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CJEU rules on Romanian VAT cases
The Court of Justice of the European Union (CJEU) has ruled in joined cases C-249/12 and C-250/12 concerning the taxable amount of VAT for real estate transactions performed by individuals. Taxand Romania provides a summary of the case proceedings.
The joined CJEU cases C-249/12 and C-250/12 refers to the situation of 2 persons that performed real estate transactions within the period 2007-2008, respectively 2007-2009. The agreements concluded between the 2 sellers and their customers did not include any specific provision with respect to VAT.
Subsequently, following a tax inspection, the Romanian tax authorities considered that the 2 individuals were deemed as taxable persons from a VAT perspective, which resulted in the reclassification of the transactions carried out in the past. Therefore the tax authorities applied additional VAT liabilities as well as late payment interest and penalties over the price stipulated in the sale-purchase agreement.
The High Court of Cassation and Justice addressed specific questions to the CJEU in order to determine whether the price agreed between the parties should be considered as VAT inclusive or VAT exclusive, to the extent that the agreement does not contain any mention with respect to VAT and the person liable for the payment of VAT is the supplier.
The CJEU stated that the VAT, by its nature, is a tax on consumption which must be borne by the end cosumer and, if such VAT may not be recovered by the supplier from the purchaser, adding VAT on the price agreed between the parties would not follow the basic principle of the VAT system.
The CJEU ruled that when an agreement concluded between the parties does not include any mention with respect to VAT and the supplier is the person liable for the payment of VAT, the price established between the parties must be deemed as including VAT to the extent that such VAT may not be recovered from the customer.
Also published in Thomson Reuters' Taxnet Pro, 21 November 2013
It is clear that the CJEU judgment is distinct when compared to the Central Fiscal Commission Decision No. 2/2011, according to which if the agreement is slient on VAT, such VAT is applied on the value of the supply. Consequently this decision may be modified, at least partially, considering the current situation and CJEU judgment.
It remains to be seen how the Romanian courts will assess whether the value of VAT may be recovered by the seller from the customer, as well as the criteria applied by them.