Opinion of the Advocate-General
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My Lords,
These two joined cases are references from the Court of First Instance, Brussels, concerning the powers of Member States to impose additional requirements as to the form and content of an invoice, over and above those mentioned in the Sixth VAT Directive ( 77/388/EEC ( Official Journal 1977, L 145, p . 1 ) ) for that invoice to be acceptable as a VAT invoice justifying the taxpayer' s right to deduct VAT paid to suppliers of goods and services (" input VAT ") from the VAT for which he is accountable to the government of the Member State (" output VAT "). The brief facts of the cases are as follows .
Mrs Jeunehomme, who trades as "Le Palais de la Voiture d' Occasion", is a second-hand car dealer . Following an investigation by the Belgian VAT administration, certain irregularities in her bookkeeping came to light . While some were admitted, she contested the administration' s four demands for payment of the VAT element on certain invoices for purchases of cars by herself for resale and brought an action before the Court of First Instance, Brussels, claiming the annulment of those demands and the return of property seized in execution . At issue is the validity of the invoices issued by Mrs Jeunehomme : she contended that the contents of an invoice fall to be decided as a matter of commercial law; whereas the VAT administration considered that the contents of an invoice for VAT purposes was a matter for tax law and that such an invoice must consequently, if it is to confer entitlement to the deduction, contain all the information required by tax law as well as that required by commercial law .
On 6 April 1987, the Court of First Instance, Brussels, stayed proceedings and referred the following question to this Court :
"Articles 18 ( 1 ) ( a ), 22 ( 3 ) ( a ) and 22 ( 3 ) ( b ) of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes provide that in order to exercise his right to deduct, a taxable person must hold an invoice stating clearly the price exclusive of value-added tax and the corresponding tax at each rate as well as any exemptions . In addition, the documents preparatory to the adoption of Article 22 ( 3 ) show that the method of invoicing comes not only within the scope of tax law but also, primarily, within that of commercial law .
In those circumstances, do Articles 18 ( 1 ) ( a ), and 22 ( 3 ) ( a ) and 22 ( 3 ) ( b ) of the Sixth Directive permit the Belgian State to make the exercise of the right of deduction subject to the holding of a document which must contain not merely the information normally set out in an invoice, as traditionally defined in commercial law, but also other information unconnected with the nature, essence and purpose of a commercial invoice, which is set out in Article 2 of Royal Decree No 1 of 23 July 1969, a measure adopted for the implementation of the Belgian Value-added Tax Code?"
Société anonyme d' étude et de gestion immobilière (" EGI ") ( a company now in liquidation and formerly engaged in construction work ) challenged the Belgian VAT authorities' refusal, on the grounds that the relevant invoices omitted certain compulsory elements and were thus insufficiently precise, to allow the deduction of input VAT on goods and services supplied to EGI by two of its suppliers, Enterprises Cotradec and Mr Scalegno . EGI claimed, inter alia, that it was contrary to the Sixth VAT Directive to make the right to deduct subject to the holding of an invoice containing all the additional elements specified by the Belgian secondary legislation . The Court of First Instance, Brussels, referred the following question for a preliminary ruling :
"Articles 18 ( 1 ) ( a ), and 22 ( 3 ) ( a ) and ( b ) of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes provide that in order to exercise his right to deduct, the taxable person must hold an invoice stating clearly the price exclusive of VAT and the corresponding tax at each rate as well as any exemptions .
The preparatory documents concerning Article 22 ( 3 ) also state that the method of invoicing is not only part of the fiscal domain but also, and primarily, of the "commercial domain" ( commentary accompanying the proposal for a Sixth Directive submitted to the Council by the Commission on 20 June 1973, Article 23 ( 3 ) ).
In those circumstances, do Articles 18 ( 1 ) ( a ), and 22 ( 3 ) ( a ) and ( b ) of the Sixth Directive permit the Belgian State to provide that a taxable person may exercise the right to deduct only if he holds a document which must contain not merely the usual information contained in an invoice in the traditional sense as defined in commercial law but also additional information, alien to the nature, essence and purpose of a commercial invoice, specified in Article 2 of Royal Decree No 1 of 23 July 1969 implementing the Belgian VAT Code, where such additional information is purely technical in nature and is designed to facilitate supervision of the collection of the tax on the basis of the accounts of another taxable person with whom the person in question has concluded a contract?"
Although the two questions referred are not textually identical, they ask the same questions as regards the interpretation to be given to Articles 18 ( 1 ) ( a ), 22 ( 3 ) ( a ) and ( b ) of the Sixth Directive . Although it seems that both are subject to the provisions of Royal Decree No 1, in Case 123/87 Jeunehomme there are additional rules specifying further information which must be given in invoices relating to the sale of motor vehicles ( Royal Decree No 17 of 20 July 1970, Article 4 ( 2 ) ( Moniteur belge of 31 July 1970, p . 7912 ) ). The Court has been told that the question raised in these cases has arisen in other cases in Belgium and the Hoge Raad of the Netherlands has also referred a related question to the Court in Case 342/87 Genius Holding BV v Inspecteur der Omzetbelasting ( entered at the Registry on 4 November 1987 ).
Article 45 of the Belgian VAT Code ( Moniteur belge of 17 July 1969, p . 7046 ) sets out the basic right of a VAT-registered person to deduct VAT paid on his purchases of goods and services for the purposes of his business from the VAT for which he is accountable on goods and services which he supplies . Article 49 of the Code authorizes His Majesty the King to lay down detailed conditions for the exercise of that right . Article 52 of the Code empowers the King to specify the elements which must appear on invoices drawn up by VAT-registered persons .
Article 3 ( 1 ) ( 1 ) of Royal Decree No 3 of 10 December 1969 ( Moniteur belge of 12 December 1969, p . 12006 ) provides that, in order to deduct input VAT from output VAT, the taxable person must hold an invoice which complies with the conditions of Article 2 of Royal Decree No 1 of 23 July 1969 ( Moniteur belge of 30 July 1969, p . 7380 ). By virtue of the latter, the elements which must appear on the invoice are as follows :
date of the invoice and its serial number in the trader' s sales ledger;
names and addresses of the VAT-registered person and his client or supplier;
date of delivery of goods or supply of services;
usual designation and quantity of goods supplied, specifying details required to establish VAT rate applicable;
sale price and any other pre-VAT elements;
VAT rate(s ) applicable and total VAT charged;
where no VAT is charged, grounds for VAT exemption .
Royal Decree No 17 in Article 4 ( 2 ) prescribes that the invoice must bear details of the make, model, year, cubic capacity of engine, horsepower of engine, model of coachwork, chassis number and year of first registration, and must give information about any equipment and accessories fitted .
The question is thus whether the Sixth Directive permits these rules to be enforced and the deduction of input tax to be withheld if they are not complied with .
Article 17 ( 2 ) ( a ) of the Sixth Directive gives the taxable person the right to deduct from the VAT which he is liable to pay "value-added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person ". This right has been accepted by the Court as an essential part of the VAT system ( Case 15/81 Gaston Schul Douane Expediteur BV v Inspecteur der Invoerrechten en Accijnzen (( 1982 )) ECR 1409 and Case 268/83 Rompelman v Minister van Financien (( 1985 )) ECR 655, at p . 663 ).
It must, however, be exercised in accordance with rules laid down in or permitted by the VAT directives . Article 18 ( 1 ) ( a ) of the Sixth Directive provides that to exercise his right to deduct under Article 17 ( 2 ) ( a ) the taxable person must hold an invoice drawn up in accordance with Article 22 ( 3 ). By Article 22 ( 3 ):
"( a ) Every taxable person shall issue an invoice, or other document serving as an invoice in respect of all goods and services supplied by him to another taxable person, and shall keep a copy thereof .
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( b ) The invoice shall state clearly the price exclusive of tax and the corresponding tax at each rate as well as any exemptions .
( c ) The Member States shall determine the criteria for considering whether a document serves as an invoice ."
By Article 22 ( 8 ): "... Member States may impose other obligations which they deem necessary for the correct levying and collection of the tax and for the prevention of fraud ."
The Directive makes express provision ( recital 17 and Article 27 ) for Member States to take or retain special measures derogating from the Directive in order to simplify the levying of the tax or to prevent fraud or tax avoidance . Such measures are, under Article 27, to be notified to the Commission, which notifies them in turn to other Member States . The procedure is specifically designed to allow a Member State, with the approval ( or at least in the absence of disapproval within the required period ) of the Community institutions and other Member States, to derogate from the Directive . In the present cases, the notification procedure was not used .
I do not consider that Article 22 ( 3 ) ( b ) is to be read as constituting an exhaustive list of the matters which must be stated in an invoice to be used for deduction purposes . At the least the invoice must also identify the seller and the buyer, the goods or services provided, and the date so as to fix the VAT period .
The Sixth Directive was not a complete harmonization of all rules relating to the administration of the VAT scheme and it seems to me that the Council left it to Member States to require other matters to be stated in the invoice which were necessary for the administration of the scheme, so long as the provisions adopted pursued the aims of the Directive, did not create exceptions to the Community scheme and did not limit its scope ( see Case 50/76 Amsterdam Bulb v Produktschap voor Siergewassen (( 1977 )) ECR 137, at p . 151 ).
Although Article 22 ( 2 ) of the Directive requires every taxable person to keep accounts in sufficient detail to permit application of the VAT scheme and inspection by the tax authority, and although by Article 22 ( 4 ) returns have to be made by the taxable person, it seems to me that the invoice which "must" be held by a taxable person in order to exercise his right to deduction is an important part of the machinery and that Member States are entitled, in the absence of further harmonizing rules, to adopt rules as to the content of an invoice which are reasonably necessary to allow adequate verification and fiscal control .
At the end of the day counsel for the applicants accepted, and in my view rightly accepted, that the Member States are not limited to requiring an invoice sufficient for commercial law rules or practice . He argued, however, that even if Member States may impose additional requirements, the absence of these should not lead to the refusal of the right to deduct though they may lead to a penalty or fine being imposed, and that if a "commercial" invoice is given there is without more a right to deduct input tax .
I do not accept this argument . It seems to me that if requirements can lawfully be imposed by a Member State, then an invoice which does not satisfy these requirements in substance is not an invoice which enables the taxpayer to exercise his right to deduct without more .
An invoice which complies with the rules is the "ticket of admission" to the right to deduct, subject to its subsequently being shown by the tax authorities to be false; if the invoice does not comply, it may be that the taxpayer can prove the genuineness of the transaction and that his supplier accounted for the VAT which he has paid as "input tax", but if the invoice is incomplete in a material respect the onus is on him to establish his right to deduct .
The requirements laid down must not, however, go beyond what is reasonably necessary for the purposes of verification and fiscal control . If a Member State wishes in particular areas to go further then it must have recourse to Article 27 of the Sixth Directive . Rules laid down which go beyond what is reasonably necessary cannot be relied on to defeat the exercise of the right to deduct .
The requirements of Article 2 of Royal Decree No 1 do not seem to me to go beyond what is reasonably necessary for the purposes of verification and fiscal control and they are not disproportionate to that aim nor do they have the effect of rendering it virtually impossible or difficult in practice for a taxable person to exercise his right to deduct input tax . These rules seem to me to reflect the legislation of several if not many Member States . The date of the operation, the event giving rise to chargeability and the information needed to decide what rate of tax is applicable are all justified . By way of example it seems to me, as counsel for Spain contended at the hearing, that the serial number of the invoice is reasonably necessary in order to check against the accounts of the buyer and the seller; the names and addresses of the VAT registered person and his supplier, the description of the goods and a statement of the price are all necessary if there is to be adequate monitoring of the collection and paying in of VAT and the prevention of fraud .
I accordingly conclude that the requirements of Article 3 ( 1 ) ( 1 ) of Royal Decree No 3 and of Article 2 of Royal Decree No 1 are compatible with the provisions of the Sixth Directive .
The question referred by the Court of First Instance in Case 123/87 Jeunehomme does not ask this Court in terms for a ruling on legislation relating specifically to motor cars ( Royal Decree No 17 ). Strictly speaking, therefore, it is not necessary to deal with that aspect of the Belgian legislation . On the other hand, since the subject-matter of the case before the national court clearly requires the national court to consider that legislation as well as the main VAT legislation, and since the Court may wish to deal with it, I indicate my views .
On the face of it some of the information specified in Royal Decree No 17 will have to be given as part of the "usual designation" of goods referred to in Article 2 of Royal Decree No 1 - perhaps model, year and cubic capacity or horsepower of engine . The other matters required may well go beyond that - model of coachwork, chassis number and year of first registration and any equipment and accessories . Even though these are matters which may well be required for the registration of the car they do not necessarily form part of an invoice for the purposes of a claim to exercise a right to deduct input tax .
The argument that different matters may be required for different sectors of trade is prima facie attractive but in the end I do not think that it is right; it is capable of leading to an even greater fragmentation which the Sixth Directive was seeking to avoid . The elements of "an invoice" for the purpose of Article 17 of the Directive should be capable of being expressed generally .
If there are particularly grave risks of tax evasion or avoidance in a given sector, the proper course is for the Member State to apply for authorization to implement special measures derogating from the normal provisions of the Directive, using the procedure available under Article 27 . Indeed, in an earlier case ( Case 324/82 Commission v Belgium (( 1984 )) ECR 1861 ) the Court noted that there was no dispute between the Commission and the Belgian Government as to the real risk of tax evasion or avoidance in the motor trade and that special measures of the kind envisaged by Article 27 might be required ( at p . 1882, paragraph 30 of the judgment ).
In this case there was no such application for authorization .
Nor do I think that the fact that a trader can still prove ( the onus being on him ) that the VAT is repayable in respect of a genuine transaction, even in the absence of an invoice complying with national legislation, justifies taking an extended view of what may be required in an invoice . The invoice is the method of exercising the right to deduct without having to prove more; to extend the requirements beyond what is reasonably necessary for verification and fiscal control seems to me to be putting on the trader a greater burden than that which Article 17 of the Sixth Directive requires .
Accordingly, in my view, to the extent that Royal Decree No 17 requires matters, not required by Article 2 of Royal Decree No 1, to be stated it goes too far .
Accordingly, in my opinion, the questions fall to be answered on the following lines :
"Articles 18 ( 1 ) ( a ), 22 ( 3 ) ( a ) and 22 ( 3 ) ( b ) of the Sixth Directive permit a Member State to make the exercise of the right of deduction referred to in Article 17 thereof subject to the holding of a document which must contain not merely the information which may be customary or necessary for commercial purposes but also other information which is reasonably necessary for the verification and fiscal control of transactions in respect of which a right to deduct input tax is sought to be exercised . Such information may include the matters set out in Article 2 of Royal Decree No 1 of 23 July 1969, a measure adopted for the implementation of the Belgian Value-added Tax Code, but if and in so far as they go beyond such matters, not the further details specified in Article 4 ( 2 ) of Royal Decree No 17 of 20 July 1970 ."
The costs of the parties to the main proceedings fall to be dealt with by the national court . The costs of the German, Spanish and Portuguese Governments and of the Commission are not recoverable .
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