C-141/96

FINANZAMT OSNABRÜCK-LAND v LANGHORST

OPINION OF ADVOCATE GENERAL LÉGER delivered o n 27 M a y 1997 *

1. The Bundesfinanzhof (Federal Finance sions of the Sixth VAT Directive 2 appear to Court) brings before the Court for the first preclude such an equation. time the practice of self-billing, in which the buyer of goods or the recipient of services himself draws up the invoice for the econ- omic transaction for which he is to pay.

I — Legal and factual background

2. In view of the legal consequences attached to the concept of an invoice under the Com- munity legislation relating to value added tax ('VAT'), the recognition of that procedure by A — Facts and national proceedings the laws of certain Member States logically led to national courts having to consider the legal effects of the documents drawn up and issued under the conditions defined by the various Member States. '

4. Mr Bernhard Langhorst, the plaintiff in the main proceedings, declared the turnover for 1985 of his agricultural business after having elected, as permitted by Paragraph 3. It is thus appropriate to determine 24(4) of the Umsatzsteuergesetz in its 1980 whether the characteristics of a document version (hereinafter 'the UStG'), 3 to be drawn up by the debtor rather than the taxed at the rate of 7%, under the general creditor are close enough to those of a tradi- provisions of the UStG, rather than at the tional invoice for it to be acknowledged as rate of 13% provided for in the first sentence having an identical function in the common of Paragraph 24(1) of that Law. system of VAT, even though certain provi-

7. The Bundesfinanzhof considers that the reduction was correctly determined by the Finanzgericht, but that the appeal by the 1. The trader providing the service (the Finanzamt might nevertheless succeed under recipient of the credit note) must be entitled the first sentence of Paragraph 14(2) of the under subparagraph 1 to show the tax sepa- UStG. Paragraph 14(2) provides as follows: rately in an invoice.

'If the trader has in an invoice for a supply or other service shown separately a higher amount of tax than he owes under this Law 2. There must be agreement between the in respect of the transaction, then he issuer and the recipient of the credit note shall also owe the additional amount. If he that the supply or other service is to be corrects the amount of tax as against the settled by a credit note.

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3. The credit note must include the infor- C — The national court's questions and the mation prescribed in the second sentence of relevant provisions of Community law subparagraph 1 above. 4

10. It consequently refers the following 4. The credit note must have been delivered three questions to the Court: to the trader providing the service.

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3. Can the recipient of a credit note, in the 13. Article 22 of the Sixth Directive princi- circumstances set out in Question 2, rely on pally determines the obligations of persons Article 21(l)(c) of the Sixth Directive if the hable to pay VAT under the internal system. value added tax mentioned in the credit note Article 22(3) deals with invoices and their is claimed from him as a tax debt to the content. Points (a) and (c) state: extent of the difference between the tax men- tioned and the tax owed by reason of taxable transactions?'

'(a) Every taxable person shall issue an invoice, or other document serving as 11. The national court states that the third invoice in respect of all goods and ser- question arises only if the answer to the sec- vices supplied by him to another taxable ond question is negative. 6 person ...

12. Article 21(1) of the Sixth Directive lists the persons liable to pay VAT under the internal system. Points (a) and (c) specify that

(c) The Member States shall determine the '(a) taxable persons who carry out taxable criteria for considering whether a docu- transactions other than those referred to ment serves as an invoice.' in Article 9(2)(e) and carried out by a taxable person resident abroad ...

— whether the trader who has carried out the economic transaction ('the trader' or 'the recipient of the credit note') and has not challenged the excessive amount of 16. The invoice constitutes the documentary VAT shown in the credit note may for evidence of the amount of VAT owed by the that reason be regarded as the person trader, thus serving both the payment of that who has mentioned it and is conse- tax and the deduction of the tax paid by the quently liable to pay it; and previous trader. 7

— in the event that, under the relevant pro- visions of the Sixth Directive cited above, 17. The Sixth Directive contains no defini- the trader is not liable to pay the excess tion of the terms 'invoice' and 'document amount of VAT because he may not be serving as invoice' used in Articles 21(l)(c) regarded as the person who has men- and 22(3)(a). After listing the minimum con- tioned it, whether he may rely on that ditions relating to the information an invoice provision to contest the obligation to pay must by virtue of its very purpose contain, 8 under German law. the directive leaves it to the Member States to determine the criteria for considering whether a document serves as an invoice. 9

A — The first question: whether a credit note issued by the recipient of a supply of goods or services may be equated with an invoice within the meaning of the Sixth Directive 18. The Federal Republic of Germany made use of that power by enacting Paragraph 14(5) of the UStG, which introduces the credit note at issue in these proceedings.

7 — Article 18(l)(a) of the Sixth Directive. 8 — Article 22(3)(b) sutes that 'the invoice shall state clearly the price exclusive of tax and the corresponding tax at each rate 15. A precise delimitation of the concept of as well as any exemptions'. an invoice within the meaning of the Sixth 9 — Article 22(3)(c).

22. The Court was careful to state, however, that that power must be exercised consis- tently with 'one of the aims of the Sixth

25. That provision, however, cited by the 10 — Joined Cases 123/87 and 330/87 Jeunehomme and EGI v national court in order to define the legal Belgian State [1988] ECR 4517 and Case C-85/95 Reisdorf context of the case, is of no use in answering v Finanzamt Köln-West [1996] ECR 1-6257. 11 — Jeunehomme and EGI, paragraph 16. Paragraph 17 states, however, that such particulars must not, by reason of their number or technical nature, render the exercise of the right to deduction practically impossible or excessively difficult. 13 — Reisdorf, paragraph 24. See also the Jeunehomme and EGI 12 — Paragraph 31. judgment, paragraph 17.

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the first question, since it gives no indication the relevant provision must be considered of whether or not the decisive factor in when interpreting it. deciding whether a credit note is a document serving as an invoice is the identity of the person who issues or delivers it.

29. Since its aim, as stated above, is to ensure that the tax is correctly levied and to avoid 26. The present question seeks to establish fraud, 1 5 there appears to be n o valid reason whether the power given to Member States why the document drawn up by the recipi­ by Article 22(3)(c) of the Sixth Directive per­ ent of the goods or services should not serve mits a document drawn up not by the trader as an invoice, where that document contains but by the recipient of the goods or services the information prescribed for invoices by to be regarded as an invoice. the Sixth Directive 1 6 and its addressee is able to correct it if necessary.

B — The second question

32. Under Paragraph 14(5)(3), the credit note must include the same information as that prescribed for invoices, including 'the consideration for the supply or other service' 35. Two readings of the question are pos- and 'the amount of tax due on the consider- sible. ation'.

36. One reading of the question itself, in the light of the grounds stated in the order for 33. A power of control for the trader is reference, is that the Bundesfinanzhof is ask- ensured by Paragraph 14(5)(2), which states ing the Court to state whether the fact that a that the parties to the contract must agree trader has accepted, without contestation, an that a credit note is to be used. Again, under incorrect credit note issued by the recipient Paragraph 14(5)(4), 'the credit note must of the goods or services means that he may have been delivered to the trader providing be regarded as a person who has mentioned the service', and the second sentence of the VAT within the meaning of Article 21(l)(c) second indent provides that 'the credit note of the Sixth Directive. If the answer is affir- shall cease to have effect as an invoice in so mative, the national court concludes auto- far as the recipient contests the amount of matically that the trader is liable for the VAT tax shown therein'. mentioned in the credit note, without raising questions on that point, which it regards as not in doubt.

34. The trader admittedly does not have an express power of rectification, but his right 37. The other reading is that the national to deprive a credit note of its status as an court's question refers also to the precise invoice by contesting its content nevertheless amount of VAT — that stated in the credit

42. However, in case the Court should not 39. Thus according to the national court, 'it accept that interpretation of the reference, I would be doubtful who was to be regarded shall examine the scope of Article 21(l)(c) of as responsible for the excessive separate the Sixth Directive independently of the mention of tax ...: the livestock dealers nature of the document with the incorrect (recipients of supplies) because of issuing the mention of VAT. credit notes or the plaintiff (provider of sup- plies) in view of the fact that he neither took steps to have the credit notes corrected by 17 — Order for reference, p. 10 et seq. the dealers nor, with the aid of the infor- 18 — Ibid., p. 6, point 11(2). mation in the credit notes, issued the dealers 19 — Ibid., p. 12, point III.

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45. While the UStG clearly states the prin- ciple of payment by the trader of the amount of VAT mentioned by him in an invoice where that amount is greater than that for 49. Here too I prefer a more flexible inter- which he was originally liable, it is silent pretation of the text. By including among where the same difference relates, as in the those liable for VAT, besides the taxable per- present case, to the content of a credit note. son, the person who mentions VAT in the

20 — Points 29 to 31 above. 21 — Point 24 above.

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invoice, the provision aims at discouraging 2. The obligation to pay the VAT mentioned tax fraud. It places the liability for payment in the invoice or credit note of the VAT on persons who issue invoices which are incorrect or correspond to ficti- tious economic operations. 22

52. If the amount invoiced does not, or not completely, correspond to the taxable econ- 50. The aim pursued does not justify a dif- omic transaction, does the obligation to pay ferent interpretation from that I have sug- the VAT extend to the entire amount shown? gested for the answer to the first question. A trader faced with an incorrect credit note, who is entitled to check its content and cor- rect it, must if he does not contest it be regarded as the person who has mentioned the tax. He is therefore liable for the errors which have been made, which may be indica- tive of fraud. 53. That question, the answer to which must be the same in Community law whether the document in which the incorrect amount is mentioned is an invoice or a credit note, arises in similar terms to those in the Genius Holding case.

55. The Court, anxious to combat tax eva- documentation. My reason for proposing sion, thus decided that it was necessary to that the Court should thus limit the scope of determine the amount of the right to deduct its previous case-law is no different from that by reference to the taxable transaction, which inspired the solution adopted in that which amounts to depriving invoices of their case: to discourage tax evasion. function of evidencing the right to deduct where they do not correspond to any trans- action or are based on an overvalued tax base. 24 If there is a contradiction between them, the tax corresponding to the taxable transaction must take priority over the tax 58. It would be an incitement to fraud if, in invoiced, so as not to allow an undue deduc- the event of a difference between the amount tion to be made. invoiced and the amount following from the taxable transaction, the incorrect part of the amount shown in the invoice could fall out- side the obligation to pay on the part of the author of the invoice.

56. According to the Genius Holding judg- ment, the information in the invoice does not have as much weight as the reality of the tax- able transaction, at least with regard to exer- 59. Above all, that would make the invoice cise of the right to deduct. The same ques- purposeless and deprive the supervisory tion may arise in the present case with authorities of a reference document describ- reference to the taxable person's obligation ing the economic operation, on the basis of to pay VAT. » •which checks may be made.

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61. Moreover, the priority given to what is where the economic operation cited might mentioned in the invoice is dictated by the not even exist, shows that the mention in the relevant provisions of the Sixth Directive. invoice is all that matters, since it constitutes The Genius Holding judgment is based the only means of referring to a specific largely on Article 17(2)(a) of the Sixth Direc- figure. tive, concerning the right to deduct. 27 In the present case, the provision whose scope is decisive is Article 21(l)(c) of the Sixth Direc- tive. That provision admittedly defines the person liable for VAT and gives no direct 62. In view of the answer given to the sec- information as to the amount to be paid. ond question, there is no need to express an However, the fact that it is intended to apply opinion on the national court's third ques- to cases where VAT is not legally due, and tion.

Conclusion

63. I n the light of t h e above considerations, I p r o p o s e that t h e C o u r t s h o u l d a n s w e r as follows:

(1) Article 22(3)(c) of t h e Sixth C o u n c i l Directive 7 7 / 3 8 8 / E E C of 17 M a y 1977 o n t h e h a r m o n i z a t i o n of t h e laws of t h e M e m b e r States relating t o t u r n o v e r taxes — C o m m o n s y s t e m of value added tax: u n i f o r m basis of assessment, allows M e m b e r States t o regard a credit n o t e issued b y t h e recipient of a s u p p l y of g o o d s o r services as a ' d o c u m e n t serving as an invoice', w h e r e it includes t h e i n f o r m a t i o n prescribed for invoices b y t h e Sixth Directive a n d its c o n t e n t m a y b e corrected o r contested b y t h e trader w h o h a s carried o u t t h e e c o n o m i c operation.