Criminal proceedings against R.

• Jurisdiction: European Union
• Celex Number: 62009CC0285
• ECLI: ECLI:EU:C:2010:381
• Date: 29 June 2010
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling
• Docket Number: C-285/09

OPINION OF ADVOCATE GENERAL

CRUZ VILLALÓN

delivered on 29 June 2010 ¹(1)

Case C‑285/09

Criminal proceedings

against

R

(Reference for a preliminary ruling from the Bundesgerichtshof (Germany))

(Sixth VAT Directive – Article 28c(A)(a) – Intra-Community supply – Refusal of exemption – Fraudulent conduct)

I – Introduction

1. In this case, the Bundesgerichtshof (Federal Court of Justice) has referred to the Court of Justice a question on the interpretation of the Sixth VAT Directive (2) in relation to the exemption for intra-Community supplies.

2. More specifically, it asks whether the Member State of origin of the goods may regard as non-exempt from the tax a vendor, a taxable person established in that State of origin, who, although he has actually effected an intra-Community supply, has concealed certain information relating to the transaction, thereby facilitating tax evasion by a purchaser established in the Member State of destination.

3. The question was raised in criminal proceedings against Mr R, the Bundesgerichtshof considering that the conviction (brought before it in an appeal on a point of law) depends on the classification of the transaction for tax purposes, in the light of the Sixth Directive. Nevertheless, this Opinion must focus on that classification for tax purposes, disregarding any punitive consequences which it may have.

4. There is already a substantial body of case-law guided by the objective of combating fraud and abusive behaviour, both of which are frequent in a system as complex as that of VAT. However, when developing that case-law, the Court of Justice has also been careful to reconcile the objective of combating fraud with observance of the basic principles of VAT, formulating responses which are proportionate and suited to each case.

5. It is appropriate, nevertheless, to point out that, in this case, the response that common-sense might at first sight require (depriving a taxable person acting in bad faith of a tax advantage) is not confirmed in the light of a detailed analysis of the principles governing the operation of VAT. In short, and offering my proposed response in advance, I consider that the admittedly desirable punitive outcome must be obtained by other means more proportionate and in any event more consistent with the system which governs and underpins the tax.

II – The legal framework

A – Community law

6. Council Directive 91/680/EEC, (3) introduced into the Sixth Directive a new Title XVIa, concerning the ‘Transitional arrangements for the taxation of trade between Member States’, and created the chargeable event of an ‘intra-Community acquisition’ and the exemption for ‘intra-Community supplies’.

7. That title opens with Article 28a, paragraph 1(a) of which provides that ‘intra-Community acquisitions of goods for consideration within the territory of the country by a taxable person acting as such or by a non-taxable legal person where the vendor is a taxable person acting as such who is not eligible for the tax exemption provided for in Article 24 and who is not covered by the arrangements laid down in the second sentence of Article 8(1)(a) or in Article 28b(B)(1)’ are to be subject to value added tax.

8. Article 28c(A) provides that intra-Community supplies are to be exempt from the tax in accordance with the following:

‘Without prejudice to other Community provisions and subject to conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions provided for below and preventing any evasion, avoidance or abuse, Member States shall exempt:

(a) supplies of goods, as defined in Article 5, dispatched or transported by or on behalf of the vendor or the person acquiring the goods out of the territory referred to in Article 3 but within the Community, effected for another taxable person or a non-taxable legal person acting as such in a Member State other than that of the departure of the dispatch or transport of the goods. …’

B – German law

1. Criminal law

9. According to Paragraph 370(1)(1) of the Abgabenordnung (the German Tax Code; ‘the AO’), (4) a person commits a criminal offence punishable by up to five years’ imprisonment or a criminal fine if he makes incorrect or incomplete declarations to the tax authorities about facts which are relevant for tax purposes and as a consequence of this reduces his tax burden or thereby obtains undue tax advantages for himself or a third party.

10. According to the Bundesgerichtshof, that provision of the AO is an incomplete rule which does not contain all of the constituent elements of the offence it creates, wherefore it must be filled out by the provisions of substantive tax law, which determine which facts are relevant for tax purposes and the conditions in which tax is charged. The Bundesgerichtshof therefore considers that ‘chargeability to tax is a legal requirement of criminal tax evasion’.

2. The tax legislation

11. Paragraph 1(1)(1) of the Umsatzsteuergesetz (Law on turnover tax; ‘the UStG’) (5) provides that the supply of goods or services effected for consideration within the territory of the country by a taxable person is to be subject to VAT.

12. For its part, however, Paragraph 4(1)(b) of the UStG incorporates the exemption laid down in Article 28c(A)(a) of the Sixth Directive, providing that transactions coming within Paragraph 1(1)(1) of the UStG are exempt from tax where there is an intra-Community supply.

13. Paragraph 6a(1) of the UStG lists the conditions which must be fulfilled for a supply to be classified as an intra-Community supply for those purposes. It requires, inter alia, that the trader or the purchaser should transport or dispatch the object of the supply to another part of the Community (number 1), and that the acquisition of the object of the supply by the purchaser should be subject to the provisions of turnover taxation in another Member State (number 3).

14. Pursuant to Paragraph 6a(3) of the UStG, the trader must prove that the conditions in subparagraphs 1 and 2 have been fulfilled.

15. Those evidential obligations are governed in more detail in Paragraphs 17a and 17c of the Umsatzsteuer-Durchführungsverordnung (the UStG Implementation Regulations; ‘the UStDV’). (6) Paragraph 17a of the UStDV introduces documentary evidence by providing that a trader must produce appropriate documentary evidence to show that the object of the supply was transported or dispatched to another part of the Union. Paragraph 17c of the UStDV specifies the trader’s obligations regarding accounting in relation to intra-Community supplies, and provides that accounting evidence must be used to establish compliance with the requirements for the exemption from tax which arise from Paragraph 6a of the UStG, in particular the name and address of the purchaser and his VAT identification number.

16. Moreover, the first sentence of Paragraph 18a(1) of the UStG imposes on a domestic trader who has made the tax-free intra-Community supplies the obligation to make a declaration to the Bundeszentralamt für Steuern (Federal Tax Authority) in which he must provide details, inter alia, of the VAT identification number of the person acquiring the goods. In addition, under the first sentence of Paragraph 18b of the UStG, the trader must declare the basis of assessment of his intra-Community supplies to the competent tax authority for the undertaking.

III – The main proceedings and the question referred

17. The defendant, Mr R, a Portuguese national, was the manager of a German company which traded in luxury cars. According to the facts as established, since 2001 it had sold more than 500 vehicles per year, (7) mostly to car dealers established in Portugal.

18. From the year 2002, the defendant carried out a series of accounting manipulations, concealing the identity of the true purchasers of the vehicles in order to enable those undertakings to evade the payment of VAT in Portugal. This also allowed him to sell the vehicles at a price which, in other circumstances, he would have been unable to demand, thereby obtaining substantial profits.

19. That manipulation consisted specifically in the issuing of false invoices in the name of fictitious purchasers, who appeared as the addressees of the supplies. Those invoices stated in each case the business name of the alleged purchaser, his VAT identification number, the description of the vehicle (which was actually supplied to another purchaser), the purchase price and the endorsement ‘tax-free intra-Community supply under Paragraph 6a of the UStG’. In that way, the impression was created that the fictitious purchaser would pay the VAT for that intra-Community acquisition in Portugal.

20. Those apparent (or ‘fictitious’) purchasers were actual undertakings based in Portugal. In some cases they had agreed to the use of their business name for those purposes and in other cases they had had no knowledge of it.

21. For their part, the real purchasers of the vehicles in question sold them to private final consumers in Portugal, concealing from the authorities of that country the existence of a prior intra-Community acquisition. In that way, they seem to have avoided paying the VAT payable on intra-Community acquisitions. Moreover, the real business relationships were concealed by other measures: whenever the final consumer was already known at the time of delivery, the defendant had the vehicle registration documents issued to that person, issuing a further fictitious invoice with the final consumer as addressee and adding the (incorrect) endorsement ‘taxation of profit margin pursuant to Paragraph 25a of the UStG’.

22. In that way, Mr R’s undertaking sold and supplied 407 vehicles for EUR 7 720 391 in 2002, and 720 vehicles for EUR 11 169 460 in 2003. All those transactions were declared in Germany as intra-Community supplies, tax-free, therefore, in the...