C-361/96

'Each Member State shall refund to any tax­ able person who is not established in the ter­ ritory of the country but who is established

(a) submit to the competent authority referred to in the first paragraph of * Original language: Greek. Article 9 an application modelled on the 1 — Council Directive 79/1072/EEC of 6 December 1979 on the harmonisation of the laws of the Member States relating to specimen contained in Annex A, attach­ turnover taxes —Arrangements for the refund of value ing originals of invoices or import docu­ added tax to taxable persons not established in the territory of the country (OJ 1979 L 331, p. 11). ments ...'.

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2. It should be noted that SGS had based its application for the refund of the input tax notwithstanding the loss of the original invoice on the principle of equity in German 3. SGS has brought an action challenging law, which is laid down in Paragraphs 163 that refusal before the Finanzgericht Köln, in and 155 of the Abgabenordnung (Tax Code). which it seeks the refund by concession of Under that principle, a derogation from par­ the turnover tax which it was charged. That ticular provisions relating to the assessment court considered it expedient to stay pro­ of tax or its refund may be granted in spe­ ceedings and refer to the Court of Justice for cific cases where it appears that their applica­ a preliminary ruling two questions concern­ 2 tion would be inequitable for the taxable ing whether the relevant provisions of the person. However, the competent German Eighth Directive at issue require without exception that the originals of the requisite documents be produced in order for turn­ over tax to be refunded or whether, where 2 — The term used in the German legislation is 'unbillig', which could be rendered in French as 'inéquitable'. those originals are lost without fault, they

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5. However, adhering to the letter of the Eighth Directive and rejecting any deroga­ tion from the requirement to submit original documentary evidence may, according to the referring court, place taxable persons who are covered by that directive, that is to say 6. As the referring court states, the above foreign traders, at a disadvantage compared procedure (using the means of proof under with their domestic competitors. It observes procedural law in order to prove a posteriori that that possibility is not consistent with the that the lost original invoice initially existed and obtaining the refund of input tax as a concession on the basis of a duplicate or photocopy of the original invoice) corre­ 3 — The referring court makes the following fine distinctions: if it were to be held that it is not a mandatory requirement sponds to German tax practice and to the under the directive for the original to accompany the appli­ cation for a refund, it will, in its view, be necessary to con­ concordant settled case-law of the highest sider whether Community law 'requires', 'permits', 'pro­ German courts. In the light of the above, the poses' or even 'suffers' the granting of concessions such as that claimed by SGS in its application. referring court expresses the view that the

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strict interpretation of the relevant provi­ (b) Should the first question be answered in sions of the directive may conflict with its the negative, does it follow from the very objective or even offend against a gen­ prohibition on discrimination under eral principle of Community law, namely the Community law and from the principle prohibition of discrimination laid down by of neutrality of turnover taxes that a tax­ 4 Article 95 of the EC Treaty. It considers able person referred to in Article 2 of the that the Court of Justice will have to take directive has the right to prove his account of all the abovementioned matters entitlement to a refund by submitting a when answering the two questions referred duplicate of the invoice or import docu­ for a preliminary ruling which I set out ment referred to in Article 3(a) where immediately below. the original has been lost for reasons beyond his control?

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1 the recipient'. 1In the view of the Advocate General, in any event, possession of the 8. As regards the Sixth Directive, the Court original invoice remains the rule, while has recognised the importance which the recourse to other means of proof is by way invoice has in the Community system of of exception and is permitted when consis value added tax as a document used both for tent with the overriding objective of the the payment of VAT and for the deduction Sixth Directive of ensuring the proper appli

In Jeunehomme, 8 the Court accepted that a Member State may require invoices to con tain particulars additional to those laid down by the directive. In Reisdorf, 9 which resembles this case more closely, the Court held that the Member States may 'regard as an invoice not only the original but also any 9. The above case-law does not answer other document serving as an invoice that directly the questions raised in this case. In fulfils the criteria determined by the Member 14 particular, in the judgment in Reisdorf, States themselves, and [are conferred] the where it is accepted that regard may also be power to require production of the original had to copy invoices in the tax refund pro cedure, reference is made to Article 18(1)(a) of the Sixth Directive, according to which the taxable person must hold 'an invoice' in 6 — Article 17(4) of the Sixth Directive states that 'the Council shall endeavour to adopt before 31 December 1977, on a order for tax to be deducted. That solution proposal from the Commission and acting unanimously, Community rules laying down the arrangements under which refunds are to be made in accordance with paragraph 3 to taxable persons not established in the territory of the country'. 10 — Emphasis added. 7 — See Case C-342/87 Genius Holding v Staatssecretaris van Financiën [1989] ECR 4227. 11 — Paragraph 23. 8 — Joined Cases 123/87 and 330/87 Jeunehomme and EGI v 12 — Opinion of Advocate General Fennelly (paragraph 25). Belgian State [1988] ECR 4517. 13 — Case C-141/96 Finanzamt Osnabrück-Land v Langhorst 9 — Case C-85/95 Reisdorf v Finanzamt Köln-West [1996] ECR [1997] ECR I-5073. I-6257. 14 — Cited above in footnote 9.

13. I consider, therefore, that limits exist both for the adoption of new formal require­ ments and for the interpretation of the mini­ mum requirements which the Community legislature has enacted. Those limits are intended to prevent the right of taxable per- sons to deduct input tax from being totally undermined. The Court has repeatedly held 11. First, a fundamental objective of the that that right, which is laid down in Article Sixth Directive must be served, namely 17(2)(a) of the Sixth Directive, constitutes an 20 ensuring the levying of tax and its supervi­ essential element of the system of VAT. 15 sion by the tax authorities. Moreover, as the Advocate General pointed out in Lang- 16 horst, the aim of the Community provi­ 17 — Cited above in footnote 8. sions which require production of the 18 — Opinion of Sir Gordon Slynn of 31 May 1988, at p. 4534 (emphasis added). invoice 'is to ensure that the tax is correctly 19 — Jeunehomme, paragraph 17. See also the Opinion of Advo- levied and to avoid fraud'. cate General Fennelly in Reisdorf (paragraph 26): '... Mem- ber States are entitled as a general rule to require that tax- able persons retain the original invoice for whatever period of time they determine, so long as that period is not so extended as to infringe the principle of proportionality articulated in that case'. 15 — See, to that effect, Jeunehomme, paragraphs 16 and 17, Reis- 20 — See Case 15/81 Gaston Schul Douane v Inspecteur der dorf, paragraph 24, and Langhorst, paragraph 17. Invoerrechten en Accijnzen [1982] ECR 1409 and Case 16 — Opinion of Advocate General Léger of 27 May 1997, point 268/83 Rompelman v Minuter van Financiën [1985] ECR 29 et seq. 655.

14. It follows from the above that, in the does not leave scope for any exceptions. It view of the Community judicature, the fits into an evidential procedure which is Community tax regime in issue is based on characterised by formality and strictness and two fundamental principles/objectives: first, for that reason cannot be bypassed even if the levying of tax and the combating of tax reasons of equity so require. The Commu­ evasion and, secondly, safeguarding the right nity legislature also appears to envisage the of taxable persons to deduct input tax (the use of original invoices only in Article 7(3) principle of fiscal neutrality). In accordance of the Eighth Directive, where it provides with the principle of proportionality, the bal­ that 'the competent authority ... shall stamp ance must not in any event be tipped exces­ each invoice and/or import document to pre­ sively in favour of one of the objectives, vent their use for further application ...'. It thereby putting achievement of the other at follows from Article 3 in conjunction with risk. Article 7 that the Eighth Directive seeks to prevent tax from being refunded twice; that risk is removed completely or, at least, more securely by the requirement to produce the original invoice. The German Government does not neglect to point out the extent of the above risk where the person applying for B — Consideration of the questions submit- the refund is not established in Germany, ted when he also escapes the supervisory powers of the German tax authorities. It refers in particular to a new form of tax fraud, con­ sisting in the creation of bogus companies for the purpose of committing tax offences such as obtaining a double refund of tax. Those companies are established outside the 15. It appears at first sight to follow from territory of the State in which they commit certain points arising from the literal and, in those infringements and they exploit the fact part, the teleologicai approach to the provi­ that that Member State is unable to exercise sions of Community law at issue that the primary supervision over them and immedi­ Community legislature makes production of ately take the appropriate preventive or the original invoice an essential requirement repressive measures. which must without exception be complied with in order for input tax to be deducted.

original invoice and, secondly, seeks to create is necessary to avoid the imposition of an effective procedure in order to combat tax double taxation on those persons. It then evasion. However, are those factors sufficient states that the Community rules put in place for it to be concluded that the obligation on by the Eighth Directive 'will mark progress taxable persons to hold the original invoice towards the effective liberalisation of the allows absolutely no exception? I do not movement of persons, goods and services ...' think so. As the Commission correctly and that they 'must not lead to the treatment states, the Eighth Directive was adopted pur­ of taxable persons differing according to the suant to the Sixth Directive in order to har­ Member State in the territory of which they 21 monise the procedures for the refund of tax are established'. It may accordingly be in the special case of an applicant who is not stated that the Eighth Directive 'follows' the established in the territory of the country in general system created by the Sixth Directive which the refund is made. Even though I do and, in accordance with the principle of not agree entirely with the Commission's equal treatment, extends the field of applica­ characterisation of the Eighth Directive as an tion of that system to a further category of act 'dependent' on the Sixth Directive, I nev­ taxable persons, namely those not established ertheless consider that it forms part of the in the country in which the input tax was more general endeavour to create a uniform levied. tax system, whose primary component is equal opportunities for all taxable persons to obtain a refund of input tax. It is therefore wrong, in my view, to seek to present the Eighth Directive as introducing exceptions to the general system of the Sixth Directive, that is to say as a corollary of the desire on the part of the Community legislature to impose, for the purpose of combating tax evasion, a stricter regime on taxable persons established outside the country in which the 19. That view was adopted by the Court in 22 refund is granted. Debouche. It found in that case that 'it is not the purpose of the Eighth Directive to undermine the scheme introduced by the Sixth Directive. According to the third recital in the preamble, the Eighth Directive is intended rather to eliminate discrepancies between the arrangements then in force in the Member States, which gave rise in some cases to deflection of trade and distortion of competition. In accordance with the fifth 18. For an understanding of the position recital, the Eighth Directive must not "lead occupied by the Eighth Directive in the to the treatment of taxable persons differing Community tax system more generally, it is according to the Member State in the terri­ particularly instructive to read the preamble 23 tory of which they are established"'. The to that directive. The Community legislature first has regard to the provision in the Sixth Directive relating to the need to lay down Community rules governing the refund of 21 — Emphasis added. tax to taxable persons not established in the 22 — Case C-302/93 Debouche v Inspecteur der Invoerrechten en Accijnzen [1996] ECR I-4495. territory of the country, and considers that it 23 — Paragraph 18.

21. I begin with the more radical solution. As has already been stated, the right of tax­ able persons to obtain a refund of input tax, so that the neutrality of value added tax in the intra-Community trading of goods and 22. However, I consider that, even if a spe­ services is in practice guaranteed and the cial Community rule is not formulated, rea­ economic integration of the Member States is sons relating to the equal treatment of tax­ promoted, constitutes the corner-stone of the able persons must lead to the same Community tax system. That right would be conclusion. As already mentioned, the prejudiced, in my view inordinately, if the Eighth Directive is intended to fill out the loss of the original invoice or, in any event, uniform system for the refund of input tax.

24 — Opinion of Advocate General Tesauro of 1 February 1996, [1996] ECR I-4497, point 8 (emphasis added). 25 — Jeunehomme, paragraph 17.

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23. Moreover, as the referring court and the Commission rightly point out, the opposite approach to interpretation of the Eighth Directive would infringe the general prin­ ciple of non-discrimination laid down in 28 — Article 7(5) of the Eighth Directive provides as follows: Article 6 of the EC Treaty, the specific prin­ 'Where a refund has been obtained in a fraudulent or in any ciple concerning the non-discriminatory tax other irregular manner, the competent authority referred to in paragraph 3 shall proceca directly to recover the treatment of products enshrined in the first amounts wrongly paid and any penalties imposed, in accordance with the procedure applicable in the Member paragraph of Article 95 of the EC Treaty, State concerned, without prejudice to the provisions relat- and the very objectives of the Eighth Direc­ ing to mutual assistance in the recovery of value added tax. 27 In the case of fraudulent applications which cannot be made tive as set out in its preamble. By contrast, the subject of an administrative penalty, in accordance with national legislation, the Member State concerned may refuse for a maximum period of two years from the date on which the fraudulent application was submitted any further refund to the taxable person concerned. Where an adminis- trative penalty has been imposed but has not been paid, the 26 — Cited above in footnote 9. Member State concerned may suspend any further refund 27 — See point 18 above. to the taxable person concerned until it has been paid.'

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29 26. As the referring court explains, domestic traders may, first, use all the means of proof available under procedural law in 24. It follows from the above that the con­ order to prove that they initially held the clusion reached in Reisdorf must also be original invoice and, secondly, may invoke applied to the interpretation of the provi­ the principle of equity, as enshrined in writ­ sions of the Eighth Directive which are at ten and unwritten law, to obtain in the end issue. That conclusion may be summarised as the refund of input tax by producing merely follows: on the grounds of the prevention of a copy invoice. Applicants for a refund who tax evasion, it is in principle necessary to are not established in Germany must there­ hold the original invoice in order to obtain a fore also be treated in the same way. Those refund of input tax; in special cases, however, persons are entitled to rely on exactly the where the original cannot be produced, same substantive and procedural rules of through no fault of the person liable to pro­ national law in order to obtain by way of duce it, the Member States may be satisfied exception a tax refund without presenting with other evidence proving that the claim the original invoice. That solution is required for a deduction is well founded. by the principle of equal treatment and by the, to my mind better, interpretation of Article 3(a) of the Eighth Directive in con­ junction with the approach adopted by the Court in Reisdorf when interpreting the cor­ responding provisions of the Sixth Directive. On the other hand, the application of a pro­ vision of national law, such as Paragraph 61 of the UStDV, in order to prevent foreign

29. There is, of course, also the other inter­ pretation, whose basis is that, for reasons of 28. First, there may be found to be a special equal treatment of taxable persons, the rule of interpretation, resulting both from decision in Reisdorf is to be applied in the the teleological approach to the provisions of context of the Eighth Directive. Under that the Eighth Directive and from the general solution, a Member States, such as Germany, principles of equity and proper administra­ which has made use of the power conferred tion, which can be expressed as follows: the on it by the Sixth Directive to accept, in requirement laid down by the Eighth Direc­ cases where the original invoice is lost with­ tive to attach the original invoice to the out fault, applications for refunds from tax­ application for the refund of tax ceases to able persons established within its territory apply when, in exceptional circumstances, which are based on other evidence, must, the taxable person proves that he lost the when it applies the Eighth Directive, also original invoice through no fault of his own grant exactly the same possibility to taxable and submits an accurate copy or duplicate persons not established in its territory. invoice in its place. That solution, which I consider preferable, presents the advantage that it involves Community law only. While it allows the conditions laid down by the Eighth Directive to be applied in a manner favourable to the taxable person, it has a par­ ticularly narrow and exceptional field of application and therefore does not compro­ mise the general requirement that the origi­ nal invoice must be held, nor does it put at risk the efforts of the Community legislature 30. In conclusion, it should be noted that to combat tax evasion and tax fraud; on the those two solutions may be used cumula­ other hand, it helps to safeguard the prin­ tively as independent legal bases for the ciple of fiscal neutrality, which constitutes answer to the questions referred for a pre­ the corner-stone of the Community tax liminary ruling.