„Balgarska telekomunikatsionna kompania“ EAD v Direktor na Direktsia „Obzhalvane i danachno-osiguritelna praktika“ - Sofia.

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2023:381
• Date: 04 May 2023
• Docket Number: C-127/22
• Celex Number: 62022CJ0127
• Court: Court of Justice (European Union)

Provisional text

JUDGMENT OF THE COURT (Ninth Chamber)

4 May 2023 (*)

(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 185 – Adjustment of deductions of input VAT – Goods written off – Subsequent sale as waste – Destruction or disposal duly proved or confirmed)

In Case C‑127/22,

REQUEST for a preliminary ruling under Article 267 TFEU from the Varhoven administrativen sad (Supreme Administrative Court, Bulgaria), made by decision of 16 February 2022, received at the Court on 22 February 2022, in the proceedings

‘Balgarska telekomunikatsionna kompania’ EAD

v

Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ – Sofia

THE COURT (Ninth Chamber),

composed of L.S. Rossi, President of the Chamber, J.-C. Bonichot and O. Spineanu-Matei (Rapporteur), Judges,

Advocate General: T. Ćapeta,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

– ‘Balgarska telekomunikatsionna kompania’ EAD, by O.P. Hadzhiyski and T.M. Mollahasan, advokati,

– Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ – Sofia, by T. Todorov, advokat,

– the European Commission, by D. Drambozova, J. Jokubauskaitė and V. Uher, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

1 This request for a preliminary ruling concerns the interpretation of Article 185 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) (‘the VAT Directive’).

2 The request has been made in proceedings between ‘Balgarska telekomunikatsionna kompania’ EAD (‘BTK’) and the Direktor na Direktsia ‘Obzhalvane i danatchno-osiguritelna praktika’ – Sofia (Director of the ‘Tax and Social Security Appeals and Practice’ Directorate of Sofia, Bulgaria) concerning the decision of the Inspector General of Taxes of the Teritorialna Direktsia na Natsionalna Agentsia za prihodite (District Office of the National Revenue Agency, ‘Major Taxpayers and Insurers Division’, Bulgaria) rejecting BTK’s request for reimbursement of sums paid in respect of adjustments of initial value added tax (VAT) deductions, which had been made because various capital goods and stock items were written off between the years 2014 and 2017.

Legal context

European Union law

3 Article 168(a) of the VAT Directive provides:

‘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’.

4 Article 184 of that directive provides:

‘The initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled.’

5 Under Article 185 of that Directive:

‘1. Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.

2. By way of derogation from paragraph 1, no adjustment shall be made in the case of transactions remaining totally or partially unpaid or in the case of destruction, loss or theft of property duly proved or confirmed, or in the case of goods reserved for the purpose of making gifts of small value or of giving samples, as referred to in Article 16.

However, in the case of transactions remaining totally or partially unpaid or in the case of theft, Member States may require adjustment to be made.’

6 Article 186 of that VAT Directive provides that Member States are to lay down the detailed rules for applying Articles 184 and 185 thereof.

Bulgarian Law

7 The zakon za danak varhu dobavenata stoynost (Law on value added tax) of 21 July 2006 (DV No 63 of 4 August 2006, p. 8), in the version applicable from 1 January 2017 (‘the ZDDS’), provides in Article 78:

‘1. Input VAT deducted is the amount of tax which a taxable person has deducted under this law in the year in which the right to deduct is exercised.

2. In the event of a change in the taxable amount, the cancellation of a supply or a change in the nature of a supply, the taxable person is required to adjust the amount of VAT deducted.

…’

8 Article 79(1) of the ZDDS provides:

‘Any taxable person who has deducted, in full, in part or in proportion to the level of use for the purposes of the independent exercise of his or her business, a tax credit on goods which he has produced, acquired or imported, shall, where those goods are destroyed, shrinkages are established or the goods are classified as wastage, pay tax in an amount equivalent to that of the input VAT deducted.’

9 Exceptions or limitations to the adjustment of input VAT are provided for in Article 80 of that law, paragraph 2 of which provides:

‘Adjustments under Article 79 shall not be made in the following cases:

1. destruction, shrinkage or wastage caused by force majeure, as well as in the case of the destruction of excisable goods under administrative control in accordance with the Law on excise duties and tax warehouses;

2. destruction, shrinkage or wastage caused by accidents or disasters which the person concerned is able to prove were not caused by him or her or by the person using the goods;

3. shrinkage resulting from a change in the physical and chemical properties in normal proportions corresponding to the standards established for the limit values for natural loss of substances and shrinkage of goods during storage and transport in accordance with a regulatory act or with business standards and norms;

4. technological wastage within permissible limits established by the technological documentation for the production or activity concerned;

5. wastage due to expiry of the service life, determined in accordance with legal requirements;

6. writing-off of capital goods, where their net book value is less than 10% of their original value.’

10 Article 79(3) and Article 80(2) of the ZDDS in the version applicable before 1 January 2017 (‘the previous version of the ZDDS’) contained provisions similar to those set out, respectively, in paragraphs 8 and 9 of the present judgment.

The dispute in the main proceedings and the questions referred for a preliminary ruling

11 BTK is a company incorporated under Bulgarian law operating in the telecommunications sector. It is subject to VAT on its activities, which include, inter alia, the provision of telecommunication services. For the purposes of its activities, it acquires various capital goods and, with a view to their resale, mobile communication devices and various items of equipment necessary or ancillary to the use of the services it provides. Deductions are made in respect of the VAT paid on those acquisitions.

12 During the period between October 2014 and December 2017, BTK wrote off various goods, such as installations, equipment or appliances considered unsuitable for use or sale for various reasons, including wear and tear, defects or their obsolete or unsuitable nature. The writing-off was carried out in compliance with the applicable national legislation. This consisted, specifically, in the removal of the assets concerned from the company’s balance sheet. Next, some of those goods were sold as waste to taxable third-party undertakings and others were destroyed or disposed of.

13 Those write-off transactions led to adjustments involving the repayment of the input VAT deducted in respect of the goods concerned. Those adjustments were made pursuant to Article 79(3) of the previous version of the ZDDS, between the years 2014 and 2016, and pursuant to Article 79(1) of the ZDDS, as of 1 January 2017.

14 On 18 January 2019, BTK submitted a request for reimbursement of the sums paid in connection with those adjustments. That request related to a total amount of 1 304 090.54 leva (BGN) (approximately EUR 666 770). It submitted on that occasion that Article 79(1) of the ZDDS and Article 79(3) of the previous version of the ZDDS were incompatible with Article 185(2) of the VAT Directive.

15 That request for reimbursement was refused by a decision of the Inspector General of Taxes of the Regional Directorate of the National Revenue Agency (Major Taxpayers and Insurers Division), adopted on 5 December 2019. That decision was confirmed by a decision of 18 February 2020 of the Director of the Tax and...