Judgement of the Court of the EU in case C-142/12 Marinov
JUDGMENT OF THE COURT
As the relevant provision of the VAT Directive – Art. 18 (c) under which the retention of goods may be treated as a taxable supply of goods for consideration refers to cessation of economic activities, the Court first examined whether that provision also covers a cessation of economic activities resulting from the VAT deregistration of a person.
Considering the main objective of Art. 18 (c) of the VAT Directive to make sure that any final consumption of goods following a cessation of economic activities is taxed, regardless of the causes of the cessation, the Court concluded that the provision of Art. 18 (c) also covers the cessation of economic activities resulting from removal of the taxable person from the VAT register.
Afterwards, the Court considered the questions concerning the taxable base of the supply of the retained goods at the time of the VAT deregistration of Marinov.
The Court reiterated that in accordance with the Court’s case-law, the cases, where the taxable base of a transaction shall be its open-market value, are exhaustively listed in Art. 80 of the VAT Directive and they are confined to transactions carried out between connected persons one of whom does not have the right of VAT deduction. In view of this, the Bulgarian national legislation cannot provide that the taxable amount is to be the open market value of the transaction in cases other than those listed in Art. 80 of the VAT Directive.
Instead, according to the Court, the relevant provision as regards the taxable base of the transaction is Art. 74 of the VAT Directive which provides that, for transactions such as that at issue in the present case, the taxable amount is to be the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, determined at the time when those transactions take place.
The Court also clarified that ‘the purchase price, determined at the time of allocation’, for the purposes of Art. 74 of the VAT Directive, refers to the residual value of the goods at the time of allocation, account being taken of the change in the value of those assets between their acquisition and the cessation.
Here, it has to be specified that this interpretation of the VAT Directive provisions does not in itself annul the application of an open-market value to the transaction, provided however that the open-market value corresponds in practice to the residual value of goods at the date of the cessation of the taxable economic activity.
In view of the above, the Court of the EU concluded that the relevant provisions of the VAT Directive are to be interpreted as precluding a provision of the 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, unless that value corresponds in practice to the residual value of those goods at that date and account is thus taken of 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.