Directive concerns the authorisation to introduce special measures:
‘The Council, acting unanimously on a proposal from the Commission, may authorise any Member State to introduce special measures for derogation from the provisions of this Directive, in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance.
Measures intended to simplify the procedure for collecting VAT may not, except to a negligible extent, affect the overall amount of the tax revenue of the Member State collected at the stage of final consumption.’
2. The European Insolvency Regulation
10. Article 7 of Regulation (EU) 2015/848 on insolvency proceedings (‘the European Insolvency Regulation’) (3) governs the law applicable to insolvency proceedings and their effects:
‘1. Save as otherwise provided in this Regulation, the law applicable to insolvency proceedings and their effects shall be that of the Member State within the territory of which such proceedings are opened (the “State of the opening of proceedings”).
2. The law of the State of the opening of proceedings shall determine the conditions for the opening of those proceedings, their conduct and their closure. In particular, it shall determine the following:
…
(i) the rules governing the distribution of proceeds from the realisation of assets, the ranking of claims and the rights of creditors who have obtained partial satisfaction after the opening of insolvency proceedings by virtue of a right in rem or through a set-off;
…’
3. Implementing Decision 2019/310
11. Recitals 1 and 3 to 5 of Implementing Decision (EU) 2019/310 authorising Poland to introduce a special measure derogating from Article 226 of Directive 2006/112 (‘Implementing Decision 2019/310’) (4) explain the background to the measure:
‘(1) By letter registered with the Commission on 15 May 2018 Poland requested an authorisation to introduce a special measure derogating from Article 226 of [Directive 2006/112] in order to apply a split payment mechanism (“the special measure”). The special measure should require the inclusion of a special statement that [VAT] has to be paid to the blocked VAT account of the supplier on invoices issued in relation to the supplies of goods and services susceptible to fraud and generally covered by the reverse charge mechanism and by the joint and several liability in Poland. …
…
(3) Poland has already taken numerous measures to fight fraud. It has introduced … the reverse charge mechanism and joint and several liability of the supplier and the customer, the Standard Audit File, tighter rules for the VAT registration and de-registration of taxable persons, increased number of audits among others. However, Poland nonetheless considers that those measures are insufficient to prevent VAT fraud.
(4) Poland is of the view that the application of the special measure will eliminate VAT fraud. Since under the split payment mechanism the amount of VAT deposited on a separate VAT account of a supplier (taxable person) can be used for restricted purposes only, namely for the payment of the VAT liability to the tax authority or for the payment of VAT on invoices received from suppliers, it is better guaranteed that the tax authorities will receive the whole VAT amount which should be transferred by the taxable person to the Polish State Treasury.
(5) Poland introduced the voluntary split payment mechanism on 1 July 2018. Poland considers that in areas particularly exposed to VAT fraud, the special measure should be introduced. Those areas are sectors of economy such as steel, scrap, electronics, gold, non-ferrous metals, fuels, and plastics. Those areas are generally covered by the reverse charge mechanism and by joint and several liability of the supplier and the customer in Poland.’
12. Article 1 of Implementing Decision 2019/310 authorises the measure:
‘By way of derogation from Article 226 of [Directive 2006/112], Poland is authorised to introduce a special statement that VAT shall be paid to the separate and blocked VAT bank account of the supplier opened in Poland on invoices issued in relation to supplies between taxable persons of goods and services listed in the Annex to this Decision where payments for supplies are made by electronic bank transfers.’
B. Polish law
1. The Law on VAT
13. Article 106e(1)(18a) of the Ustawa z dnia 11 marca 2004 r. o podatku od towarów i usług (Law of 11 March 2004 on the tax on goods and services; ‘Law on VAT’) provides that, in the case of invoices on which the total amount due exceeds 15 000 Polish zlotys (PLN) or the equivalent of that amount in a foreign currency and which cover the supply to a taxable person of goods or services listed in Annex No 15 to that law, the invoices must contain the expression ‘split payment mechanism’.
14. In accordance with Article 108a(1) of the Law on VAT, taxable persons who have received an invoice showing the amount of tax may apply the split payment mechanism when paying the amount due arising from that invoice. Article 108a(1a) of the Law on VAT provides that, when making payments for purchased goods or services listed in Annex No 15 to that law and evidenced by an invoice on which the total amount due exceeds PLN 15 000 or the equivalent of that amount in a foreign currency, taxable persons are required to apply the split payment mechanism.
15. On request by the taxable person, the director of the tax office must grant consent for the funds to be transferred to an account designated by the taxable person, in accordance with Article 108b(1) of the Law on VAT, or, in accordance with Article 108b(5)(1) of that law, must refuse to grant such consent by means of a decision to that effect, if the taxable person is in arrears with the payment of certain taxes or duties.
2. Law on banking
16. In accordance with Article 62b(2)(2)(a) of the Law on banking, the VAT account may be debited exclusively in order to make certain payments into the account of the tax office, in settlement of, inter alia, VAT, corporation tax, income tax, excise duties and customs duties.
III. Facts and the request for a preliminary ruling
17. The special measure introduced by Poland covers the supply of certain goods or services which are paid for by electronic bank transfer. In that regard, the taxable person must have a separate, blocked VAT account opened in Poland. That VAT account is reserved for the collection of the VAT paid by the taxable person’s customers, for the payment of VAT to those who supply goods or services to the taxable person and for the settlement of other duties owed to the State Treasury under public law.
18. The recipient of the supply pays the net price into the taxable person’s ordinary bank account, but transfers the VAT payable on the supply of goods or services to the taxable person’s VAT account.
19. On 28 June 2021, the insolvency administrator of the taxable person against whom insolvency proceedings had been opened on 30 January 2019 applied to the first-tier tax authority to have the funds held in the taxable person’s VAT account transferred to the account of the insolvency estate.
20. The first-tier tax authority refused to give its consent. It stated that, at the time of the notice of insolvency, the taxable person had arrears of both VAT and income tax that were greater than the amount which the insolvency administrator was asking to be transferred.
21. An appeal brought by the insolvency administrator against that refusal was unsuccessful. The appellate authority upheld the decision of the first-tier tax authority and shared the view expressed there. The insolvency administrator brought an action against the latter decision.
22. The Wojewódzki Sąd Administracyjny we Wrocławiu (Regional Administrative Court, Wrocław, Poland), which has jurisdiction over the aforementioned action, has decided to stay the proceedings and refer the following three questions to the Court of Justice for a preliminary ruling under Article 267 TFEU:
‘(1) Must the provisions of [Implementing Decision 2019/310] [and] the provisions of [the VAT Directive], in particular Articles 395 and 273 thereof, as well as the principle of proportionality and the principle of neutrality, be interpreted as precluding national legislation and practice which, in the circumstances of the case at hand, preclude the grant of consent for the transfer, by an insolvency administrator, of funds held in the VAT account of a taxable person (split payment mechanism) to a bank account which has been designated by that taxable person?
(2) Must Article 17(1) of the [Charter] – [concerning the] right to property – in conjunction with Article 51(1) and Article 52(1) thereof, be interpreted as precluding national legislation and practice which, in the circumstances of the case at hand, by precluding the grant of consent for the transfer, by an insolvency administrator, of funds held in the VAT account of a taxable person (split payment mechanism), consequently result in the funds owned by the insolvent taxable person in that VAT account being frozen, and thus make it impossible for the insolvency administrator to carry out his or her duties in the course of the insolvency proceedings?
(3) Having regard to the context and objectives of [Implementing] Decision 2019/310, as well as the provisions of [the VAT Directive], must the principle of the rule of law stemming from Article 2 [TEU] and the principle of legal certainty which implements it, the principle of sincere cooperation stemming from Article 4(3) TEU, and the principle of good administration stemming from Article 41(1) of the Charter, be interpreted as precluding national practice which, by precluding the grant of consent for the transfer, by an insolvency administrator, of funds held in the VAT account of a taxable person (split payment mechanism), seeks to frustrate the objectives of the insolvency proceedings defined by an insolvency court as falling within Polish jurisdiction for the purposes of Article 3(1) of Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings … (OJ 2015 L 141, p. 19), and consequently leads to a situation as a result of which, through the application of an inappropriate national measure, the State Treasury is treated preferentially as a creditor at the expense of the general body of creditors?’
23. Written observations in the proceedings before the Court of Justice were lodged by the Dyrektor Izby Administracji Skarbowej we Wrocławiu (Director of the Tax Chamber, Wrocław, Poland), the Rzecznik Małych i Średnich Przedsiębiorców (Ombudsman for Small and Medium-sized Enterprises, Poland), Poland and the European Commission. The Court refrained from holding a hearing, in accordance with Article 76(2) of the Rules of Procedure.
IV. Legal assessment
24. By the three questions which it has referred for a preliminary ruling, the referring court wishes to ascertain, in essence, whether EU law precludes national legislation and practice whereby the insolvency administrator is denied access to the funds held in the taxable person’s VAT account, in so far as the taxable person has tax arrears. In its request for a preliminary ruling, the referring court expresses fundamental doubts as to the compatibility of the special measure with the VAT Directive, Implementing Decision 2019/310, the Charter and the general principles of EU law.
25. I shall therefore start by looking at whether and, if so, to what extent the configuration of the special measure is compatible with the VAT Directive (A). Next, I shall examine whether the refusal to grant access to the VAT account in the course of the insolvency proceedings relating to the taxable person is in conformity with EU law (B).
A. The compatibility of the special measure with the VAT Directive
26. The referring court has doubts about the compatibility of the special measure with the VAT Directive, in particular in the light of Articles 395 and 273 thereof (1). It is also important to examine its compatibility with Article 206 in conjunction with Article 168(a) of the VAT Directive (2).
1. Legal basis: Article 395(1) of the VAT Directive
27. Article 1 of Implementing Decision 2019/310 authorises Poland to introduce a special statement to the effect that, in certain cases, VAT is to be paid into a separate and blocked VAT account. Since, according to Article 1 of that implementing decision, that authorisation is a derogation from Article 226 of the VAT Directive, that ‘special statement’ is to be understood as a specific invoicing instruction in connection with the supply of certain goods or services. Invoices must also mention that, by way of derogation from Article 226 of the VAT Directive, the recipient of the supply is to pay the VAT into a separate VAT account belonging to the taxable person.
28. The Council based that authorisation to introduce a special measure in particular on Article 395(1) of the VAT Directive. That provision states that the Council, acting unanimously on a proposal from the Commission, may authorise any Member State to introduce special measures in derogation from the VAT Directive in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance. As is clear in particular from the recitals of Implementing Decision 2019/310, the introduction of the special measure is intended to prevent VAT fraud.
29. Since the conditions of Article 395(1) of the VAT Directive are thus met, the present case does not hang on the compatibility of the special measure with Article 273 of that directive, notwithstanding the question to that effect raised by the referring court. Article 395(1) of the VAT Directive is, at least so far as the special measure is concerned, the more specific legal basis.
30. It is also doubtful whether Article 273 of the VAT Directive would be a suitable legal basis for the introduction of the special measure. In contrast to Article 395(1) of that directive, which permits measures aimed (alternatively) at simplifying the procedure for collecting VAT or at preventing certain forms of tax evasion or avoidance, Article 273 of the VAT Directive makes it possible only to impose additional obligations aimed (cumulatively) at ensuring the correct collection of VAT and at preventing evasion. In the present case, the special measure, however, is intended not to ensure the correct collection of VAT but only to prevent tax evasion (and tax losses). What is more, the special measure is not an additional obligation but rather a derogation from the VAT Directive. Derogations, however, are permissible only on the basis of Article 395 of that directive.
2. Compatibility with Article 206 in conjunction with Article 168(a) of the VAT Directive
31. The special measure would, however, also have to be compatible with the other provisions of the VAT Directive. Unlike Italy, (5) for example, Poland applied for a derogation only from Article 226 of the VAT Directive, and received it by way of Implementing Decision 2019/310.
32. What we may have here, at first glance, is an infringement of Article 206 in conjunction with Article 168(a) of the VAT Directive. After all, Article 206 of the VAT Directive provides that taxable persons are liable for payment only of the VAT arising from their transactions that becomes chargeable on submission of a VAT return at the end of a particular taxation period (see Article 250 et seq. of the VAT Directive) and after deduction of the input VAT which they have themselves paid to other taxable persons. In principle, therefore, VAT is payable not after each completed taxable transaction but only after the end of the relevant taxation period. (6) The Polish scheme, however, prevents taxable persons from freely disposing of that amount from the moment they receive payment from their customer.
33. What is more, Article 206 of the VAT Directive is closely linked to the right to deduct input VAT provided for in Article 168(a) of the VAT Directive. It is settled case-law that the right of taxable persons, as expressed in that provision, to deduct immediately the VAT due or already paid on goods purchased and services received as inputs from the VAT which they are liable to pay is a fundamental principle of the common system of VAT established by EU legislation. (7) The pre-financing of VAT not actually intended to burden the taxable trader must therefore be kept to a minimum. (8)
34. The Polish special measure is nonetheless compatible with those provisions. Although taxable persons cannot freely dispose of the VAT account, they can at least use it to pay VAT to those supplying goods or services to them. What is more, it appears that that account may be used to discharge all liabilities to the State.
35. Therefore, in so far as taxable persons can pay VAT to those supplying goods or services to them using the funds held in the VAT account, they do not have to pre-finance VAT to any greater extent than is provided for under the normal system established by the VAT Directive. In those circumstances, the special measure does not infringe Article 206 of the VAT Directive.
36. The position as regards Article 168(a) of the VAT Directive may be otherwise, however, if the sum of the funds held in the VAT account exceeds the amount of the tax debt. If, in those circumstances, taxable persons are unable to dispose of the funds in the VAT account in a timely manner, they are deprived of liquidity for no reason under tax law. While the surplus amount must therefore be promptly released to the taxable person, the tax authority must still be able to verify the accuracy of the declared tax liability, at least if it has any specific doubts in that regard. (9) It is for the national court to review whether those requirements are met. Such a scenario does not appear to be present here, however, since, according to the information provided by the referring court, the taxable person appears to have outstanding tax arrears. Even so, the referring court will ultimately have to examine this too.
37. It is true that the taxable person’s right to dispose of the VAT collected is thus restricted. However, it cannot (yet) be said that the taxable person must pay the tax at an earlier point in time than as provided for in Article 206 of the VAT Directive. In most typical cases, the restricted right of disposal is confined to the difference between the taxable person’s own tax liability and the input tax deduction plus the aforementioned duties under public law. From a temporal point of view, the right of disposal is limited only until the time of the next tax return. What is more, the second sentence of Article 206 of the VAT Directive would even allow a Member State to derogate from the rule that payment must be made when the VAT return is submitted and to demand interim payment, in the case of VAT which has already become chargeable. (10)
38. Consequently, there is no derogation from Article 206 of the VAT Directive. We may therefore leave open the question whether only minor derogations from individual provisions of the VAT Directive would (by implication) be permitted in the very formal procedure under Article 395 of the VAT Directive, even though those provisions are not mentioned in the implementing decision.
B. Compatibility with EU law of not releasing the VAT account in the event of insolvency
39. It must further be clarified whether it is compatible with EU law for national tax authorities to deny the insolvency administrator of an insolvent taxable person access to the VAT account.
40. It therefore falls to be examined whether the European Insolvency Regulation or the VAT Directive precludes the prioritisation of (VAT) claims in insolvency proceedings (1) or whether the grant of unrestricted access to the VAT account is required under Article 17(1) of the Charter (2) or follows from other principles of EU law (3).
1. The ranking of (VAT) claims in insolvency proceedings
41. EU law does not lay down any material rules of its own as regards the order in which creditors are to be satisfied in insolvency proceedings. It provides only conflict-of-law rules for this purpose. Thus, in accordance with Article 7(1) and (2)(i) of the European Insolvency Regulation, it is the law of the State of the opening of proceedings that is to govern, inter alia, the distribution of proceeds from the realisation of assets and the ranking of claims. If, therefore, insolvency proceedings are opened in Poland, it is Polish law, as the applicable insolvency law, that determines, inter alia, the ranking of claims.
42. The VAT Directive, too, certainly does not preclude the prioritisation of claims to tax in insolvency proceedings relating to a taxable person. On the contrary, the special features of VAT law may even require that the VAT collected by the insolvent taxable person is to be paid first and foremost to the State and is not to be used to satisfy all of the taxable person’s other creditors.
43. In the view of the Director of the Tax Chamber, Wrocław, this can be inferred from the judgment of 15 October 2020, E. (VAT – Reduction of the taxable amount) (C‑335/19, EU:C:2020:829). In that judgment, the Court held that the primacy of EU law can also render inapplicable the order in which creditors are satisfied under insolvency law, if this is not in accordance with the provisions of the VAT Directive. (11)
44. The aforementioned dispute, however, had to do with the direct effect of Article 90 of the VAT Directive for the benefit of the taxable person, who should not bear the risk that his debtor, the recipient of the supply, may become insolvent. By contrast, the present case concerns the impact of the taxable person’s insolvency on the separate and blocked VAT account. The aforementioned judgment does not support any direct inference in that regard.
45. What does militate in favour of the priority satisfaction of the State’s claims to VAT in the event of the insolvency of the taxable person is the special function which the VAT system assigns to the now insolvent taxable supplier.
46. It is settled case-law of the Court that VAT is an indirect tax on consumption which is to be borne by the final consumer. (12) In that regard, the taxable undertaking acts – as the Court puts it – only as ‘tax collectors for the State and in the interest of the public exchequer’. (13) The tax liability of the taxable undertaking therefore performs a purely technical function that arises exclusively from the indirect way in which VAT is collected. From a material point of view, VAT, as a general tax on consumption, is intended to tax not the taxable undertaking but the financial capacity of consumers as reflected in their expenditure of assets to obtain a consumable benefit. (14)
47. Where, however, taxable persons act only as ‘tax collectors for the State and in the interest of the public exchequer’, it seems contradictory to allow all of their creditors free access to the sums so collected. In that context, taxable persons act, rather, as a kind of trustee. They (only) collect the tax for, and pass it on to, the State. As soon as VAT is paid (as part of the price), all of the parties involved – that is to say, the taxable person (including the insolvency administrator), his creditors and the payer – know that that amount is not materially owed to the taxable person but is to be passed on to the State (indirect collection of tax), even though it is first (formally) paid into an account belonging to the taxable person.
48. It should also be noted that the indirect taxation method provided for under the VAT Directive is departed from at certain points. In particular, shifting the tax liability to the recipient of the supply (see Articles 196 and 199 of the VAT Directive) leads to the direct taxation of the expenditure incurred by the recipient of the supply. The VAT due on the transaction is not available to the taxable person’s creditors in the case of such a reverse-charge mechanism either, because it is already owed by the recipient of the supply, who pays it to the State and does not therefore pay it first to the supplier. As is clear in particular from recital 5 of Implementing Decision 2019/310, however, the special measure was specifically introduced for transactions which, because of their susceptibility to fraud, were already subject to the reverse-charge mechanism. Even without the special measure, therefore, that VAT would apparently not have been available to the insolvency estate either.
49. To my mind, however, the (formal) taxation method can have no bearing on the material question as to whether the VAT is to be paid to the State for which it was collected or is also available to the taxable person’s creditors to satisfy their claims.
50. Consequently, EU law does not preclude national legislation and practice which ultimately have the effect, in insolvency proceedings, of prioritising the satisfaction of the creditor of tax liabilities over the creditors of other claims.
2. Compatibility with Article 17(1) of the Charter
51. The refusal by the tax authorities to release the funds held in the VAT account could, however, constitute a breach of the taxable person’s (account holder’s) right to property guaranteed in Article 17(1) of the Charter.
(a) Scope of the Charter under Article 51(1) of the Charter
52. For that to be the case, the special measure would in the first place have to constitute an implementation of EU law in accordance with Article 51(1) of the Charter.
53. In the Commission’s view, this is not the case, since neither the VAT Directive nor the European Insolvency Regulation govern the ranking of claims in insolvency proceedings. According to the Commission, the fact that Implementing Decision 2019/310 authorises Poland to introduce the split payment mechanism is not sufficient to support the assertion that this is an implementation of EU law. That line of argument, however, is unconvincing.
54. In accordance with settled case-law, the concept of ‘implementing Union law’ within the meaning of Article 51(1) of the Charter presupposes a sufficient degree of connection between an act of EU law and the national measure. The fact that the matters in question are closely related or that one may have an indirect effect on the other is not sufficient. (15) Fundamental EU rights are not applicable to national legislation where the provisions of EU law do not impose any specific obligations on Member States with regard to the situation at issue in the main proceedings. (16)
55. Although the special measure constitutes a derogation from the provisions of the VAT Directive, it is nonetheless an implementation of EU law within the meaning of Article 51(1) of the Charter. After all, it is EU law alone, namely Article 395(1) of the VAT Directive in conjunction with Implementing Decision 2019/310, which enables Poland to introduce the special measure derogating from the VAT Directive in the first place. That special measure thus continues to give practical expression to the provisions of the VAT Directive for Poland, but in a way which derogates from that in which those provisions are put into effect by the other Member States.
56. If, however, the implementation of the VAT Directive entails a commitment to the fundamental rights of the European Union, this must also be the case where individual Member States are authorised by the European Union to introduce selectively derogating special measures under Article 395(1) of the VAT Directive, and go on to implement them.
57. What is more, the special measure is intended to combat VAT fraud, in accordance with the requirement laid down in Article 395(1) of the VAT Directive. (17) That objective is recognised and promoted by the provisions of EU law on the common system of VAT. (18) For this reason too, the application of the special measure constitutes an implementation of EU law.
58. In addition, the special measure is apparently also intended to fulfil the obligation, imposed on Member States by Article 325(1) TFEU, to effectively counter activities affecting the financial interests of the European Union. The Court of Justice has, after all, stated (19) that, in the light of the own resources decision, (20) there is a direct link between the collection of VAT revenue, in compliance with the applicable EU law, and the availability to the EU budget of the corresponding VAT resources, since any lacuna in the collection of the first potentially causes a reduction in the second. As much as that assertion may be open to question, (21) it must nonetheless ultimately be concluded that the special measure constitutes an implementation of EU law within the meaning of Article 51 of the Charter, that is to say, an implementation of the VAT Directive.
59. The special measure must therefore be measured against Article 17(1) of the Charter.
(b) Interference with Article 17(1) of the Charter and the justification therefor
60. Article 17(1) of the Charter protects all rights with an asset value that create, under the legal system concerned, an established legal position enabling the holder to exercise those rights autonomously and for his or her own benefit. (22) Available money constitutes such a legal position with an asset value. (23) The first sentence of Article 17(1) of the Charter also protects the use and disposal of lawfully acquired property.
61. A measure which provides that VAT must be paid into a separate VAT account of the taxable person, the use of which is restricted, therefore interferes with the scope of the protection provided for under Article 17(1) of the Charter. This is because the taxable person cannot freely dispose of the funds held in the VAT account. As I understand the Polish legislation, the taxable person can use the VAT account only for certain enumeratively listed payments. In accordance with Article 108b(1) of the Law on VAT, the taxable person must seek the tax authority’s consent to access the account for any other purpose.
62. It follows from the third sentence of Article 17(1) of the Charter, however, that the use of property may be regulated by law in so far as that is necessary for the general interest. What is more, in accordance with Article 52(1) of the Charter, limitations may be placed on the exercise of the rights and freedoms enshrined therein, on condition that those limitations are not disproportionate. (24)
63. The special measure pursues a legitimate purpose, namely the combating of VAT fraud. (25) It is also not obviously unsuitable for attaining that objective. After all, it transforms a system of indirect tax collection that is susceptible to fraud into a semi-indirect system of tax collection which is less susceptible to fraud and under which the VAT collected is paid neither directly to the State nor indirectly to the State via another taxable person, but into a form of trust account belonging to the taxable person.
64. It must not, however, go beyond what is necessary to achieve the purpose which it pursues. The only more lenient yet equally suitable means conceivable are other anti-fraud measures. It is important to take into account the discretion which the legislature of the Member State concerned enjoys in that regard. The Court of Justice has nothing before it to indicate that the limits of that discretion have been breached here. It would appear that other anti-fraud measures have not been sufficiently successful. (26)
65. Finally, the measure should be appropriate. It is true that the risk of VAT fraud may be lower in an insolvency administration than in the normal course of business. It cannot be ruled out entirely, however. What is more, the assets held in the VAT account are used to settle the taxable person’s tax liabilities and are thus not removed from him. There is only a temporary restriction of the right to dispose of the VAT, which, from a material point of view, is in any event owed to the State alone.
66. It might at most be said that the other insolvency creditors are deprived of the assets to satisfy their claims because the State is effectively given priority over them. However, on the one hand, the request for a preliminary ruling does not relate to the fundamental rights of the other insolvency creditors. On the other hand, in so far as the VAT is collected only ‘in trust’, it is difficult to establish on the part of the other creditors a right with an asset value to the surrender of the VAT, which is actually owed to the State.
67. Moreover, EU law does not govern the ranking of claims in insolvency proceedings. If national law confers on the exchequer a preferential right to non-harmonised taxes in insolvency proceedings, there is certainly no implementation of EU law. EU fundamental rights are therefore not to be examined in this regard.
68. Consequently, it is not incompatible with EU law for national law to require tax authorities, even after insolvency proceedings have been opened against a taxable person, to examine whether there are tax arrears, and to release sums held in the VAT account only in so far as that is not the case. This is certainly true where the examination and release of funds that are not needed to satisfy tax arrears take place within a reasonable period of time.
69. Consequently, although the special measure constitutes an interference with Article 17(1) of the Charter, it is justified.
3. Breach of other principles of EU law
70. There is nothing to indicate the presence of a breach of the principles of the rule of law and legal certainty provided for in Article 2 TEU (to which the referring court also refers). The tax authority’s decision contained a statement of reasons and was based, according to the referring court, on Polish law and its interpretation by the Polish courts. It was also open to appeal.
71. The right to good administration reflects a general principle of EU law. The requirements to which that right gives rise also apply to national tax authorities in the implementation of EU law. (27) There is, however, no evidence of a breach of that principle here. Finally, there is nothing to indicate the presence of a breach of the principle of sincere cooperation under Article 4(3) TEU either.
V. Conclusion
72. I therefore propose that the Court’s answer to the questions referred should be as follows:
Article 17(1) of the Charter of Fundamental Rights of the European Union, the principles of proportionality, neutrality, the rule of law, legal certainty, sincere cooperation and good administration, as well as the provisions of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, in particular Articles 395 and 206 thereof, and of Council Implementing Decision (EU) 2019/310 of 18 February 2019 authorising Poland to introduce a special measure derogating from Article 226 of Directive 2006/112, do not preclude national legislation and practice whereby the insolvency administrator is denied permission to transfer the funds held in the VAT account belonging to the taxable person to the bank account designated by the insolvency administrator, in so far as the taxable person still has tax arrears.