© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
A15. Fair procedures
RIGHT TO GOOD ADMINISTRATION
- Obliged to conduct diligent and impartial examination of all relevant matters before adopting a decision
"[48] In addition, as regards the requirements pertaining to the right to good administration, referred to in paragraph 39 above, the Court has held that administrative authorities such as the national tax authority must, when carrying out their inspection duties, conduct a diligent and impartial examination of all the relevant matters so that they can be sure that, when they adopt a decision, they have at their disposal the most complete and reliable information possible for that purpose (judgment of 16 May 2024, Slovenské Energetické Strojárne, C‑746/22, EU:C:2024:403, paragraph 50 and the case-law cited)." (Cityland C-164/24)
- Cannot systematically refuse to take into account late supplied evidence
"[51] The lack of possibility for the tax administration to take into account, due to the content of Paragraph 124(3) of the Law on the organisation of the tax administration, any late reply to a request of additional information, which results in a systematic rejection of those late replies, necessarily leads that administration to contravene that principle, since it is adopting a decision which it knows to be possibly based on incomplete – or even erroneous – elements. Moreover, the effect of that is that that tax administration disproportionately breaches the principle of VAT neutrality by leaving the taxable person liable to pay the VAT in respect of which he or she is entitled to obtain a refund, whereas the common system of VAT is intended to relieve the operator entirely of the burden of the VAT due or paid in the course of all his or her economic activities (see, to that effect, judgment of 21 October 2021, CHEP Equipment Pooling, C‑396/20, EU:C:2021:867, paragraph 55)." (Slovenské Energetické Strojárne C-746/22)
- Must be complied with when deregistering a taxpayer
"[39] Second, when exercising those powers, the Member States must ensure compliance with the requirements pertaining to the right to good administration, reflecting a general principle of EU law, which is applicable in a tax inspection procedure (see, to that effect, judgment of 16 May 2024, Slovenské Energetické Strojárne, C‑746/22, EU:C:2024:403, paragraph 50)." (Cityland C-164/24)
Right to have situation dealt with within a reasonable time
"[53] Where a national administration implements EU law in respect of a person, that person enjoys, by virtue of the right to sound administration which reflects a principle of EU law, the right to have his or her situation dealt with within a reasonable period of time (see, to that effect, judgment of 14 May 2020, AGROBET CZ, C‑446/18, EU:C:2020:369, paragraph 43), and then, in the event of legal proceedings, the right to have his or her case heard within a reasonable period of time, in accordance with the second paragraph of Article 47 of the Charter of Fundamental Rights of the European Union.
[54] Therefore, once the procedure for examining the situation of a taxable person in the light of the rules of the common system of VAT has been reopened, the principle of sound administration and Article 47 of the Charter of Fundamental Rights require that the duration of such a review and, where appropriate, subsequent judicial review must not be unreasonable in the light of the particular circumstances of each case." (Napfény-Toll C-615/21)
- Breach may only lead to annulment of decision where delay affects ability of T to defend itself
"[53] However, it should be recalled that the excessive length of proceedings, whether administrative or judicial, is capable of justifying the annulment of the decision taken at the end of that procedure only where that length has had an effect on the ability of the person concerned to defend him or herself (see, to that effect, judgments of 26 November 2013, Gascogne Sack Deutschland v Commission, C‑40/12, EU:C:2013:768, paragraph 81, and of 8 May 2014, Bolloré v Commission, C‑414/12 P, not published, EU:C:2014:301, paragraph 84)." (Napfény-Toll C-615/21)
- T expected to retain evidence during limitation period and if notified of investigation
"[57] In so far as, during the limitation period, taxable persons must expect that their legal situation which arose based on their tax return may be challenged, then, when the tax authority informs them of the reopening of the procedure examining that situation, that that may mean they must justify the information contained in their tax return and, lastly, when they bring an action against the amended notice issued at the end of that procedure, that they must establish that their claim is well founded by means of an offer to prove, it is for them to ensure that they keep all the relevant supporting documents relating to their tax return until the tax decisions become final. Given the predominant role of the tax return and the documentary evidence in the common VAT system for the purposes of establishing the accuracy of taxable persons’ returns, it is therefore only in exceptional circumstances that it could be established that the excessive length of an administrative or judicial procedure is capable of having had an impact on the ability of the person concerned to defend him or herself." (Napfény-Toll C-615/21)
RIGHT TO BE HEARD
"[41]...However, it does not appear necessary, in the present case, to invoke the right to good administration, as a general principle of EU law, from a different perspective to that of the right to be heard and the right to have access to the file, which, in accordance with the case-law, form part of the rights of the defence (judgment of 10 September 2013, G. and R., C‑383/13 PPU, EU:C:2013:533, paragraph 32; see, to that effect, judgment of 16 October 2019, Glencore Agriculture Hungary, C‑189/18, EU:C:2019:861, paragraphs 41 and 51), also referred to by the question referred." (MB C-277/24)
- Parties must have knowledge and be able to debate in adversarial manner factual and legal elements
"[27] According to this case law, the tax authority bears the burden, firstly, of precisely characterizing the constituent elements of the fraud and of providing evidence of the fraudulent conduct and, secondly, of establishing that the taxable person actively participated in that fraud or that he knew or should have known that the transaction invoked to establish that right was involved in that fraud. It is for the national courts to verify that the tax authorities have provided sufficient proof of this (see, to that effect, judgment of 1 December 2022, Aquila Part Prod Com, C-512/21, EU:C:2022:950, paragraph 36).
[28] However, in order to satisfy the requirements of the right to a fair trial, it is important that the parties have knowledge and be able to debate in an adversarial manner before the court seised both the factual and legal elements which are decisive for the outcome of the proceedings, including evidence of the taxable person's participation in VAT fraud alleged by the tax authorities (judgment of 1 December 2022, Aquila Part Prod Com, C-512/21, EU:C:2022:950, paragraphs 60 and 61).
[29] Consequently, the answer to the first question, under c), is that the right to a fair trial, enshrined in Article 47 of the Charter of Fundamental Rights, must be interpreted as meaning that its respect requires that the taxable person be aware of and be able to argue in an adversarial manner, before the national court seised, the evidence on which the tax authorities rely to consider that this taxable person is involved in VAT fraud." (Pegazus Busz C-262/24)
- Cannot adopt a joint and several liability decision against person without giving them right to be heard
"[58] A decision which, as a result of the latter proceedings, finds M.B. jointly and severally liable for the tax debt of company B., as previously determined in the context of the tax proceedings, would adversely affect M.B.
[59] Consequently, in the situation referred to in the preceding paragraph, the principles set out in paragraph 56 above require the Polish tax authority to respect the rights of the defence of the individual in joint and several liability proceedings initiated following tax proceedings in which a finding was made of a tax debt, which could not, in whole or in part, be recovered from the person who is taxable for VAT purposes.
[60] As is apparent from paragraphs 18 and 23 above, in the present case, according to the findings of the referring court, the joint and several liability proceedings do not appear to call into question the amount of the debt, since the purpose of the proceedings appears to be confined to establishing whether the conditions arising from Article 116 of the Tax Code are present in order for the tax debt previously established as a result of the tax proceedings to be claimed from a third party. Therefore, joint and several liability proceedings which take place in such circumstances could undermine the very essence of the rights of the defence of that third party." (MB C-277/24)
- Including calling into question the facts/findings based upon which the tax debt is said to exist
"[65] In the light of the foregoing considerations, the answer to the question referred for a preliminary ruling is that Article 273 of the VAT Directive, read in conjunction with Article 325(1) TFEU, the rights of the defence and the principle of proportionality, must be interpreted as not precluding national legislation and practice under which a third party who may be held jointly and severally liable for the tax debt of a legal person cannot be a party to the tax proceedings brought against that legal person to establish the tax debt of that legal person, without prejudice to the need for that third party, during any joint and several liability proceedings brought against that third party, to be able effectively to call into question the findings of fact and the legal classifications made by the tax authority in the context of the tax proceedings, and to have access to the file of the tax authority, in accordance with the rights of that person or of other third parties." (MB C-277/24)
Right to know the case against
"[51] In that regard, it should be borne in mind that, according to a consistent body of case-law, respect for the rights of the defence is a general principle of EU law. That principle applies where the authorities are minded to adopt a measure which will adversely affect an individual. In accordance with that principle, the addressees of decisions which significantly affect their interests must be placed in a position in which they can effectively make known their views as regards the information on which the authorities intend to base their decision. The authorities of the Member States are subject to that obligation when they take decisions which come within the scope of EU law, even though the EU law applicable does not expressly provide for such a procedural requirement (judgment of 16 October 2019, Glencore Agriculture Hungary, C‑189/18, EU:C:2019:861, paragraph 39 and the case-law cited).
[52] As is apparent from paragraph 41 above, the rights of the defence include the right to be heard and the right of access to the file." (MB C-277/24)
Right to effective judicial protection
"[42] Similarly, having regard to the administrative nature of the tax proceedings and, moreover, the joint and several liability proceedings, Article 47 of the Charter, relating to the right to an effective remedy and to a fair trial, is no more relevant than the right to effective judicial protection (see, to that effect, judgment of 1 December 2022, Aquila Part Prod Com, C‑512/21, EU:C:2022:950, paragraph 59)." (MB C-277/24)
- Cannot rely on alleged infringements without national court having power to examine existence of infringements
"[62] By contrast, if that court is not empowered to examine the existence of an infringement of obligations arising from national provisions or from EU law relating to the safety of the food supply chain, relied on as evidence of the existence of VAT fraud or of the participation of the taxable person therein, that evidence cannot be accepted without undermining the right to an effective judicial remedy and must therefore be disregarded (see, by analogy, judgments of 17 December 2015, WebMindLicenses, C‑419/14, EU:C:2015:832, paragraphs 87 to 89, and of 16 October 2019, Glencore Agriculture Hungary, C‑189/18, EU:C:2019:861, paragraphs 66 to 68)." (Aquila Part Prod C-512/21)
LIMITS ON RIGHTS
Limits permitted but must be proportionate
"[53] However, the principle of respect for the rights of the defence is not an unfettered prerogative but may be restricted, provided that the restrictions in fact correspond to objectives of public interest pursued by the measure in question and do not constitute, in the light of the objectives pursued, a disproportionate and intolerable interference which impairs the very substance of the rights thus guaranteed (judgment of 16 October 2019, Glencore Agriculture Hungary, C‑189/18, EU:C:2019:861, paragraph 43 and the case-law cited)." (MB C-277/24)
- Confidentiality and business secrecy
"[54] Those objectives include, inter alia, in the context of tax proceedings, the protection of the requirements of confidentiality or business secrecy (see, to that effect, judgment of 16 October 2019, Glencore Agriculture Hungary, C‑189/18, EU:C:2019:861, paragraph 55)." (MB C-277/24)
- Third party who may jointly and severally liable can be excluded from tax debt proceedings as long as right to defence is protected by other means
"[65] In the light of the foregoing considerations, the answer to the question referred for a preliminary ruling is that Article 273 of the VAT Directive, read in conjunction with Article 325(1) TFEU, the rights of the defence and the principle of proportionality, must be interpreted as not precluding national legislation and practice under which a third party who may be held jointly and severally liable for the tax debt of a legal person cannot be a party to the tax proceedings brought against that legal person to establish the tax debt of that legal person, without prejudice to the need for that third party, during any joint and several liability proceedings brought against that third party, to be able effectively to call into question the findings of fact and the legal classifications made by the tax authority in the context of the tax proceedings, and to have access to the file of the tax authority, in accordance with the rights of that person or of other third parties." (MB C-277/24)