C-42/83

JUDGMENT OF 10. 7. 1984 — CASE 42/83

In Case 4 2 / 8 3

R E F E R E N C E t o t h e C o u r t u n d e r Article 177 of t h e E E C T r e a t y by the Østre Landsret [Eastern Division of the Danish H i g h C o u r t ] for a preliminary ruling in t h e proceedings pending before that c o u r t between

DANSK DENKAVIT A P S

and

MINISTERIET FOR SKATTER OG AFGIFTER [Ministry for Fiscal Affairs]

Facts and Issues

The facts of the case, the course of the I — Facts and p r o c e d u r e procedure and the observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of 1. Article 10 (2) of the Sixth Council Justice of the EEC may be summarized Directive of 17 May 1977 (77/388/EEC) as follows : on the harmonization of the laws of the

DANSK DENKA VIT v MINISTERIET FOR SKATTER OG AFGIFTER

On the other hand, with respect to similar obligations in relation to import VAT, Article 23 of the directive merely By virtue of Article 20 (1) of the Danish provides that "Member States shall lay Law on value-added tax, promulgated on down the detailed rules for the making 1 July 1982 under No 369, every under- of the declarations and payments". taking which is subject to VAT must inform the authorities, no later than one month and 20 days after the expiry of each tax period, of the amount of its By virtue of the second paragraph of input and output tax during that period. Article 23, Member States may provide According to Article 15 of the Law,

JUDGMENT OF 10. 7. 1984 — CASE 42/83

By virtue of Article 29 of the Law on value-added tax, tax is paid on goods of 3. The plaintiff in the main pro- foreign origin when they are imported ceedings, Dansk Denkavit ApS [here- and the tax is calculated in accordance inafter referred to as "Dansk with the rules laid down in Chapter 8 of Denkavit"], a subsidiary of the the Customs Law (Articles 69 to 95). Netherlands company Denkavit Inter- national BV, which markets animal feeding-stuffs which are purchased from Article 85 of the Danish Customs Law the Denkavit consortium in the (which was promulgated on 15 De- Netherlands and are imported into cember 1982 under No 659) provides Denmark, has at its own request been that the accounting period for taxes on registered as an importer and thus pays consumption levied on goods imported import VAT in respect of goods of with a view to profit by persons foreign origin, in accordance with the registered in accordance with Article 82 abovementioned national provisions of the Law is one month. The tax on which are applicable to persons who consumption in respect of goods cleared import by way of trade. through customs during the accounting period must be paid to the customs administration before the end of the month following the accounting period, Having commenced business at the but, under Article 15 (1) of the Law on beginning of 1981, the plaintiff in the value-added tax, it may be set off as main proceedings noted the disparity input tax at the end of the tax period for described above and, with a view domestic transactions during which the to securing its elimination, applied on importation took place, as extended by 3 June 1981 to the Danish Ministry with the corresponding period for payment. responsibility for taxes and excise duties

" 1 . Must the Sixth Council Directive According to Dansk Denkavit, the (77/388/EEC of 17 May 1977) on difference between the periods in the harmonization of the laws of the question entails a difference in the real Member States relating to turnover burden represented by the taxes on the taxes, in particular Articles 10, 22 goods concerned since the taxes must be and 23 thereof, be interpreted in regarded as encumbering the goods as such a way that the directive from the time when they are paid to the precludes a Member State from Treasury. Specifically with regard to the laying down accounting periods and Sixth Council VAT Directive, the periods within which payment must plaintiff claimed that it contains no be made in respect of value-added provision requiring Member States to lay tax chargeable on the importation of down different accounting periods and goods from another Member State that the directive cannot, moreover, be (value-added tax on imports) which interpreted as allowing the laying down are in conformity with the periods of different accounting periods, because prescribed by Article 22 (4) of the if that were the case it would have to be directive but which mean that regarded as void by reason of its registered importers obtain a shorter incompatibility with Article 95 of the average period of credit for making Treaty. payment of that tax to the revenue authorities than the average period of credit which the same Member State generally permits registered 5. In support of its submissions before undertakings, including importers, in the national court, the defendant, the respect of payment to the revenue

authorities of the net amount of Mikaelsen, Legal Adviser, and Gregers value added tax on the general Larsen, by Dansk Denkavit ApS, turnover (net tax liability)? represented by Karen Dyekjær-Hansen, and by the Commission of the European Communities, represented by its Legal 2. What significance must be attached Adviser D. R. Gilmour, acting as Agent, in deciding Question 1 to the fact assisted by Frantz Dahl of the that the provisions of the Member Copenhagen Bar. State in question on the rendering of accounts and payment of value- added tax on imports may be 9. Upon hearing the report of the regarded as entailing an average Judge-Rapporteur and the views of the period of credit for importers which Advocate General, the Court decided to constitutes a reasonable counterpart open the oral procedure without any to the average period of credit which preparatory inquiry. However, it invited purchasers at the same commercial the Commission to answer a question and industrial stage can obtain from concerning the national legislation of the suppliers, for the payment of the other Member States regarding the time- purchase price, inclusive of value- limits at issue in the main proceedings. added tax, when they purchase products manufactured in the Member State in question? II — W r i t t e n o b s e r v a t i o n s s u b - 3. Must Article 95 of the EEC Treaty m i t t e d p u r s u a n t to A r t i c l e be interpreted in such a way that it 20 of t h e P r o t o c o l of t h e precludes a Member State from S t a t u t e of the C o u r t of laying down, in respect of value- Justice added tax on imports, accounting periods and periods within which 1.1. In its observations the plaintiff in payment must be made in the the main proceedings, Dansk Denkavit, manner described in Questions 1 and maintains that the system adopted by 2? Danish legislation concerning the accounting period and time-limit for 4. If the answer to Question 3 is in the payment for internal VAT, on the one affirmative, must the provisions of hand, and import VAT on the other, the Sixth Council Directive (77/388/ gives rise to discrimination against EEC, of 17 May 1977) be treated as products imported from the other inapplicable in the judgment in the Member States and is thus contrary to case before the Danish Court, and if Article 95 of the EEC Treaty, which so to what extent?" prohibits the direct or indirect imposition on the products of other Member States of any internal taxation in excess of that 7. The order making the reference was imposed directly or indirectly on similar received at the Court Registry on 17 domestic products. March 1983. 1.2. According to Dansk Denkavit, the 8. Pursuant to Article 20 of the discrimination against imported products Protocol on the Statute of the Court in favour of domestic products lies in the of Justice of the EEC, written obser- fact that, in the case of import VAT, the vations were submitted by the Danish tax is actually collected and, in addition, Government, represented by Laurids the accounting period and the time-limit

for payment are specific to that tax and (Article 13 (2) in conjunction with are short, whereas in the case of internal Article 15). Regard being had to the VAT the accounting period and the procedure for deduction, the result is time-limit for payment are longer. that the amount of VAT paid by the supplier is always identical to the amount simultaneously deducted by the buyer, so that the VAT is not paid to the Treasury 1.3. It points out that, by contrast with until the end of the prescribed period for goods supplied by Danish undertakings, payment following the tax period during goods which are imported are invoiced which the goods are supplied to the final

off as input tax (Article 15 (4) of the Law on VAT) until the expiry of the period comprising the tax period The plaintiff points out that the VAT is applicable to domestic transactions therefore in every case at the disposal during which the import took place and either of the seller or of the buyer during the period for payment of the net tax the period in course, until it is finally liability arising from those transactions. paid to the Treasury, and undertakings The plaintiff emphasizes the result of this which benefit from that system will, like is that the import tax must be financed undertakings which by contrast suffer a throughout that period. pecuniary loss as a result of the system, be able to take that situation into account in their pricing policy.

conjunction with Article 13 (2) of the enjoys an equivalent advantage, in terms Law on VAT) and on the other as input of interest, which is reflected by the tax for the buyer (Article 15) within the same tax period, that is to say the period possibility of reducing the price of the within which invoicing takes place goods by a corresponding amount. The amount of VAT in question, until

actually paid to the Treasury, remains at period for payment, two and a half the disposal of traders in the internal months and 20 days. market in the form of interest-free liquid funds giving rise to the same economic On the other hand, in the case of import consequences regarding the formation of VAT, the average period of credit is the price of the product, regardless of equivalent to one half of the accounting whether the amount is at the disposal of period (which is one month), that is to the buyer or of the seller. say half a month, plus the period for payment of one month, giving a total of In that regard it emphasizes that whilst one month and a half. that analysis, which concerns marketing under the internal system, contains Consequently, the period of credit for nothing new in view of the fact that the import VAT is one and a half months, VAT system is wholly neutral as regards whereas that for VAT under the internal undertakings, it does show that what is system is two and a half months and 20 decisive is the period of credit granted to days. the supplier before he must account to the Treasury for the VAT paid by the consumer and that the advantage arising 1.5. Dansk Denkavit thus draws the

1.4. In that regard, Dansk Denkavit, payment.of import VAT is shorter than referring to the provisions of Danish that granted for payment of the net tax legislation, states that, as regards the tax liability at the corresponding stage of charged on transactions on the internal marketing of domestic products. market, it is possible to calculate for each transaction subject to VAT the average period of credit before VAT must be 1.6. It maintains that those discrimi- accounted for.

According to Dansk Denkavit: Thus the average period of credit for payment of the tax on transactions on the internal market is one and a half The fact that the periods of credit months, which gives, after addition of granted vary from one sector to another one month and 20 days representing the and from one undertaking to another is

That Article 95 is immediately applicable On the other hand, the fact that import and creates direct effects for the VAT must be paid by the importer nationals of Member States, according to within a short period direct to the the decision of the Court in Case 74/76 Treasury and not to the supplier entails (Iannelli v Meroni, [1977] ECR 557), so the result that, regardless of the period that nationals are entitled to require that of credit which the supplier may grant, national law be disregarded in so far as the amount of the VAT is not available its provisions are contrary to Article 95 and cannot play any part in the of the Treaty; formation of the prices of goods, enabling them to be reduced so as to reflect interest on disposable liquid funds. That import VAT is an internal tax (judgment of the Court in Case 15/81, Gaston Schul, [1982] ECR 1409), the lawfulness of which depends on its Finally, Dansk Denkavit considers that compatibility with Article 95 of the its interpretation is supported by the Treaty; argument that, under a national system in which the credit periods are equal, import VAT is never paid because the undertaking calculating the import VAT That, as regards the assessment, in the at the same time shows it as an input tax light of Article 95, of the incidence of a (deductible tax) in its ordinary VAT tax on domestic products and on return. It emphasizes that in such a case imported products, the decisive criterion, exactly the same situation arises as that according to the decisions of the Court which arises in the case of internal VAT, (judgments in Case 171/78, Commission namely that input VAT is always v Denmark, [1980] ECR 447, Case matched by the corresponding output 74/76, Iannelli v Meroni, cited above,

Dansk Denkavit also observes that the incompabtibility of the Danish legislation with Article 95 of the Treaty cannot be contested on the ground that any harmo- Dansk Denkavit observes further that in nization of the tax periods and of the any event, although the directive in time-limits for payment would entail as a question does not formally prohibit the preliminary more extensive harmon- grant of periods of credit under the ization under Article 99 of the EEC import VAT system which are different Treaty. It observes that the scope and the from those granted under the internal respective objectives of Articles 95 and VAT system, neither does it require that 99 of the Treaty are distinct, which led the periods should differ. It considers the Court to state in its judgment in that the directive's silence on this point Case 171/78 (Commission v Denmark, cannot be construed as authorizing the cited above) that "the implementation of Member States to adopt a system which the programme of harmonization laid is contrary to the Treaty (judgment of down by Article 99 of the EEC Treaty the Court in Gaston Schul) merely

DANSK DENKAVIT v MINISTERIET FOR SKATTER OG AFGIFTER

"It is of no significance, for the purpose 1.8. As regards the answers to be given of the answer to Question 1, that the to the national court, Dansk Denkavit provisions of national law on the considers that the essential question is the third one, to which it proposes the rendering of accounts and payment of following reply: import VAT may be regarded as entailing an average period of credit for importers corresponding to the period for payment allowed by suppliers to their "Article 95 of the EEC Treaty must be buyers at the same marketing stage when interpreted as precluding a Member State the buyers purchase goods produced in from laying down, with respect to the the Member State in question." importation of goods from another Member State, an accounting period and a time-limit for payment in respect of Finally, with regard, to the answer to be import VAT which entail an average period of credit for the payment thereof given to the fourth question, Dansk which is shorter than the period of credit Denkavit states that if Question 1 is applicable in the case of the payment to answered in the negative, in other words the Treasury of VAT under the internal if it is considered that the Sixth VAT system by virtue of the [Danish] rules Directive specifically permits different relating to the accounting period and the periods of credit, the reply which must time-limit for payment." be given to the fourth question is that the Sixth Directive is invalid in that respect. It observes however that such an inter- As regards the first question, Dansk pretation of the Sixth VAT Directive is Denkavit considers that the reply to that unnecessary and, moreover, is incorrect question must be given in the light of the from both the linguistic and the legal third question, since it is appropriate to points of view; therefore the plaintiff interpret the Sixth Directive as being in proposes primarily that the fourth conformity with Article 95 of the Treaty. question should be answered as follows: It therefore proposes that the following answer be given to the first question : "This question is devoid of purpose."

In the event of the Court's answering the new harmonizing measures which the third question in the affirmative and the Community may adopt in the future, first question in the negative, the plaintiff since the requirements which it sets out proposes in the alternative that the do not go beyond what may be fourth question be answered as follows : demanded, even before any harmon- ization, on the basis of Article 95 of the Treaty, which is directly applicable. It "The Sixth Council Directive of 17 May emphasizes in that respect that it is not 1977 on the harmonization of the calling for a radical measure eliminating laws of the Member States relating to the specific scheme of the system of turnover taxes (77/388/EEC) is in- accounting for import VAT, since that compatible with Article 95 of the EEC could be brought about only by a Treaty and is therefore invalid, in so far harmonizing measure such as that as it requires or allows Member States to embodied in the Commission's Proposal fix accounting periods and time-limits for a Fourteenth Directive. for payment in respect of import VAT which entail a period of credit for the payment of that tax which is on average shorter than that allowed by the rules on 2. In its observations, the Danish the accounting period and the time-limit Government starts by giving a description for payment to the Treasury of VAT of the VAT system, the way in which it under the internal system.

It considers that for legislation is in fact intended to establish that purpose it would be sufficient to and maintain conditions of equality as grant the same tax period and the same regards competition between purchases payment period as for payment to the made on the internal market and Treasury of internal VAT and that the imports. national legal provisions in question could be amended specifically and independently, because the amendment would not in any way affect the general It observes in the first place that, under scheme of the VAT system or disrupt its the VAT system, it is not possible to application. follow the payments of tax in respect of a given product, but only to calculate, on the basis of averages, the effects of the Furthermore, Dansk Denkavit points out VAT system as a whole on the liquidity that its replies are not prejudicial to any position of undertakings.

Moreover, according to the Danish induced it to grant import undertakings Government, the favourable or unfavour- the same cash-flow advantages as those able character of the system does not granted to the other undertakings by depend exclusively on the length of the prescribing that import VAT was to be periods in question but upon a whole collected not at the time of importation series of interrelated factors, such as but at a later stage. whether tax is payable to the Treasury or a repayment is due, the length of the

Thus, for industrial and commercial average is likely to be obtained by a undertakings as a whole and at all stages buyer from his supplier, in the case of of distribution and the provision of the purchase of domestic products, services, there is a cash-flow advantage where the terms of purchase are "current in so far as the duration of the tax month plus 30 days". periods and of the periods within which payment must be made gives a longer average period of credit in respect of the tax liability than the period of credit It adds in this respect that since (a) an usually obtained by final consumers from average period of credit of that duration their suppliers, but the way in which allowed for purchases made in Denmark such a credit advantage is shared among was taken into consideration when the the undertakings involved in the chain of accounting period and payment period transactions depends on the individual for import VAT were fixed in 1970 and ways in which each undertaking operates (b) the periods of credit in trade have and on the combined effects of the other since tended to become shorter, the factors mentioned above. payment period for import VAT probably entails a longer period of credit than is available for payment of VAT

calculated quarterly as part of the periodic return in respect of the net tax It observes that the legislature's concern liability. It explains that the reason for to achieve as far as possible equality as this is that importers would in such regards competition between import circumstances, as a result of the right to transactions and domestic purchases deduct import VAT, be released from

the obligation to pay import VAT to the It points out however that Article 23 (4) Treasury, which would entail a wholly of the proposal for a directive unreasonable distortion of competition. nevertheless imposes the condition that the taxable person must have a fixed It adds that, if the wish expressed by establishment within the territory of the importers were to be complied with, the country in question. consequence would be that the net amount credited by the State to the The Danish Government emphasizes that importer would be considerably higher it is clearly apparent from the proposal than that allowed to an undertaking at and from the preparatory proceedings the same marketing stage dealing in that it is not concerned with a series of

the importer). On the other hand, an Member States expressed reservations undertaking of the same kind, dealing in regarding the action to be taken Danish products, is granted credit by the concerning the proposal. State only for a much smaller tax liability, after deduction of the VAT In that respect, the Danish Government which he has had to pay, within the states that it has drawn attention to the periods of credit ordinarily granted, to financial consequences which the his Danish supplier of goods. implementation of that proposal would involve for the State budget.

to the greatest extent possible. State to increased interest charges of around 500 to 600 million Kroner per The Danish Government observes that annum. the Proposal for a 14th Directive on harmonization of the laws relating to turnover taxes moves in the direction of 2.2. With regard to the first question the request made by Dansk Denkavit, submitted by the Østre Landsret the because, in a new Article 23 (2), it Danish Government goes on to observe obliges Member States to grant any that the time limits for payment of taxable person who so requests auth- import VAT provided for by Danish orization not to pay the tax payable on legislation are in conformity with those importation at the time when the goods laid down in the Sixth Directive.

DANSK DENKAVIT v MINISTERIET FOR SKATTER OG AFGIFTER

It average periods of credit for payment to is therefore impossible to interpret the the Treasury of the two different kinds directive as meaning that national rules of tax. of this kind are prohibited, unless it is considered that collection of the tax In that regard, the Danish Government when the goods cross the frontier, and observes that, even if the Member States likewise the collection of duties under opted for the course expressly provided customs provisions, are prohibited. for in the second and third sub- paragraphs of Article 10 (3) of the directive, which provide respectively Moreover, according to the Danish

duties. Member States may apply the acceptable under the rules of the provisions in force governing customs directive. duties as regards the chargeable event and the date when the tax becomes Thus, according to the Danish Govern- chargeable," ment, the wording of the Sixth Directive

is perfectly clear and there are no the existence of the Proposal for a 14th grounds whatsoever for an interpretation Directive submitted by the Commission such as that proposed by Dansk shows that the view maintained by Denkavit. Dansk Denkavit does not correspond to the existing law. Turning to the provisions of the directive as a whole, the Danish Government The Danish Government thus proposes observes that they reflect the radically that the first question should be different circumstances surrounding pay- answered in the negative, in the ment of import VAT and the net tax following terms :

2.3. With respect to the second question, rules, relating for example to the the Danish Government observes that it chargeable event, calculation of the tax concerns the essential effect of the and the tax liability. Danish system, which entails, as regards In support of this principle of differen- competition, the maximum degree of tiation between the internal VAT system neutrality possible at the present stage of and the system of import VAT, the development of Community law. Danish Government refers to the judgment given in Gaston Schul, in which In the opinion of the Danish the Court found that it was lawful to Government, it is however more correct require individuals to pay import VAT to answer Questions 1 and 3 in the even though they are not subject to VAT negative, there being no need to impose when they sell to domestic purchasers. the condition that the legislation of a Member State should be as described in According to the Danish Government, the second question submitted to the the general scheme of the directive thus Court. clearly shows that it is not possible to maintain that the rules relating to the net According to the Danish Government, it tax liability and to import VAT must be is immaterial that a negative reply to the uniform; such uniformity should be first and third questions should make envisaged only by means of harmon- reference, for the purpose of the decision ization of the national rules on VAT, to be given by the Østre Landsret in the otherwise, in view of the differences at main proceedings, to the characteristics present existing in the other Member of'the tax system described in the second States, the consequence would be a question. serious distortion of competition to the detriment of transactions carried out

DANSK DENKAVIT v MINISTERIET FOR SKATTER OG AFGIFTER

The Danish Government considers that it For the purposes of the present case the is therefore inappropriate to make Danish Government therefore considers comparisons — which are impossible — absolutely decisive the fact that the between, on the one hand, the effects of Court has stated clearly that Anicie 95 the system adopted by the exporting

JUDGMENT OF 10. 7. 1984 — CASE 42/83

system. The intrinsic characteristics of submitted to the Court by the Østre the VAT system make it impossible, by Landsret, to reply to the third question contrast with the position regarding in the negative inasmuch as the only excise duty, to identify within the correct basis of comparison lies in the context of the marketing of goods under relationship between the payment of the internal system a particular payment VAT by the importer to the State and of tax which can be compared with the the payment by the same trader of VAT payment of import VAT. to a domestic supplier, the comparison In that respect the Danish Government being based solely on average values. emphasizes that in the case of a The Danish Government thus proposes transaction under the internal system a that the third question be answered in buyer does not have to pay the VAT to the negative on the ground that it is the Treasury and that there is, moreover, justified to levy import VAT as soon as no example of a seller having to settle a the goods cross the frontier. tax liability corresponding to the output In the event of the Court's considering tax on the whole sales value of the that under Article 95 a Member State is goods, in view of the fact that the obliged to grant importers a period of fundamental principle underlying the credit, the duration of that period must, VAT system is the generalized right of according to the Danish Government, be deduction. determined on the basis of the situation of undertakings described in average According to the Danish Government, terms; the correct basis of comparison in there are therefore special circumstances that respect is achieved by so framing the in the case of import VAT, in view of rules that there is no reason for an the fact that, whilst the tax is a importer to buy goods in his own

DANSK DENKAVIT v MINISTERIET FOR SKATTER OG AFGIFTER

Treasury. Therefore, to lay down case, for the purpose of payment of individual accounting periods, in the . import VAT and discharge or the net tax light of the periods of credit granted in liability, to render uniform the rules the exporting Member. State as compared affecting the amount of tax in respect of with those under the rules of the which credit may be granted. importing Member State, regarding import VAT levied on particular goods, rather than being merely a source of In that regard it emphasizes the most practical difficulties, is in fact impossible. important differences between the rules of the Sixth Directive concerning the net Finally, according to the Danish tax liability and those concerning import Government, it is not possible at the VAT and cites the following, provisions: present stage of development of with regard to taxable transactions, Community law to make relevant Articles 2, 5 and 6 in comparison with comparisons between the respective Article 7; Article 10 concerning the liquidity positions — seen in general chargeable event and the chargeability of terms and in so far as those situations are the tax; Article 11 A compared with engendered by the VAT systems — of Article 14, regarding exemptions; Article exporters in one Member State and 16 (2) regarding exemptions from VAT undertakings at the same marketing stage within the country for goods or services

The Danish Government observes that it would be difficult to maintain with 2.5. As regards the fourth question, the respect to taxable persons the difference Danish Government considers that it is which the Court expressly admitted in its devoid of purpose, in view of the judgment in Gaston Schul and, since the negative reply proposed for the third majority of the provisions of the Sixth question. Directive are based on a fundamental

distinction between tax charged on the Court to apply the second paragraph transactions under the internal system of Article 174 of the Treaty by analogy and tax charged on importation, it must and to indicate which of the effects of be left to the Community legislature to the regulation declared void were to be decide on the appropriate measures for regarded as definitive (judgment of eliminating such considerable conflicts 15. 10. 1980 in Case 4/79, Providence with the Treaty. agricole de la Champagne [1980] ECR

that difference. It considers that such a implement the directive must continue to situation would endanger the common apply until the Council has amended the basis of assessment for VAT and might directive. perhaps influence the determination of the own resources of the Community. The Danish Government submits that if, The Danish Government observes that contrary to its expectations, the Court the Court has held on several occasions should reply to the third question in the that Article 95 is directly applicable and affirmative, it would nevertheless be that the practice so far followed by the appropriate to reply to the fourth Court must be taken to mean that question in the negative, in view of the directives adopted by the Council may, fact that the amendments made necessary where appropriate, be held to be invalid by any invalidation of the directive at the if they are contrary to Article 95. It adds present stage of harmonization of the that, according to well-established VAT system are such that those case-law of the Court, in so far as it is amendments could only be adopted by not possible to circumscribe a specific the legislature. part of a provision which is contrary to law, it is for the competent Community

tax equality between the internal market The Danish Government observes that, if and the import market, account for the the legislation at issue had been a regu- existence of two chargeable events within lation, it would have been reasonable for the VAT system, namely:

3.2. With regard to the first question, the Commission examines the provisions The Commission observes that, of Article 10 (1) (a) and (b) and 10 (3), according to the "philosophy" on which Article 22 (4) and (5) and Article 23 of the VAT system rests, the importer is a the Sixth Directive, and points out that, buyer who, by way of exception, is with regard to the questions submitted, responsible for paying the VAT to the they indicate that: State. This anomaly is the immediate consequence of the continuing existence of frontiers. The tax becomes payable at the time when — to simplify — goods are delivered or imported; It explains that the existence of tax frontiers and the necessity of charging VAT on imported goods entail the consequence that the two chargeable The time of payment of the tax to the events mentioned above never take place State may nevertheless be deferred, at at the same marketing stage. the will of the Member State;

The Sixth VAT Directive does nor. The Commission considers that that fact specify for how long payment of the tax is of crucial importance in any case may be thus deferred with respect either concerning the compatibility of the rules to the internal system or to importation. of the VAT system with Article 95 of the Treaty, since the Court has held that for the purposes of Article 95 what must be compared are the tax burdens on It observes that the Sixth VAT Directive domestic goods and those on imported certainly contains rules regarding the goods at the same marketing stage. length of the tax period, but that period

is merely one factor in the comparison differences of treatment, is a question of drawn by the first question and, in general interest. any event, the Member States are empowered, within their own territory, It refers in that regard to its Proposal for to lay down different tax periods for a Fourteenth Council Directive on the different transactions. harmonization of the laws of the Member States relating to turnover taxes — Deferred payment of the tax payable The Commission therefore considers that on importation by taxable persons the only reply which can be given to the (Official Journal C 201, of 5. 8. 1982, first question is that the Sixth VAT p. 5), and observes that, as appears from Directive does not preclude the laying the explanatory memorandum to that down of tax periods and periods for proposal, it is perfectly aware of the fact payment which differ according to that the operation of the VAT system whether the tax relates to imported tends to place imported goods at a disad- goods or to goods subject to the internal vantage, adversely affecting cash-flow. It system. states that, being aware of those disparities, which, however, it considers difficult to quantify any more precisely, 3.3. As regards the second question, the it proposed a legislative solution whereby Commission considers that the reply the payment of import VAT would be must be that for the interpretation of the incorporated in the normal internal provisions of the Sixth VAT Directive machinery for payment and deduction, requested in the first question no as is the case in the Benelux countries significance whatsoever is.to be attached and the ' United Kingdom. The Com- to the fact that a relationship of the kind mission considers nevertheless that the described in the question exists between, disadvantage regarding cash-flow which on the one hand, the calculation and tends to be associated with imported payment of import VAT and, on the goods cannot be considered an other, the average period of credit infringement of Article 95. granted to buyers by sellers within the country. It states that, since the Sixth VAT Directive allows Member States full The Commission states that, in view of latitude to determine the period within the case-law of the Court on the which payment must be made, the relationship between Articles 95 and 99 reasons for which a Member State of the Treaty, if it had had the slightest chooses one particular period rather than doubt on the matter, it would have taken another is entirely without relevance to the necessary measures to eliminate any the interpretation of the Sixth VAT such discrimination by seeking the Directive with respect to the first opinion of the Court as to the correct question. interpretation to be given to Article 95 in that respect.

3.4.1. It observes that, in order to on Iy from that time that the question of assess whether from the formal point of discrimination may arise. view Article 95 precludes Member States from laying down tax periods and time limits for payment which are different In that respect, the Commission con- for imports, on the one hand, and siders that the tax periods and time limits transactions under the internal system, for payment laid down by law and the on the other, reference should be made periods of credit allowed in trade, which to the case-law of the Court, which are fixed contractually between makes clear that, in fiscal matters, the individuals, cannot be used as the basis comparison must relate to the same of a comparison enabling compatibility marketing stage. with Article 95 of the Treaty to be assessed, and to have recourse to those factors would be tantamount to com- It considers that the consequence of the paring matters which are not compar- existence of tax frontiers is that the tax able. Accordingly, the precondition for periods and time-limits for payment in the correct application of Article 95 is question cannot technically be regarded again not satisfied.

Consequently, the marketing stage is not the same and For those reasons the Commission a comparison on that basis cannot considers that no assessment in the light therefore satisfy the strict condition of Article 95 is possible. governing the application of Article 95. According to the Commission, the most Thus, the Commission considers that the that can be said in the light of the reply to the third question must be that requirements of Article 95 in these Article 95, does not preclude the laying circumstances is that, in view of the down of different tax periods and time tendency for the present VAT system to limits for payment for import VAT, on operate to the detriment of imported the one hand, and transactions under the goods, the Member States have a clear internal system on the other. duty to define the obligations imposed on importers, taking reasonable account of the practices normally followed

JUDGMENT OF 10. 7. 1984 — CASE 42/83

that it might be claimed that the Moreover the Commission observes, as a comparison which should be made is a subsidiary point, that the assessment of comparison of the obligations imposed, the length of the periods of credit on the one hand, on the importer and, granted to taxable persons under the on the other, on the taxable person internal system and to importers is under the internal system, regardless of distorted, and indeed rendered the fact that those persons, in the impossible, by the fact that an importer terminology of the Sixth VAT Directive, may deduct the import VAT before he are at different marketing stages. It may actually pays it (unless the transaction is be claimed that from this point of view for the purpose of final consumption), there exists a manifest advantage for the because when an import transaction has internal market which constitutes taken place the VAT to which it is discrimination, by reason of the fact that subject is regarded as input tax, which the importer has a maximum of 59 days' can then be deducted without the need credit whereas the taxable person under to wait for the subsequent declaration the internal system has a maximum credit and payment of the tax. It is possible period of four months and 20 days. therefore, according to the circum- stances, that an import transaction taking place on a particular day may appear in The Commission nevertheless considers a return under the internal system that that comparison is based on an relating to a period expiring on the next day, whereas the tax has to be paid only incorrect calculation. It points out that on the 57th day thereafter. the period of four months and 20 days under the internal systems is obtained by adding the tax period of three months The Commission therefore maintains and the payment period of one month that no discrimination can be inferred and 20 days. from facts which are so uncertain.

goods supplied under the internal system, tax payable under the internal system the reasons underlying those differences and the value-added tax payable on are not relevant to the interpretation of importation. its provisions. Question J/Article 95 of the EEC Treaty A reply was given to this question within does not preclude Member States from the specified period. laying down rules for the collection of VAT by virtue of which different tax periods and time-limits for payment IV — O r a l p r o c e d u r e apply to imported goods on the one hand and to goods supplied under the internal system on the other." At the sitting on 25 January 1984 oral argument was presented and the questions put by the Court were answered by the plaintiff in the main I l l — R e p l y given to t h e q u e s - proceedings, represented by K. Dyekjær- t i o n p u t by t h e C o u r t Hansen, by the defendant in the main proceedings and the Danish Govern- The Commission of the European ment, both represented by M. Gregers Communities was invited by the Court to Larsen, and by the Commission of the state in writing before 15 December 1983 European Communities, represented by whether the legislation of the other F. Dahl. Member States provides — and if so to what extent — for different accounting The Advocate General delivered his periods and time-limits for payment in opinion at the sitting on 28 February respect of the net amount of value-added 1984.

Decision

1 By o r d e r of 2 M a r c h 1983, which was received at the C o u r t on 17 M a r c h 1983, the Østre Landsret [Eastern Division of the D a n i s h H i g h C o u r t ] referred to the C o u r t for a preliminary ruling u n d e r Article 177 of the E E C T r e a t y several questions on the interpretation of Article 95 of the E E C T r e a t y and of the Sixth Council Directive ( 7 7 / 3 8 8 / E E C ) of 17 M a y 1977 o n the h a r m o n i z a t i o n of the laws of the M e m b e r States relating to t u r n o v e r taxes (Official J o u r n a l L 145, p . 1, hereinafter referred t o as " t h e Sixth Directive") in o r d e r to enable it to decide w h e t h e r the Danish legislation on value-added tax is compatible with those provisions.

s According to the national court's order, it is apparent from the aforementioned provisions that, in the case of internal VAT, undertakings enjoy an average credit period of two and a half months, plus 20 days, as from the delivery or invoicing of goods sold domestically; in the case of import VAT, the average credit period is one and a half months as from clearance of the imported goods through customs.

6 Having noted that difference, Dansk Denkavit asked the defendant in the main proceedings to allow it to pay import VAT on the basis of the same accounting and credit periods as those available to persons required to pay internal VAT. The refusal of that request, by decision of 27 July 1981, on the ground that Danish national legislation did not allow otherwise, gave rise to the proceedings before the national court.

DANSK DENKAVIT v MINISTERIET FOR SKATTER OG AFGIFTER

7 In those proceedings, Dansk Denkavit claimed that the Danish legislation was incompatible with Community law on the ground that it was contrary to the Sixth Directive to prescribe different accounting and payment periods for internal VAT and import VAT, since the provisions of that directive could not be interpreted as requiring or allowing a difference between the periods in question.

s Moreover, Dansk Denkavit maintained that, if such a difference were permitted by the provisions of the directive, those provisions would have to be considered invalid as being incompatible with Article 95 of the EEC Treaty, because the difference between the periods in question gives rise to a difference in the actual burden to which the goods are subject as a result of those taxes, by reason of their economic effects in terms of interest.

" 1 . Must the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes, in particular Articles 10, 22 and 23 thereof, be interpreted in such a way that the directive precludes a Member State from laying down accounting periods and periods within which payment must be made in respect of value-added tax chargeable on the importation of goods from another Member State (import VAT) which are in conformity with the periods prescribed by Article 22 (4) of the directive but which mean that registered importers obtain a shorter average period of credit for making payment of that tax to the revenue authorities than the average period of credit which the same Member State generally permits registered under- takings, including importers, in respect of payment to the revenue auth- orities of the net amount of value-added tax on the general turnover (net tax liability) ?

JUDGMENT OF 10. 7. 1984 — CASE 42/83

2 What significance must be attached in deciding Question 1 to the fact that the provisions of the Member State in question on the rendering of accounts and payment of import VAT may be regarded as entailing an average period of credit for importers which constitutes a reasonable counterpart to the average period of credit which purchasers at the same commercial and industrial stage can obtain from suppliers, for the payment of the purchase price, inclusive of value-added tax, when they purchase products manufactured in the Member State in question?

3 Must Article 95 of the EEC Treaty be interpreted in such a way that it precludes a Member State from laying down, in respect of import V A I , accounting periods and periods within which payment must be made in the manner described in Questions 1 and 2?

of the amount of VAT charged directly on the cost of the various price components. By virtue of Article 17 (2) of the Sixth Directive the machinery for such deductions allows taxable persons to deduct from the VAT owed by them the input VAT already charged on the goods.

14 That is the general framework for the operation of Article 2 of the Sixth Directive, which subjects to value-added tax, on the one hand, "the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such" (paragraph 1) and, on the other hand, "the importation of goods" (paragraph 2). "Supply of goods" is defined in Article 5 as "the transfer of the right to dispose of tangible property as pwner", whereas "the importation of goods" is defined, in Article 7, as "the entry of goods into the territory of the country".

is The Sixth Directive also harmonizes the concepts of "chargeable event" and "chargeability" of the tax; in the case of internal VAT these occur "when the goods are delivered or the services are performed" (Article 10 (2)); in the case of imported goods, however, they occur "at the time when the goods enter the territory of the country" (Article 10 (3)).

i6 As regards the obligations of taxable persons in connection with tax periods, accounting periods and time-limits for payment, paragraphs (4) and (5) of Article 22 of the Sixth Directive provide as follows with regard to internal VAT:

"4. Every taxable person shall submit a return within an interval to be determined by each Member State. This interval may not exceed two months following the end of each tax period. The tax period may be fixed by Member States as a month, two months or a quarter. However, Member States may fix different periods provided that these do not exceed a year.

is In the first question, the Østre Landsret asks, essentially, whether, within the framework laid down by its provisions, the Sixth Directive allows national legislation to distinguish between internal VAT and import VAT by prescribing different accounting periods as the basis for the tax liability and different periods for payment of the tax.

i9 As is apparent from the provisions of Article 22 (4) and (5) and Article 23 of that directive, the framework within which Member States may exercise their legislative power in order to fix the periods within which the tax must be paid following the chargeable event is different for import VAT and tor internal VAT. It cannot therefore be inferred either from those provisions or from its other provisions that the Sixth Directive requires national legislation to make the periods in question either uniform or different; on the contrary, the directive leaves the Member States free to formulate, within the .framework which it lays down, the detailed arrangements regarding the periods in question.

DANSK DENKAVIT v MINISTERIET FOR SKATTER OG AFGIFTER

20 Consequently, the provisions of the directive do not preclude a Member State from laying down, in respect of import VAT, accounting periods and periods for payment which are different from the periods which apply to the payment of the net tax liability under the internal system.

The second question

21 In view of the answer given to the first question, an answer to the second question submitted by the Østre Landsret is unnecessary.

JUDGMENT OF 10. 7. 1984 — CASE 42/83

25 The Danish Government maintains that the decisive criterion for compatibility with Article 95 of the Treaty is the actual incidence of each tax on domestic and imported products which are in a comparable situation as regards the transactions concerned. That however, is not the position in the case of products subject to the systems of internal and import VAT, because import VAT, being a compensating charge which is necessary at the present stage of development of Community law, has no equivalent in the internal system, having regard in particular to the purchaser's obligation to pay the VAT to the revenue authorities and to the fact that the tax is calculated on the total sale value of the goods. According to the Danish Government, import VAT represents a special situation since, whilst it is an element of the internal tax system of the State, it is nevertheless impossible to find any comparable situation within the framework of a marketing transaction under the internal system, since import VAT is linked to the crossing of a frontier.

26 The Commission maintains that Article 95 of the Treaty cannot be applied in this case because import VAT and internal VAT do not relate to the same stage of marketing, since the transactions under the internal system relate to sales whereas in the case of imports they relate to purchases; moreover, for economic reasons, the two taxes differ in several respects; consequently, a comparison of the two situations with a view to ensuring the correct application of Article 95 would be hazardous, if not impossible.

3i As regards domestic transactions, Article 22 (4) of the Sixth Directive provides that so-called "tax periods" are to be laid down, by reference to which the net tax liability of the taxable person is to be established, account being taken of the often numerous transactions to which the VAT machinery gives rise during the period in question. At the end of each tax period, taxable persons have a further period in which to prepare their return and a period within which payment must actually be made. The tax periods cannot however be assimilated to such periods for collection or payment of the tax, but constitute solely a reference period for calculating the net tax position of each taxable person.

32 In those circumstances, imported products are, as regards tax periods, in a position which cannot be compared with that of products subject to the internal system, since their tax position is net as from the time of im- portation.

33 Consequently, the Court considers that such tax periods need not, as Community legislation stands at the present time, be taken into consideration in the comparison of the payment and collection periods granted in respect of imports and in respect of domestic transactions.

JUDGMENT OF 10. 7. 1984 — CASE 42/83

34 The reply to the question submitted must therefore be that differences in time-limits laid down by national legislation with regard to the taxation of imports and taxation of domestic transactions may, in certain circumstances, constitute an infringement of Article' 95 of the Treaty. Nevertheless, tax periods which serve as a basis for calculating the net tax position of each taxable person under the internal system need not, as Community legislation stands at the present time, be taken into consideration in the comparison of the periods for payment. Thus, there is nothing in legislation such as that described by the national court which is capable of constituting discrimi- nation within the meaning of Article 95 of the Treaty.

in reply to the questions submitted to it by the Østre Landsret by order of 2 March 1983, hereby rules:

1. The Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes does not prevent a Member State from laying down in respect of VAT on imports accounting periods and periods for payment which are different from the periods allowed for payment of the net tax liability under the internal system.

DANSK DENKAVIT v MINISTERIET FOR SKATTER OG AFGIFTER

2. Differences in time-limits laid down by national legislation with regard to the taxation of imports and taxation of domestic transactions may, in certain circumstances, constitute an infringement of Article 95 of the Treaty. Nevertheless, tax periods which serve as a basis for calcu- lating the net tax position of each taxable person under the internal system need not, as Community legislation stands at present, be taken into consideration in the comparison of the periods for payment. Thus, there is nothing in legislation such as that described by the national court which is capable of constituting discrimination within the meaning of Article 95 of the Treaty.

Mackenzie Stuart Koopmans Bahlmann Galmot

Pescatore O'Keeffe Bosco Due Kakouris