Court of Justice of the European Communities (including Court of First Instance Decisions)

The Community legislation

'2. The taxable person shall effect the deduction by subtracting from the total amount of value added tax due for a given tax period the total amount of the tax in respect of which, during the same period, the right to deduct has arisen and can be exercised under the provisions of paragraph 1.

...

4. Where for a given tax period the amount of authorized deductions exceeds the amount of tax due, the Member States may either make a refund or

carry the excess forward to the following period according to conditions which they shall determine.

However, Member States may refuse to refund or carry forward if the amount of the excess is insignificant.'

The Belgian legislation

'[W]ith respect to the requirements laid down in the first and second subparagraphs, provision may be made by Royal Decree for a retention in favour of the VAT, Registration and Property Authority, having the effect of a preventive attachment within the meaning of Article 1445 of the Judicial Code.'

'If the tax debt referred to in the first paragraph does not constitute, in favour of the administration, a debt which is, in whole or in part, certain, definite and due for payment, which is inter alia the case where it is disputed or has given rise to an order for recovery within the meaning of Article 85 of the Code, execution of which is opposed by an objection within the meaning of Article 89 of the Code, the tax credit shall be retained by the administration up to the amount of the tax claimed. That retention shall take effect as a preventive attachment until the dispute has been definitively resolved, either in the administrative procedure or by a final court judgment. The condition laid down by Article 1413 of the Judicial Code shall be deemed to have been satisfied as regards the implementation of that retention [fourth subparagraph].

If, with regard to the balance refundable resulting from the return referred to in Article 55(1)(3) of the Code, and in respect of which the taxable person has or has not opted for a refund, either there are serious grounds for presuming or there is

evidence that the aforesaid return or returns concerning previous periods contain inaccurate information and if such grounds for presumption or evidence point to the existence of a tax debt the actual existence of which cannot, however, be established before the time for the payment order or for the operation equivalent to payment, no payment order shall be made in respect of the balance nor shall the balance be carried forward to the following tax period, and the tax credit shall be retained in order to permit the administration to verify the accuracy of the information [fifth subparagraph].

...

The serious grounds for presumption or the evidence referred to in the foregoing subparagraph, proving or indicating the tax debt, must be established by an official report drawn up in accordance with Article 59(1) of the Code. The report shall be brought to the notice of the taxable person by registered letter [sixth subparagraph].

The retention referred to in subparagraphs (4) and (5) shall have the effect of a preventive attachment until the evidence contained in the report referred to in the foregoing subparagraph is refuted or until the accuracy of the relevant transactions emerges from information obtained under the cooperation mechanisms established by the European Communities on exchange of information between Member States of the Community [seventh subparagraph].

...

The taxable person may only contest the attachment referred to in paragraphs 4 and 5 in accordance with Article 1420 of the Judicial Code. However, the court having jurisdiction in the matter of attachments may not order the attachment to be lifted for so long as the evidence contained in the report referred to in subparagraph 6 has not been refuted, particulars have not been obtained by way of exchange of information between Member States of the Community or an investigation by either the Office of the Public Prosecutor or an examining magistrate is pending. The retention shall cease when the attachment is lifted by the administration or by judicial decision. If it is lifted by the administration, the taxable person shall be informed by registered letter indicating the date on which it was lifted [tenth subparagraph].

Where the tax credit ceases to be retained, the tax debt constituting a debt in favour of the administration which is certain, definite and due for payment shall if appropriate be discharged in accordance with subparagraph 2, without any formality having to be completed [eleventh subparagraph].'

Case C-286/94

'On a proper construction of Article 18(4) of the Sixth VAT Directive, may a Member State refrain from refunding substantial VAT credits of its residents or carrying them forward to a following tax period, and instead attach them as a protective measure under national rules owing to the existence of serious grounds for suspecting tax evasion, without creating a definitive legal title in that respect and without the Member State having received any authorization under Article 27 of the Sixth VAT Directive?'

Case C-340/95

'1. Do Articles 18(4) and 27 of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes (VAT Directive 77/388/EEC) have direct effect in the national legal systems of the Member States and thus in Belgian law?

2. If so, does Article 18(4) of the Directive preclude a Member State from refusing to refund to a taxable person a VAT credit in relation to a specific period or periods during which that credit arose or to carry it over to a subsequent tax period, and instead withholding it by means of the Belgian withholding procedure, which has the effect of a preventive attachment within the meaning of Article 1445 of the Belgian Judicial Code, as long as no definitive entitlement has arisen in that regard and only up to the amount of the demand relating to that tax period or earlier periods, where the demand is disputed by the taxable person?

3. Is Article 18(4) of the Directive applicable, given that, according to the Belgian State, such withholding is a debt-recovery procedure?

- If so, is Article 27 of the Directive applicable if such withholding were to form part of the "conditions" (modalités)?

- If not, is Article 27 applicable, on the assumption that such withholding is a debt-recovery procedure?

4. If Article 18(4) of the Directive is applicable to the Belgian withholding procedure, does that procedure infringe the principle of proportionality as defined by the Court of Justice?'

Case C-401/95

'1. Must Article 18(4) of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes be interpreted as permitting a Member State to refuse to refund a VAT credit from a specific tax period or to carry it forward to a following period, yet to retain it on the ground that, and for so long as, it has a claim against the taxpayer in question relating to a previous tax period, if that claim is disputed by the taxpayer and thus does not yet constitute a definitive title, where the Member State has not received any authorization under Article 27 of the Sixth VAT Directive?

2. If Question 1 is to be answered in the affirmative, must Article 18(4) of the Sixth VAT Directive, in conjunction with the principle of proportionality, be interpreted as permitting the Member State to lay down that the necessity or urgency of the retention may not be contested in any way and that the retention may in no way be replaced by a guarantee or annulled so long as the disputed VAT claim has not been made the subject-matter of a final judicial decision?'

Case C-47/96

'1. Must Article 18(4) of the Sixth VAT Directive be interpreted as permitting a Member State, instead of refunding to a taxable person a VAT credit for a given tax period, or carrying it forward to a subsequent tax period, to "withhold" the same by way of protective attachment on the basis of an additional demand in respect of an earlier tax period, where that additional demand is contested in law and is thus not based on any definitive entitlement, and where the Member State has not obtained authorization pursuant to Article 27 of the VAT Directive?

2. In the event that Question 1 is answered in the affirmative:

Do the principle of proportionality enshrined in Community law and Article 18(4) of the Sixth VAT Directive permit the Member State to provide:

(1) that the taxable person may contest the attachment (as validated by the "withholding" measure) only by adducing evidence rebutting the allegations made by the Treasury in the official report, and not by challenging the actual need for, and urgency of, that measure;

(2) that withholding may not be replaced by another form of security nor lifted pending the delivery of final judgment on the contested demand for payment made by the Treasury?'

The preliminary questions

preventive attachment of a refundable VAT credit where either there are serious grounds for presumption of tax evasion or there is a VAT debt claimed by the tax authority, that debt being contested by the taxable person.

than is necessary in order to ensure effective recovery and would adversely affect to a disproportionate extent the right of deduction.

a date other than that on which the retained VAT balance would normally have been paid under the Sixth Directive, and therefore that the principle of proportionality precludes the application of such legislation. The same applies to the other conditions mentioned above: in particular, lateness in filing returns can be penalized in a manner unconnected with the retention procedure and without affecting the right to refund of the VAT balance.

Costs