Judgement of the Court of the EU in case C-142/12 Marinov
TAXABLE BASE OF DEEMED SUPPLY OF GOODS UPON VAT DEREGISTRATION
Case C-142/12 – Hristomir Marinov v NRA
The taxable base of the deemed supply of goods which are retained by a taxable person when he ceases to carry out a taxable economic activity, that including the person’s VAT deregistration, cannot be the open market value of the assets unless that value corresponds to the residual value of those goods at that date after taking into account the change in the value of those goods between the date of their acquisition and the date of the cessation of the taxable economic activity.
When a taxable person ceases to carry out an economic activity, including the case when the person is removed from the VAT register, but retains certain goods, the VAT legislation treats the retention of those goods available with the person upon the cessation of his activities as a taxable supply of the goods. The purpose of the provision is to avoid a situation where the final consumption of the goods, on which the VAT was deducted by the taxable person, remains untaxed following the deregistration of the person.
The main question which arises in this situation concerns the taxable base of this deemed supply of the retained goods and whether it should be equal to the open-market value of those goods, as the Bulgarian VAT Act provides.
FACTS AND QUESTIONS REFERRED FOR A PRELIMINARY RULING
Hristomir Marinov acting on behalf of Lampatov-H – Hritomir Marinov (“Marinov”) was removed ex-officio from the Bulgarian VAT register with effect from 4 November 2009 for nonpayment of the VAT owed on the basis of the VAT declarations for the period from April to July 2009.
Following a tax audit for the period from 1 January 2007 to 4 November 2009 it was established by the revenue authorities that at the time of his VAT deregistration Marinov was in a possession of several vehicles in respect of which VAT had been deducted. Therefore, the tax authorities concluded that at the time of his VAT deregistration Marinov had carried out a taxable supply of those available vehicles taking the taxable amount for VAT in respect of the vehicles on the basis of their ‘open market value’, determined following an expert’s report.
Marinov appealed the tax assessment claiming that the taxable base of the deemed supply of the retained goods should have taken into account the depreciation in the value of those assets since their acquisition.
When the administrative appeals instance dismissed the appeal, Marinov lodged an appeal with Varna Administrative court. In those circumstances, the Administrative court decided to stay the proceedings and to refer the case to the Court for a preliminary ruling and to ask the Court of the EU whether Directive 2006/112/EC (the “VAT Directive”) is to be interpreted as precluding a provision of national law under which, in the event of the cessation of the taxable economic activity, the taxable amount of the transaction is to be the ‘open market value’ of the assets in existence at the time of that cessation and no account is taken of the change in value of those assets between the date of their acquisition and the date of the cessation of the taxable economic activity.