Contents
Judgment of the Court (Seventh Chamber)12 September 2024note(Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Right of deduction — Time limits for filing and paying certain taxes — Extension of time on account of the COVID-19 pandemic — Denial of the right to deduct VAT — Time-barred — Principles of equivalence, effectiveness and neutrality of VAT)In Case C‑429/23,REQUEST for a preliminary ruling under Article 267 TFEU from the Administrativen sad – Varna (Administrative Court, Varna, Bulgaria), made by decision of 30 June 2023, received at the Court on 11 July 2023, in the proceedings‘NARE-BG’ ЕООDvDirektor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite,THE COURT (Seventh Chamber),composed of F. Biltgen, President of the Chamber, N. Wahl and M.L. Arastey Sahún (Rapporteur), Judges,Advocate General: M. Szpunar,Registrar: A. Calot Escobar,having regard to the written procedure,after considering the observations submitted on behalf of:– ‘NARE-BG’ ЕООD, by D.D. Petkova-Topalova, advokat,– the Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite, by D. Zhelyazkov,– the Spanish Government, by A. Pérez-Zurita Gutiérrez, acting as Agent,– the European Commission, by D. Drambozova and J. Jokubauskaitė, acting as Agents,having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,gives the following
Judgment
1This reference for a preliminary ruling concerns the interpretation of Articles 184 and 186 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 2010/45/EU of 13 July 2010 (OJ 2010 L 189, p. 1) (‘the VAT Directive’), and of the principles of equivalence, effectiveness and neutrality of value added tax (VAT).
2The request has been made in proceedings between ‘NARE-BG’ EOOD and the Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (Director of the Varna ‘Tax and Social Security Appeals and Practice Board’ of the National Public Revenue Agency, Bulgaria) (‘the director’) regarding the director’s refusal to allow NARE-BG to exercise its right to deduct input VAT for the taxable transactions carried out before NARE-BG’s registration for VAT.
Legal context
European Union law
3Article 167 of the VAT Directive provides:‘A right of deduction shall arise at the time the deductible tax becomes chargeable.’
4Article 168 of that 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;…’
5Article 178 of that directive provides:‘In order to exercise the right of deduction, a taxable person must meet the following conditions:(a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;…’
6The first paragraph of Article 179 of the VAT Directive states:‘The taxable person shall make the deduction by subtracting from the total amount of VAT due for a given tax period the total amount of VAT in respect of which, during the same period, the right of deduction has arisen and is exercised in accordance with Article 178.’
7Article 180 of the VAT Directive provides:‘Member States may authorise a taxable person to make a deduction which he has not made in accordance with Articles 178 and 179.’
8Article 184 of that directive is worded as follows:‘The initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled.’
9Article 185 of that directive provides: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.’
10Article 186 of the VAT Directive provides:‘Member States shall lay down the detailed rules for applying Articles 184 and 185.’
Bulgarian law
The ZDDS
11Article 72 of the Zakon za danak varhu dobavenata stoynost (Law on value added tax) (DV No 63 of 4 August 2006), in the version applicable to the facts in the main proceedings (‘the ZDDS’), states:1. A person registered under this law may exercise the right to deduct VAT in the tax period in which that right arose or in one of the 12 subsequent tax periods.2.The person shall exercise the right under paragraph 1 by:(1) including the input VAT in the calculation of the result for the tax period referred to in paragraph 1 in the VAT return under Article 125 for the same tax period;(2) listing the document pursuant to Article 71 in the purchase ledger under Article 124 for the tax period referred to in paragraph 1.’
12Article 74 of the ZDDS provides:1. A person registered under Article 96, 97 or 98, or Article 100(1) and (3), or Article 102, 132 or 132a, shall be entitled to deduct input VAT in respect of assets purchased or otherwise acquired or contributed within the meaning of the Zakon za schetovodstvoto [(Law on Accounting)] prior to the date of that person’s registration under [the ZDDS], which exist on the date of registration.2.The right referred to in paragraph 1 shall arise only in respect of assets in existence at the date of registration for which the following conditions are simultaneously satisfied:(1) the requirements of Articles 69 and 71 are met;(2) the supplier is a registered person within the meaning of the law at the time of issue of the tax document and the supply was taxable on that date;…(4) the assets were acquired by the person in the 5 years preceding the date of registration for the purposes of this law and, concerning immovable property, in the 20 years preceding that date.3.The registered person referred to in paragraph 1 shall also be entitled to deduct input VAT on services received prior to the date of that person’s registration for the purposes of this law, provided that the following conditions are simultaneously satisfied:(1) the services are directly related to the registration of the person in accordance with the Targovskia zakon [(Commercial Law)];(2) the services were received no later than one month prior to the registration of the person under the commercial law;(3) the person has filed an application for registration under this law within 30 days of that person’s registration under Article 82 of the Danachno-osiguritelen protsesualen kodeks [(Tax and social security code of procedure)];(4) the person holds an invoice as referred to in Article 71(1) for services received;(5) the provider of the service is a registered person within the meaning of the law at the time of issue of the tax document and the supply was taxable on that date;…4. For the existing assets of the registered person referred to in paragraph 1, which are or would be fixed assets, used simultaneously to carry out an independent economic activity and for his or her own needs or for the needs of the owner, his or her employees or more generally for purposes other than his or her independent economic activity, the right to deduct input VAT shall arise under the conditions laid down in Articles 71a and 71b.’
13Article 75 of the ZDDS states:1. The right to deduct input VAT under Article 74 shall arise on the date of registration under this law.2. The right to deduct input VAT provided for in paragraph 1 shall be exercised in the tax period in which it arose or in one of the 12 subsequent tax periods, and the relevant documents referred to in Article 71 shall be recorded in the purchase ledger together with the taxable amount and the tax relating to the goods or services received.’
14Article 124(4) of the ZDDS provides:‘The person registered shall be obliged to show the tax documents received by him or her in the purchase ledger by no later than the twelfth tax period following the period during which they were issued, but without going beyond the last tax period referred to in Article 72(1). …’
15Article 125 of the ZDDS provides:1. For each tax period, the registered persons must file a tax return drawn up on the basis of the accounting records referred to in Article 124, with the exception of the cases referred to in Article 159b.’…3. The registered person shall also attach to the tax return referred to in paragraph 1 the accounting records referred to in Article 124 for the tax period concerned.4. The tax return referred to in paragraph 1 shall be filed even if there is no tax payable or to be received and in cases where the registered person has not made or received a supply or acquisition or has not carried out any imports for that tax period.5. The returns referred to in paragraphs 1 and 2 and the accounting records referred to in paragraph 3 must be filed by the fourteenth day of the month following the tax period to which they relate.…’
16Article 126 of the ZDDS provides:1. Errors in returns filed pursuant to Article 125(1) and (2) on account of documents unrecorded or incorrectly entered in the accounting records referred to in Article 124 shall be corrected in accordance with the detailed rules provided for in paragraphs 2 and 3.2. Errors found up to the expiry of the time limit for the filing of the tax return shall be corrected by the person making the necessary corrections and re-filing the returns referred to in Article 125(1) and (2) and the accounting records referred to in Article 124.3.Apart from the cases referred to in paragraph 2, the errors shall be corrected as follows:(1) the person shall carry out the necessary corrections during the tax period in which the error was found and shall include the document not recorded in the accounting register relating to the same tax period – in the case of documents not recorded in the accounting records pursuant to Article 124;(2) the person shall inform the competent tax authority, in writing, which shall take measures to correct the person’s tax liability for the tax period concerned – in the case of documents incorrectly entered in the accounting records.’
The ZKPO
17Article 1(4) of the Zakon za korporativnoto podohodno oblagane (Law on Corporation Tax) (DV No 105 of 22 December 2006), in the version applicable to the facts in the main proceedings (‘the ZKPO’), provides:‘This law governs the taxation:…4. of income falling within its scope received in the Republic of Bulgaria by resident or non-resident legal persons.’
18Article 92 of the ZKPO is worded as follows:1. Taxpayers subject to corporation tax must file an annual tax return on a form for taxable income and for the annual corporation tax due.2. The annual tax return shall be filed no later than 31 March of the following year with the Regional Directorate of the National Revenue Agency of the taxable person’s place of registration.’
19Article 93 of the ZKPO provides:‘Taxable persons shall pay corporation tax for the year concerned by 30 June of the following year at the latest, after deducting advance payments made for the year concerned.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
20NARE-BG is a company incorporated under Bulgarian law which acquires land in order to construct buildings the implementation of which it entrusts to sub-contractors.
21Between 2017 and 2019, in connection with a building project in Varna (Bulgaria), that company received 71 invoices issued by subcontractors for a total VAT amount of 117 458.80 Bulgarian leva (BGN) (approximately EUR 60050).
22On 25 November 2019, that company was registered for VAT under Article 100(1) of the ZDDS.
23In respect of the tax periods from 25 November 2019 to 30 September 2020, NARE-BG filed nil VAT returns.
24On 13 March 2020, a state of emergency was declared in the Republic of Bulgaria on account of the COVID-19 pandemic, with effect from 13 March to 13 April 2020. It was progressively extended until 30 April 2021. In that context, national legislation on measures and actions taken during the state of emergency was adopted in order to remedy the consequences of that pandemic. In view of the difficulties caused by that pandemic for economic operators, that legislation extended the time limits for filing and paying certain taxes, without, however, providing for any such special scheme for the filing, payment and deduction of VAT.
25On 10 December 2020, NARE-BG filed a VAT return for the November 2020 tax period, listing supplies giving rise to the right to deduct input VAT in an amount of BGN 10 125.40 (approximately EUR 5180).
26On 14 January 2021, NARE-BG filed a VAT return for the December 2020 tax period, listing supplies giving rise to the right to deduct input VAT in an amount of BGN 117 458.80, corresponding to the VAT stated on the 71 invoices that it had received between 2017 and 2019.
27On 15 January 2021, it informed, in writing, the Teritorialna direktsia na Nationalna agentsia za prihodite Varna (Regional Directorate of the National Revenue Agency, Varna, Bulgaria) (‘the tax authority’), in accordance with Article 126(3) of the ZDDS, that it had incorrectly taken into account those invoices in the purchases ledger and in the tax return for the December 2020 tax period instead of taking them into account in the purchases ledger and in the tax return for the November 2020 tax period. It was claimed that those errors, whose correction it sought, stemmed from the COVID-19 infection and quarantine of that company’s accountant, whose work was entrusted to a substitute.
28The tax authority, however, denied the right to deduct VAT in respect of those invoices on the basis of Article 72(1) of the ZDDS, under which a taxable person registered in accordance with that law may exercise his or her right of deduction in the tax period during which that right arose or in one of the 12 subsequent tax periods. The right to deduct VAT in respect of assets purchased or acquired and in respect of services received prior to the registration of the taxable person arises, under Article 75(1) and (2) of the ZDDS, on the date of that registration. Therefore, having regard to the date of NARE-BG’s registration for VAT, NARE-BG should have exercised its right of deduction in relation to the 71 invoices at issue in the November 2020 tax period at the latest. Since that right of deduction had not been exercised in the VAT return for that tax period – which should have been filed, in accordance with Article 125(5) of the ZDDS, by 14 December 2020 at the latest – that right of deduction expired.
29Therefore, taking the view that NARE-BG, which exercised its right to deduct VAT in respect of those 71 invoices in the December 2020 tax period, had infringed Article 72 of the ZDDS, the tax authority issued, on 24 January 2022, an adjustment notice against that company for a total VAT amount of BGN 117 458.80.
30NARE-BG brought an action against that adjustment notice before the Administrativen sad – Varna (Administrative Court, Varna, Bulgaria), which is the referring court.
31Before that court, NARE-BG relies, in support of its right to deduct VAT, on the interpretation of Article 179(1) and Articles 180 and 273 of the VAT Directive and the principles of the neutrality of VAT, effectiveness and equivalence in the field of indirect taxation, as follows from the case-law resulting from the judgments of 8 May 2008, Ecotrade (C‑95/07 and C‑96/07, EU:C:2008:267), and of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458). It submits that the judgment of 7 July 2022, X (C‑194/21, ‘the judgment in X’, EU:C:2022:535), relied on by the director, is not, by contrast, applicable in a situation such as that at issue in the main proceedings.
32The director contends that NARE-BG exercised its right to deduct VAT out of time, namely in the December 2020 tax period instead of that of November 2020, in breach of Article 75(2) of the ZDDS, on account of the COVID-19 infection of its accountant. Accordingly, the director submits that the dispute in the main proceedings concerns only that provision, read in conjunction with Article 75(1) of the ZDDS, and not the conditions for correcting errors contained in the VAT returns filed by that company. Accordingly, it submits that it is appropriate, in the present case, to apply only the case-law arising from the judgment in X, according to which the adjustment mechanism provided for by the VAT Directive is not intended to apply where the taxable person has failed to exercise his or her right to deduct VAT and has lost that right as a result of the expiry of the limitation period.
33In that regard, the referring court entertains doubts as to the relevance, for the dispute in the main proceedings, of the case-law resulting from the judgments of 8 May 2008, Ecotrade (C‑95/07 and C‑96/07, EU:C:2008:267), and of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458). The facts of the cases which gave rise to those judgments are different from those of the dispute in the main proceedings, which is characterised by the adoption of legislative measures, adopted in the context of the state of emergency linked to the COVID-19 pandemic, providing for a longer period for the filing and payment of certain taxes without providing for such a period for the filing, payment and deduction of VAT.
34Similarly, that court is uncertain as to the relevance of the judgment in X, taking into account the different factual circumstances underlying that judgment and the dispute in the main proceedings.
35In those circumstances, the Administrativen sad – Varna (Administrative Court, Varna) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:(1) In the context of the measures introduced by law to contain the epidemic, including the imposition of administrative measures to restrict people from leaving home and moving freely in localities, restrict contact with other persons and close retail premises, where, in connection with those measures to contain the epidemic, the time limits for declaring and paying tax debts pursuant to the [ZKPO] (which lays down the time limits for declaring and paying taxes on income in national law) were extended, does a limitation period such as that at issue in the present proceedings have the effect of rendering practically impossible or excessively difficult the exercise of the right to deduct [VAT] by taxable persons during the period in which the measures to contain the epidemic are in force, and, from that point of view, are national legislation and tax administration practices such as those at issue in the present proceedings compatible with Article 184 of [the VAT Directive], in conjunction with Article 186 thereof, in the light of the principle of neutrality [of VAT] introduced by the VAT Directive and the principles of equivalence and effectiveness enshrined in European Union law (judgment of 8 May 2008, Ecotrade, C‑95/07 [and] C‑96/07, EU:C:2008:267)?(2) In the light of the possibility provided for in the [ZDDS] of correcting the information declared by means of a VAT declaration pursuant to [that law], is, in the circumstances of the present case, a practice of the tax authority permitted under Article 184 of the VAT Directive, in conjunction with Article 186 thereof, whereby a taxable person is refused the right to deduct input tax on the ground that the VAT was declared by means of a correcting declaration filed in order to correct the data in respect of the last tax period of the limitation period (12 months) for exercising the right to deduct input tax in respect of supplies, received by the taxable person before the date of its registration pursuant to the ZDDS, provided that the transactions were not concealed, the data on the performance thereof were available in the applicant’s accounts, the tax administration had the necessary information, and there is no evidence that the budget was damaged?’
Consideration of the questions referred
Admissibility
36The director and the Spanish Government dispute the admissibility of the two questions referred.
37As regards the first question, first, the director submits that it does not concern the interpretation of EU law, but only the application of national tax law. Secondly, the Spanish Government is of the view that that question is hypothetical, since the referring court has not sufficiently specified that the containment measures adopted in the context of the state of emergency declared in response to the COVID-19 pandemic actually prevented or impeded NARE-BG’s exercise of the right to deduct VAT during the 12-month limitation period, the temporary incapacity of the accountant concerned having covered only a period of 2 weeks during those 12 months.
38As regards the second question, the director submits that it is not relevant to the resolution of the dispute in the main proceedings. The director submits that the request for correction referred to in paragraph 27 above in fact relates to the return filed by NARE-BG for the December 2020 tax period. Since that request was filed after the expiry of the limitation period, the tax authority rightly refused to allow that company to exercise its right to deduct VAT, and that company cannot seek the correction of that return.
39In that regard, it should be observed that, as the Court has held on many occasions, questions on the interpretation of EU law referred by a national court in the factual and legislative context which that court is responsible for defining, the accuracy of which is not a matter for the Court to determine, enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of EU law that is sought is unrelated to the actual facts of the main action or its object, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (judgment of 11 January 2024, Societatea Civilă Profesională de Avocaţi AB & CD, C‑252/22, EU:C:2024:13, paragraph 38 and the case-law cited).
40In the present case, first, it should be noted that the referring court states that it requires – in the light of the Court’s case-law deriving from the judgments of 8 May 2008, Ecotrade (C‑95/07 and C‑96/07, EU:C:2008:267, paragraph 46 and the case-law cited), and of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458, paragraph 49) – an answer to the question whether NARE-BG is able, under the VAT Directive, to deduct, after the expiry of the limitation period, the input VAT on transactions carried out prior to the date of its VAT registration, by requesting the correction of a VAT return filed before the expiry of that period.
41Secondly, that court asks whether the limitation period for the filing, payment and exercise of the right to deduct VAT laid down by the applicable national legislation in practice renders impossible or excessively difficult the exercise of that right to deduct VAT, in view of the fact that the measures adopted in the context of the state of emergency due to the COVID-19 pandemic laid down longer time limits for the filing and payment of certain taxes, while the limitation period for exercising the right to deduct VAT was not amended.
42In the light of the foregoing, and in view of the presumption of relevance enjoyed by the questions referred for a preliminary ruling, it is not self-evident that the interpretation of the VAT Directive that is sought by the referring court bears no relation to the actual facts of the main proceedings or its purpose or that the problem raised by that court is hypothetical.
43It follows that the questions referred are admissible.
Substance
44By its two questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 184 of the VAT Directive, read in conjunction with Article 186 thereof, and the principles of equivalence, effectiveness and neutrality of VAT must be interpreted as precluding national legislation and administrative practice under which a taxable person is denied the right to deduct input VAT paid prior to that taxable person’s registration for VAT, on the ground that that person requested that deduction after the expiry of the limitation period laid down by the applicable national legislation, by means of a return seeking to correct a VAT return filed before the expiry of that limitation period, notwithstanding the fact that national measures linked to the COVID-19 pandemic were adopted in order to extend the time limits for the filing and payment of certain taxes, without including VAT among those taxes.
45In the first place, it should be recalled that, according to settled case-law, the right of taxable persons to deduct the VAT due or paid on goods purchased and services received as inputs from the VAT which it is liable to pay is a fundamental principle of the common system of VAT established by EU legislation (judgment of 6 October 2022, Vittamed technologijos, C‑293/21, EU:C:2022:763, paragraph 38 and the case-law cited).
46The rules governing deduction are intended to relieve the taxable person entirely of the burden of the VAT due or paid in the course of all its economic activities. The common system of VAT therefore ensures neutrality of taxation of all economic activities, whatever their purpose or results, provided that those activities are themselves, in principle, subject to VAT (judgment of 6 October 2022, Vittamed technologijos, C‑293/21, EU:C:2022:763, paragraph 39 and the case-law cited).
47As the Court has repeatedly held, the right of deduction provided for in Article 167 et seq. of the VAT Directive is an integral part of the VAT scheme and may not, in principle, be limited. In particular, the right of deduction is normally exercisable immediately in respect of all the taxes charged on input transactions (see, to that effect, judgment of 6 October 2022, Vittamed technologijos, C‑293/21, EU:C:2022:763, paragraph 40 and the case-law cited).
48A taxable person may nevertheless be authorised to make a VAT deduction under Articles 180 and 182 of the VAT Directive even if it did not exercise its right during the period in which the right arose, subject, however, to compliance with certain conditions and procedures determined by national legislation (the judgment in X, paragraph 37 and the case-law cited).
49In the present case, it is apparent from the documents before the Court that, first, under Article 75(1) and (2) of the ZDDS, the right to deduct input VAT in respect of supplies and services provided prior to the registration of the taxable person, under that law, arises on the date of that registration and must be exercised in the tax period in which it arose or in one of the 12 subsequent tax periods. The time limit for exercising the right to deduct the VAT indicated on the 71 invoices received by NARE-BG prior to its registration for VAT was therefore 12 months. That period began to run from the tax period during which the right of deduction arose and expired in November 2020. In accordance with Article 125(5) of the ZDDS, that right of deduction should have been exercised by 14 December 2020 at the latest, which is the deadline laid down for filing the tax return for the November 2020 tax period.
50Secondly, it should be noted that NARE-BG did not exercise its right to deduct VAT during the 12-month period. It is true that, on 10 December 2020, NARE-BG filed a VAT return for the November 2020 tax period, without, however, including the VAT indicated on the 71 invoices received prior to its registration for VAT. It was only on 15 January 2021, after the expiry of that 12-month period, that it corrected, with the tax authority, that VAT return for the November 2020 tax period.
51In that regard, it is clear from the case-law of the Court that the possibility of exercising the right to deduct VAT without any temporal limit would be contrary to the principle of legal certainty, which requires the tax position of the taxable person, having regard to that person’s rights and obligations vis-à-vis the tax authority, not to be open to challenge indefinitely (the judgment in X, paragraph 41 and the case-law cited).
52The Court held that a limitation period the expiry of which has the effect of penalising a taxable person who has not been sufficiently diligent and has failed to claim deduction of the input VAT, by making it forfeit its right to deduct VAT, cannot be regarded as incompatible with the regime established by the VAT Directive in so far as, first, that limitation period applies in the same way to analogous rights in tax matters founded on domestic law and to those founded on EU law (principle of equivalence) and, secondly, that it does not in practice render impossible or excessively difficult the exercise of the right to deduct VAT (principle of effectiveness) (the judgment in X, paragraph 42 and the case-law cited).
53As regards the principle of equivalence, it must be stated that it is for the referring court alone to consider whether the detailed procedural rules laid down by national law are similar, taking into account the purpose, cause of action and essential characteristics of those allegedly similar detailed procedural rules (see, to that effect, judgment of 10 February 2022, Philips Orăştie, C‑487/20, EU:C:2022:92, paragraph 30 and the case-law cited).
54However, the Court may, for the purposes of the verification which the national court must carry out, provide it with certain information relating to the interpretation of EU law (judgment of 10 February 2022, Philips Orăştie, C‑487/20, EU:C:2022:92, paragraph 31).
55In the present case, national legislation on measures and actions taken during the state of emergency was adopted in order to remedy the consequences of the COVID-19 pandemic. That legislation extended the time limits for the filing of returns and payment concerning certain direct taxes provided for by the ZKPO, without providing for any special scheme for the filing, payment or deduction of VAT. However, that circumstance is not sufficient to render that legislation incompatible with the principle of equivalence.
56It is clear from the case-law of the Court that direct taxes, such as income tax, and indirect taxes, such as VAT, are fundamentally different in nature and are not comparable for the purpose of applying the principle of equivalence (see, by analogy, order of 9 December 2022, The Navigator Company and Navigator Pulp Figueira, C‑459/21, EU:C:2022:979, paragraphs 28 and 29).
57As regards, next, the principle of effectiveness, it should be stated that a limitation period of 12 months from the registration of the taxable person for VAT is also not liable – in circumstances such as those of the main proceedings – in practice to render impossible or excessively difficult the exercise of the right to deduct VAT.
58In that regard, first, it must be stated that the state of emergency due to the COVID-19 pandemic did not come close to covering the entire period during which NARE-BG could file a return in order to exercise its right to deduct the VAT contained in the 71 invoices at issue. Secondly, it is not apparent from the documents before the Court that there were difficulties in the Republic of Bulgaria for persons liable for the payment of VAT in general or for NARE-BG in particular which, during that state of emergency, would have rendered impossible or excessively difficult the exercise of the right of deduction. Thirdly, the COVID-19 infection of the NARE-BG accountant in December 2020 cannot be regarded as rendering impossible the exercise by that company of the right to deduct VAT during the 12-month period which it had for that purpose.
59In the second place, it should be stated that, as regards the question whether any obligation arises to make an adjustment of the deduction of VAT provided for in Articles 184 and 185 of the VAT Directive, that obligation is, admittedly, defined broadly in Article 184 inasmuch as the initial deduction is to be adjusted where it is higher or lower than that to which the taxable person was entitled. That wording does not exclude, a priori, any foreseeable situation of undue deductions, and the general scope of that adjustment obligation is supported by the express enumeration of the derogations permitted by the VAT Directive in Article 185(2) thereof (the judgment in X, paragraph 43 and the case-law cited).
60In accordance with Article 185(1) of that directive, such an adjustment must be made inter alia when changes to factors which were taken into consideration for the determination of the amount of that deduction occurred after the filing of the VAT return.
61It follows, however, from the Court’s case-law that the adjustment mechanism is applicable only where there is a right of deduction. Articles 184 and 185 of the VAT Directive cannot give rise to a right of deduction (the judgment in X, paragraph 45 and the case-law cited).
62It follows that the adjustment mechanism provided for by the VAT Directive is not intended to apply where the taxable person failed to exercise the right to deduct VAT and has lost that right as a result of the expiry of a limitation period (the judgment in X, paragraph 46).
63Consequently, that mechanism does not apply in circumstances, such as those in the main proceedings, where the taxable person who failed to exercise the right to deduct VAT when filing the VAT return for a given taxable period wishes to exercise that right subsequently, upon the correction of that return, where the limitation period laid down by national law for exercising that right has expired.
64In the third place, the principle of the neutrality of VAT also cannot call that conclusion into question. It is true that the adjustment mechanism is an integral part of the deduction scheme established by the VAT Directive and is intended to enhance the precision of deductions so as to ensure the neutrality of VAT (judgment of 28 May 2020, World Comm Trading Gfz, C‑684/18, EU:C:2020:403, paragraph 31 and the case-law cited).
65The principle of neutrality of VAT cannot, however, have the effect of allowing a taxable person to adjust a deduction entitlement which it did not exercise before the expiry of a limitation period and which it has therefore lost.
66In the light of the foregoing considerations, the answer to the questions referred is that Article 184 of the VAT Directive, read in conjunction with Article 186 thereof, and the principles of equivalence, effectiveness and neutrality of VAT must be interpreted as not precluding national legislation and administrative practice under which a taxable person is denied the right to deduct input VAT paid prior to that taxable person’s registration for VAT, on the ground that that person requested that deduction after the expiry of the limitation period laid down by the applicable national legislation, by means of a return seeking to correct a VAT return filed before the expiry of that period, notwithstanding the fact that national measures linked to the COVID-19 pandemic were adopted in order to extend the time limits for the filing and payment of certain taxes, without including VAT among those taxes.
Costs
67Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
Operative part
On those grounds, the Court (Seventh Chamber) hereby rules: Article 184 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2010/45/EU of 13 July 2010, read in conjunction with Article 186 of Directive 2006/112, as amended by Directive 2010/45, and the principles of equivalence, effectiveness and neutrality of value added tax (VAT)must be interpreted as not precluding national legislation and administrative practice under which a taxable person is denied the right to deduct input VAT paid prior to that taxable person’s registration for VAT, on the ground that that person requested that deduction after the expiry of the limitation period laid down by the applicable national legislation, by means of a return seeking to correct a VAT return filed before the expiry of that period, notwithstanding the fact that national measures linked to the COVID-19 pandemic were adopted in order to extend the time limits for the filing and payment of certain taxes, without including VAT among those taxes.
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