Ainārs Rēdlihs v Valsts ieņēmumu dienests.

• Jurisdiction: European Union
• Celex Number: 62011CJ0263
• ECLI: ECLI:EU:C:2012:497
• Date: 19 July 2012
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling
• Docket Number: C‑263/11

JUDGMENT OF THE COURT (Second Chamber)

19 July 2012 (*1 )

‛Sixth VAT Directive — Directive 2006/112/EC — Concept of ‘economic activity’ — Supplies of timber in order to alleviate the damage caused by a storm — Reverse charge procedure — Failure to register in the register of taxable persons — Fine — Principle of proportionality’

In Case C-263/11,

REFERENCE for a preliminary ruling under Article 267 TFEU from the Augstākās tiesas Senāts (Latvia), made by decision of 13 May 2011, received at the Court on 26 May 2012, in the proceedings

Ainārs Rēdlihs

v

Valsts ieņēmumu dienests,

THE COURT (Second Chamber),

composed of J.N. Cunha Rodrigues (President of the Chamber), A. Rosas, A. Ó Caoimh, A. Arabadjiev (Rapporteur) and C.G. Fernlund, Judges,

Advocate General: E. Sharpston,

Registrar: C. Strömholm, Administrator,

having regard to the written procedure and further to the hearing on 28 March 2012,

after considering the observations submitted on behalf of:

— Valsts ieņēmumu dienests, by N. Jezdakova, ģenerāldirektore,

— the Latvian Government, by I. Kalniņš and A. Nikolajeva, acting as Agents,

— the European Commission, by A. Sauka and C. Soulay, acting as Agents,

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

gives the following

Judgment

1 This reference for a preliminary ruling concerns the interpretation of Article 4(1) and (2) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), as amended by Council Directive 2006/98/EC of 20 November 2006 (OJ 2006 L 363, p. 129) (‘the Sixth Directive’), of Article 9(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), as amended by Council Directive 2006/138/EC of 19 December 2006 (OJ 2006 L 384, p. 92) (‘the VAT Directive’), and of the principle of proportionality.

2 The reference has been submitted in the course of proceedings between Mr Rēdlihs and the Valsts ieņēmumu dienests (Latvian tax authority; ‘the VID’) concerning the former’s failure to register in the register of taxable persons for purposes of value added tax (‘VAT’).

Legal context

European Union law

3 The VAT Directive, pursuant to Articles 411 and 413 thereof, repealed and replaced, as from 1 January 2007, the European Union legislation on VAT, including the Sixth Directive. According to recitals 1 and 3 in the preamble to the VAT Directive, the recasting of the Sixth Directive was necessary to ensure that the provisions on the harmonisation of the laws of the Member States relating to VAT would be presented in a clear and rational manner in a revised structure and wording while, in principle, not making material changes.

4 According to Article 2(1)(a) of the VAT Directive, which essentially reproduces the wording of Article 2(1) of the Sixth Directive, ‘the supply of goods for consideration within the territory of a Member State by a taxable person acting as such … shall be subject to VAT’.

5 Article 9(1) of the VAT Directive, which is worded in terms which are essentially similar to those of Article 4(1) and (2) of the Sixth Directive, provides: ‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity. Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’

6 Article 213(1) of the VAT Directive, which essentially reproduces the wording of Article 22(1) of the Sixth Directive, in the version resulting from Article 28h(1) of that directive, provides, in particular, that ‘[e]very taxable person shall state when his activity as a taxable person commences, changes or ceases’.

7 Pursuant to the single article of Council Decision 2006/42/EC of 24 January 2006 authorising Latvia to extend the application of a measure derogating from Article 21 of Sixth Directive 77/388 (OJ 2006 L 25, p. 31), that Member State was authorised to continue to designate the recipient of goods or services as being the person liable to pay VAT in the case of timber transactions from 1 May 2005 to 31 December 2009. The Council Implementing Decision of 7 December 2009 (OJ 2009 L 347, p. 30) authorised Latvia, by way of derogation from Article 193 of the VAT Directive, to continue to designate the recipient of goods and services as being the person liable to pay VAT in the case of timber transactions up to 31 December 2012.

Latvian law

8 The relevant provisions of national law, in the version applicable to the dispute in the main proceedings, are contained in the Law on VAT (Latvijas Vēstnesis No 49 of 30 March 1995).

9 Article 1(6) of that Law provides: ‘[T]he term “economic activity” shall mean any systematic activity for which remuneration is paid that does not consist of the payment, by the employer to the worker, of a salary or any other remuneration on the basis of which compulsory social security contributions and residents’ income tax have to be calculated’.

10 Article 3(3) and (5) of that Law states: ‘3. Natural persons or legal entities and the groups of such persons linked by a contract or an agreement, or their representatives, shall be registered in the register of taxable persons for [VAT] purposes maintained by the [VID]. … 5. [I]f the total value of the sales of goods and services subject to VAT effected by a natural person or legal entity during the previous 12 months has not reached or exceeded LVL 10000, that person, that group or its members shall be entitled not to be included in the register of taxable persons for VAT purposes maintained by the VID. This rule shall also apply to institutions financed by the State budget. Persons who make use of that right must, within thirty days from the date on which that amount is reached or exceeded, have themselves entered in that register.’

11 Article 13.2 of that Law provides: ‘1. In respect of the supplies of timber referred to in paragraph 2, if the supplier and purchaser are registered with the VID as taxable persons for [VAT] purposes, the purchaser shall pay the supplier in accordance with the procedure set out by the Chamber of Ministers and in compliance with the following conditions: (1) the commercial relationship between the supplier and the purchaser of timber shall be documented by an accounting document drawn up in a standard form — the invoice for transport of the timber — the detailed procedure for the use, submission and payment of which shall be set out by the Chamber of Ministers; (2) the taxable person shall deduct from the tax to be paid, in respect of the input VAT on the timber purchased, only the amount indicated on the transport invoice, if all of the timber bought during the tax year in question was intended for the performance of that person’s taxable activities. In that case, [VAT] shall not be payable on the timber bought …’

12 Article 35(3) of that Law provides: ‘[W]here a person has not registered, under the provisions of Article 3 of this Law, as a taxable person with the VID but carries out taxable transactions, that person shall be subject to payment of the tax from the date on which he ought to have registered, without having the right to deduct input VAT. If that person carries out supplies of timber that are subject to the tax, a fine shall be imposed on him in the amount of 18% of the value of the timber supplied, from the date on which he ought to have registered.’

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

13 During an inspection carried out by the VID, it was found that the applicant in the main proceedings had carried out 12 supplies of timber in April 2005 and 25 transactions of the same type over a period from May 2005 to December 2006. It was also found that the applicant in the main proceedings had not registered in the register of taxable persons for VAT purposes and had not declared any economic activity to the VID.

14 By a decision of 21 June 2007, the VID, inter alia, penalised that failure to register by imposing on Mr Rēdlihs, pursuant to Article 35(3) of the Law on VAT, a fine of LVL 11 363.20, that is to say, 18% of the value of the supplies at issue, which corresponded to the VAT rate applicable at the time.

15 Mr Rēdlihs brought proceedings seeking the annulment of that decision. He submitted that the supplies of timber which he had carried out could not be considered to be an economic activity as they were neither systematic nor carried out independently. Those supplies were, he argued, of an exceptional nature inasmuch as they were effected, not for profit, but to alleviate the damage caused by a storm, which constituted a case of force majeure. He also drew attention to the fact that a report of the forestry department showed that the forest concerned was young and that its trees should therefore not be cut down. Moreover, it would not have been possible to sell in one lot all of the trees felled following that storm.

16 In the alternative, he submitted that he had acquired the forest at...