Recently the Fourth Chamber of the Court of Justice of the European Union (CJEU) has delivered judgment dated 22 February 2024 in Case C-674/22, in which it rules on a request for a preliminary ruling on the interpretation of EU law, pursuant to Article 267 TFEU, from the Rechtbank Gelderland (District Court, Gelderland, the Netherlands), in the proceedings between the Municipality of Dinkelland, (Netherlands) and the Ontvanger van de Belastingdienst/Grote ondernemingen, kantoor Zwolle (Tax Authority/Large Businesses, Zwolle office, the Netherlands), concerning the latter authority's refusal to pay compensatory interest to the Municipality of Dinkelland on an amount of VAT which was returned to him.

The reference judgment goes into detail on the interpretation that certain provisions of Council Directive 2006/112/EC of 28 November 2006 on the common system of VAT, in the light of the case law relating to whether, in the context of the case at hand, Union law requires the payment of interest to a taxable person, from the day of payment of an amount of VAT which has subsequently been returned, as the City Council demands, or if, as the Tax Authority that made the requested refund in this case maintains, the calculation of the interest on the amount returned is correct, in accordance with its internal regulations, for a period that began at eight weeks from receipt of the refund request, and concluded fourteen days after notification of the return resolution.

The reasons that motivated the request for a refund of undue income in the case analyzed, and on whose nature the CJEU rules, are, on the one hand (i) errors committed in accounting, and on the other (ii) a change in the accounting rules applicable to municipal corporations.

The court that referred the question for a preliminary ruling has doubts, essentially, as to whether the amount returned in the present case was actually received in breach of EU law, a necessary condition established by case law for considering the calculation of compensatory interest from the date of payment.  The consulting court is clear that the tax authorities cannot be held liable for errors made in the accounting of the Municipality of Dinkelland, however, from paragraph 56 of the judgment of April 28, 2022, Gräfendorfer Geflügel- und Tiefkühlfeinkost Produktions and others (C‑415/20, C‑419/20 and C‑427/20, EU:C:2022:306), it follows that the obligation to pay interest arises from the impossibility of having access to the amount unduly paid for a certain period of time, regardless of the possible liability of the taxpayer.

Regarding the modification of the distribution key of the VAT borne and paid, the referring court also has doubts as to whether, taking into account that the refund of the amount of VAT derived from this modification is essentially the result of the change in the accounting standards applicable to municipal corporations, it could also be considered that the impossibility of disposing of this amount derives from an infringement of Union law.

Well, the CJEU begins by recalling, in the Judgment that we are analysing, that the Case Law, in fact, and as stated by the court that raises the question, is based on the idea that when a Member State has collected taxes in breach of the rules of Union Law, the individuals concerned have the right to the restitution not only of the tax unduly collected, but also of the amounts paid to that State or retained by it in direct relation to that tax (judgments of 12 December 2006, Test Claimants in the FII Group Litigation, C‑446/04, EU:C:2006:774, paragraph 205, and 23 April 2020, Sole-Mizo and Dalmandi Mezőgazdasági, C‑13/18 and C‑126/18, EU:C:2020:292, paragraph 35). It is therefore necessary to determine, for the two substantive issues raised in this specific case mentioned above, whether the amount returned should be considered to have been "collected in contravention of Union law", in the sense established by the aforementioned Community jurisprudence.

1. On the one hand, the CJEU resolves that if a taxpayer invoices a VAT by mistake, the latter is collected not in violation of Union regulations, but under Article 203 of the Directive on VAT, which provides that it will be the debtor of the VAT any person who mentions this tax on an invoice (for all, judgment of October 13, 2022, HUMDA, C‑397/21, EU:C:2022:790,). Similarly, pursuant to Article 250(1) of the Directive on the VAT, taxpayers must submit a declaration of VAT which includes all the data necessary to determine the tax rate payable and the deductions to be made. Therefore, the tax authorities do not contravene Union law when they collect an amount of VAT according to that declaration, even if the taxable person, for reasons attributable solely to him, has not entered in that declaration the data necessary to determine the scope of his right to deduction established in Article 168 of the aforementioned Directive, so that he has not exercised this right. Therefore, it cannot be considered that an amount of VAT has been collected "in contravention of Union law" because the taxpayer has, by mistake, failed to exercise his right to deduction.
2. On the other hand, an amount of VAT which has been returned due to the modification, with retroactive effect, of the rules for calculating the VAT deductible amount corresponding to the general expenses of a taxable person, can only be considered as a tax that was levied "in contravention of Union law", within the meaning of the aforementioned case law, if the initial rules of that calculation, according to which the said amount was levied, are incompatible with Union law, due to the applicable national rules, or to a requirement imposed by the tax authorities.

He CJEU concludes, in short, that Union law must be interpreted as meaning that it does not oblige a taxpayer to pay interest from the date of payment of an amount of VAT which is subsequently returned by the Tax Authority, when this return is the result, in part, of the finding that the taxpayer, due to errors committed in his accounting, did not fully exercise his right to deduct the VAT supported and paid in the tax periods in question and, in part, of a modification with retroactive effect of the calculation rules of the VAT deductible corresponding to the general expenses of the aforementioned taxpayer if said rules are established under the sole responsibility of the latter.

You can consult the full text of the judgment at the following link: https://eur-lex.europa.eu/legal-content/ES/TXT/?uri=CELEX%3A62022CJ0674&qid=1710154161588