Case C-309/06
Marks & Spencer plc
v
Commissioners of Customs & Excise
(Reference for a preliminary ruling from the House of Lords)
(Taxation – Sixth VAT Directive – Exemption with refund of tax paid at the preceding stage – Erroneous taxation at the standard rate – Right to zero rate – Entitlement to refund – Direct effect – General principles of Community law – Unjust enrichment)
Summary of the Judgment
1.Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Option for Member States to maintain exemptions with refund of the tax paid at the preceding stage
(Council Directive 77/388, Art. 28(2))
2.Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Option for Member States to maintain exemptions with refund of the tax paid at the preceding stage
(Council Directive 77/388, Art. 28(2))
3.Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Option for Member States to maintain exemptions with refund of the tax paid at the preceding stage
(Council Directive 77/388, Art. 28(2))
1.Where, under Article 28(2) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, both before and after the insertion of the amendments made to that provision by Directive 92/77, a Member State has maintained in its national legislation an exemption with refund of input tax in respect of certain specified supplies, a trader making such supplies does not have any directly enforceable Community‑law right to have those supplies taxed at a zero rate of value added tax.
In authorising Member States to apply exemptions with refund of the tax paid, Article 28(2) of the Sixth Directive lays down a derogation to the rules which govern the standard rate of value added tax. It is therefore correct to state that it is by reason of Community law that those exemptions, known as ‘zero-rating’, are permitted. However, Community law does not require Member States to maintain such exemptions. It is apparent from the actual wording of the original version of Article 28(2) that the exemptions which were in force on 31December 1975 ‘may be maintained’, which means that it is for the Member State concerned alone to decide whether or not to retain a particular piece of legislation which satisfied, inter alia, the conditions set out in the final indent of Article 17 of Second Directive 67/228, now repealed, which provided that exemptions with refund of the tax paid could only be established for clearly‑defined social reasons and for the benefit of the final consumer.
(see paras 22-23, 28, operative part 1)
2.Where, under Article 28(2) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, both before and after the insertion of the amendments made to that provision by Directive 92/77, a Member State has maintained in its national legislation an exemption with refund of input tax in respect of certain specified supplies but has mistakenly interpreted its national legislation, with the consequence that certain supplies benefiting from exemption with refund of input tax under its national legislation have been subject to tax at the standard rate, the general principles of Community law, including that of fiscal neutrality, apply so as to give a trader who has made such supplies a right to recover the sums mistakenly charged in respect of them.
The maintenance of exemptions or of reduced rates of value added tax lower than the minimum rate laid down by the Sixth Directive is permissible only in so far as it complies with, inter alia, the principle of fiscal neutrality inherent in that system. The principles governing the common system of value added tax, including that of fiscal neutrality, apply even to the circumstances provided for in Article 28(2) of the Sixth Directive and may, if necessary, be relied on by a taxable person against a national provision, or the application thereof, which fails to have regard to those principles. In that regard, the right to obtain a refund of charges levied in a Member State in breach of rules of Community law is the consequence and the complement of the rights conferred directly on individuals by Community law. That principle also applies to charges levied in breach of national legislation permitted under Article 28(2) of the Sixth Directive.
(see paras 33-36, operative part 2)
3.Although the principles of equal treatment and fiscal neutrality apply in principle to circumstances in which a Member State has erroneously taxed certain supplies benefiting from an exemption which that Member State has maintained in its national legislation under Article 28(2) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, and in which the trader concerned seeks to recover the sums wrongly paid, the infringement of those principles is not constituted merely by the fact that a refusal to make repayment was based on the unjust enrichment of the taxable person concerned.
By contrast, the principle of fiscal neutrality precludes the concept of unjust enrichment from being applied only to taxable persons such as ‘payment traders’ (taxable persons for whom, in a given prescribed accounting period, the output tax collected exceeds the input tax) and not to taxable persons such as ‘repayment traders’ (taxable persons whose position is the inverse of that of payment traders), in so far as those taxable persons have marketed similar goods, which is for the national court to determine.
Furthermore, the general principle of equal treatment, the infringement of which may be established, in matters relating to tax, by discrimination affecting traders who are not necessarily in competition with each other but are nevertheless in a similar situation in other respects, precludes discrimination between ‘payment traders’ and ‘repayment traders’ which is not objectively justified.
That finding is not affected where there is evidence that a trader who has been refused repayment of value added tax which was wrongly levied has not suffered any financial loss or disadvantage.
Lastly, it is for the national court itself to draw any conclusions with respect to the past from the infringement of the principle of equal treatment referred to above, in accordance with the rules relating to the temporal effects of the national legislation applicable in the main proceedings, in compliance with Community law and, in particular, with the principle of equal treatment and the principle that it must ensure that the remedies which it grants are not contrary to Community law.
(see paras 54, 57, 64, operative part 3-5)