© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
A11. Legal certainty
THE PRINCIPLE​
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- Those subject to rules should know unequivocally their rights and obligations
"[59] Indeed, the principle of legal certainty, which underlies that objective, requires that EU rules enable those concerned to know unequivocally the extent of their rights and obligations so that they are in a position to order their affairs with the benefit of full information (see, to that effect, judgment of 15 July 2010, Commission v United Kingdom, C‑582/08, EU:C:2010:429, paragraph 49 and the case-law cited)." (RPO C-390/15)
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- Observe all the more strictly in the case of rules with financial consequences
"[47] Moreover, as the Court has repeatedly held, Community legislation must be certain and its application foreseeable by those subject to it (see, particularly, Case C-301/97 Netherlands v Council [2001] ECR I‑8853, paragraph 43, and Halifax and Others , cited above, paragraph 72). That requirement of legal certainty must be observed all the more strictly in the case of rules liable to entail financial consequences, in order that those concerned may know precisely the extent of the obligations which they impose on them (see, particularly, Case 326/85 Netherlands v Commission [1987] ECR 5091, paragraph 24, and Case C‑17/01 Sudholz [2004] ECR I‑4243, point 34)." (Isle of Wight C-288/07)
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- Necessary to be aware, before concluding a transaction, of tax obligations
"[56] That principle must be observed all the more strictly in the case of rules liable to entail financial consequences, in order that those concerned may know precisely the obligations which such rules impose on them. It follows that it is necessary that taxable persons should be aware, before concluding a transaction, of their tax obligations (judgment of 9 October 2014, Traum, C‑492/13, EU:C:2014:2267, paragraph 29 and the case-law cited)." (Cartrans Spedition C-495/17)
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"[29] It must be pointed out that that principle is to be observed all the more strictly in the case of rules liable to entail financial consequences, in order that those concerned may know precisely the obligations which such rules impose on them. It follows that it is necessary that taxable persons be aware, before concluding a transaction, of their tax obligations (see judgment in Teleos and Others, EU:C:2007:548, paragraph 48 and the case-law cited)." (Traum C-492/13)
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- Not absolute, balance against other requirements
"[42] Moreover, since the requirements arising from the application of the principle of legal certainty are not absolute, the Member States must ensure they are weighed against the other requirements inherent in their membership of the European Union, in particular those set out in Article 4(3) TEU, to take any appropriate measure, general or particular, to ensure the fulfilment of the obligations arising from the Treaties or from acts adopted by the institutions under those Treaties..." (Napfény-Toll C-615/21)
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- Does not prevent legislation based on abstract legal notions
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"[35] By the second and third questions, which it is appropriate to examine together, the referring court asks the Court to examine the validity of amended Directive 2011/16, in the light of the principle of legal certainty, the principle of legality in criminal matters enshrined in Article 49(1) of the Charter and the right to respect for private life guaranteed in Article 7 of the Charter, in so far as the concept of ‘arrangement’, and therefore those of ‘cross-border arrangement’, ‘marketable arrangement’ and ‘bespoke arrangement’, ‘intermediary’, ‘participant’, ‘associated enterprise’, the description ‘cross-border’, the various ‘hallmarks’, the ‘main benefit test’ and, lastly, the starting point of the 30-day period prescribed for fulfilling the reporting obligation, which that directive uses and lays down in order to determine the scope and reach of that obligation, are not sufficiently clear and precise.
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[37] However, those requirements cannot be interpreted as precluding the EU legislature from having recourse, in a norm that it adopts, to an abstract legal notion, nor as requiring that such an abstract norm refer to the various specific hypotheses in which it applies, given that all those hypotheses could not be determined in advance by the legislature (judgment of 16 February 2022, Hungary v Parliament and Council, C‑156/21, EU:C:2022:97, paragraph 224 and the case-law cited)." ​(Belgian Association of Tax Lawyers C-623/22)
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- Degree of foreseeability required depends on context, may have to take advice
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"[45] Lastly, the Court has emphasised that the degree of foreseeability required depends to a considerable extent on the content of the text in question, the field it covers and the number and status of those to whom it is addressed. A law may still satisfy the requirement of foreseeability even if the person concerned has to take appropriate legal advice to assess, to a degree that is reasonable in the circumstances of the case at issue, the consequences which a given action may entail. This is particularly true in relation to persons carrying on a professional activity, who are used to having to proceed with a high degree of caution when pursuing their occupation. Such persons can therefore be expected to take special care in evaluating the risk that such an activity entails (judgment of 5 May 2022, BV, C‑570/20, EU:C:2022:348, paragraph 43 and the case-law cited)." ​(Belgian Association of Tax Lawyers C-623/22)
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- Not to confuse breadth with lack of clarity
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"[66] In the light of the case-law referred to in paragraphs 36 to 45 above, such a provision, although worded in broad terms, clearly satisfies the requirements of clarity and precision arising from the principles of legal certainty and legality in criminal matters. In that regard, it should be noted that the comments made by the OBFG in its observations on that definition do not relate so much to a possible lack of clarity of that provision, but to its breadth." ​(Belgian Association of Tax Lawyers C-623/22)
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- Indefinite state of uncertainty regarding rights not compatible with legal certainty
"[49] Lastly, it must be borne in mind that, according to the case-law of the Court, the principle of legal certainty requires the tax position of the taxable person, having regard to his or her or its rights and obligations vis-à-vis the tax authority, not to be open to challenge indefinitely (judgment of 5 December 2024, Modexel, C‑680/23, EU:C:2024:1000, paragraph 34 and the case-law cited).
[50] It is apparent from paragraph 42 above that a penalty consisting in the removal of a taxable person from the VAT register, without formally prohibiting the exercise, by that taxable person, of the activity subject to VAT, in respect of which that taxable person registered therein, is liable to lead to the tax situation both of that taxable person and of purchasers of goods and recipients of services supplied by that taxable person being constantly and repeatedly called into question. Therefore, such a penalty also cannot be regarded as consistent with the principle of legal certainty." (Cityland C-164/24)
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Objectivity​
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- Expressions which define taxable transactions are objective in nature (purpose + result irrelevant)
"[39] Just like other expressions which define taxable transactions for the purposes of the Sixth Directive (see, in particular, Joined Cases C‑354/03, C‑355/03 and C‑484/03 Optigen and Others [2006] ECR I‑483, paragraph 44, and Joined Cases C‑439/04 and C‑440/04 Kittel and Recolta Recycling [2006] ECR I‑6161, paragraph 41), the meanings of 'intra-Community supply' and 'intra-Community acquisition' are objective in nature and apply without regard to the purpose or results of the transactions concerned (Teleos and Others, paragraph 38)." (R C-285/09)
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- Transactions should be taxed taking into account their objective characteristics
"[39] According to the proportionality principle, a national measure goes further than is necessary to ensure the correct collection of the tax if, in essence, it makes the right of exemption from VAT subject to compliance with formal obligations, without any account being taken of the substantive conditions and, in particular, without it being necessary that any consideration be given as to whether those requirements have been satisfied. Transactions should be taxed by taking into account their objective characteristics (judgment of 9 February 2017, Euro Tyre, C‑21/16, EU:C:2017:106, paragraph 34 and the case-law cited)."
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- Intra-community dispatch not interpreted as depending on intention of vendor as to transpor: objective fact of physical movement
"[39] Contrary to Teleos and Others’ argument that the supplier’s and purchaser’s intention to effect an intra-Community transaction is sufficient for its classification as such, it is clear from the Court’s case-law that requiring the tax authorities to carry out inquiries to determine the intention of the taxable person would be contrary to the objectives of the common system of VAT of ensuring legal certainty and facilitating the measures necessary for the application of VAT by having regard, save in exceptional cases, to the objective character of the transaction concerned (see Case C‑4/94 BLP Group [1995] ECR I-983, paragraph 24; Optigen and Others , paragraph 45; and Kittel and Recolta Recycling , paragraph 42).
[40] Consequently, it is necessary that the classification of intra-Community supplies and acquisitions be made on the basis of objective matters, such as the physical movement of the goods concerned between Member States." (Teleos C-409/04)
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- Supply of service is objective enquiry, without need to inquire into intention of taxable person
"[41] It is also apparent from the case-law of the Court that the term supply of services is therefore objective in nature and applies without regard to the purpose or results of the transactions concerned and without its being necessary for the tax authorities to carry out inquiries to determine the intention of the taxable person (see, to that effect, Halifax and Others , paragraphs 56 and 57 and the case-law cited)." (Newey C-653/11)
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"[11] ... Further, the term “supply of services” must be interpreted objectively without regard to the purpose or results of the transactions concerned and without it being necessary for the tax authorities to carry out inquiries to determine the intention of the taxable person: see Commissioners of Revenue and Customs v Newey (C‑653/11) judgment of 20 June 2013 EU:C:2013:409, para 41." (Blue Lagoon Beach Hotel & Co Ltd v. Assessment Review Committee [2023] UKPC 24)
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- Test for determining availability of zero-rate construed as objective rather than subjective
"[21]...[The Judge] held, applying that test, on the facts as found, that the FTT was correct to hold that both products in issue had been heated for the purposes of enabling them to be consumed at above ambient temperature. Thus, both should properly be subject to VAT at the standard rate.
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[41] Moving on from Pimblett, there is no doubt that, subject to the impact of European law, we would be bound by that decision to hold that this statute, properly construed, creates a subjective test of the supplier's intentions.
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[43] Within those principles then, can this legislation now be re-construed as to achieve an obligation to determine fiscal liability according to objective, rather than subjective, criteria, as required by BLP?
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[49] In the end, however, I conclude that this provision can be "read down" in accordance with the Marleasing principle to supply an objective test, as advanced (in the end) by the Respondents, which I have sought to summarise in paragraph 44 and 45 above, with the assistance of Briggs LJ's pithy question. This approach to the matter searches for the assumed common intention of the supplier and the consumer as to whether it is a term of the bargain that the product be supplied in order to be eaten hot. By this entirely objective enquiry, the court derives the terms of the bargain from what each party to the contract says and does (including the presentation of the supply in the shop and in any advertising)." (Sub One Limited v. HMRC [2014] EWCA Civ 773)
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- Abusive aim of transaction must be established by objective factors
"[35]...Second, it must be apparent from a number of objective factors that the essential aim of the transactions concerned is solely to obtain that tax advantage (see, to that effect, judgments of 21 February 2006, Halifax and Others, C‑255/02, EU:C:2006:121, paragraphs 74 and 75, and of 11 November 2021, Ferimet, C‑281/20, EU:C:2021:910, paragraph 54 and the case-law cited)..." (UAB Ha.En C-227/21)
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"[31] ... But the Halifax test requires the "essential aim" of a transaction is to be determined by reference to "objective factors". As Advocate General Maduro put it at para 87 of his opinion, this "must not be confused with the subjective intention of the participants in those activities". Much of the evidence which the parties deployed before the First Tier Tribunal could go only to Pendragon's subjective intention or motive, or KPMG's assumptions about the attractions of their scheme to their client. Much of the rest was of no assistance in a case where tax planning was admitted to be part of the rationale of the scheme and transactions comprising it spoke for themselves." (HMRC v. Pendragon Plc [2015] UKSC 37)
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Principle of legality in taxation matters​
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- Any obligation to pay tax + all essential elements defining substantive features must be provided for by law
"[96]....Parameters and rules external to the national tax system at issue cannot therefore be taken into account in the examination of the existence of a selective tax advantage within the meaning of Article 107(1) TFEU and for the purposes of establishing the tax burden that should normally be borne by an undertaking, unless that national tax system makes explicit reference to them.
[97] This finding is an expression of the principle of legality of taxation, which forms part of the legal order of the European Union as a general principle of law, requiring that any obligation to pay a tax and all the essential elements defining the substantive features thereof must be provided for by law, the taxable person having to be in a position to foresee and calculate the amount of tax due and determine the point at which it becomes payable (see, to that effect, judgment of 8 May 2019, Związek Gmin Zagłębia Miedziowego, C‑566/17, EU:C:2019:390, paragraph 39)." (Fiat Chrysler Finance Europe C-885/19P)
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"[119] Moreover, the principle of legality of taxation, which forms part of the legal order of the European Union as a general principle of law, requires that any obligation to pay a tax and all the essential elements defining the substantive features thereof must be provided for by law, and the taxable person must be in a position to foresee and calculate the amount of tax due and determine the point at which it becomes payable (see, to that effect, judgment of 8 May 2019, Związek Gmin Zagłębia Miedziowego, C‑566/17, EU:C:2019:390, paragraph 39)." (Engie Global C-451/21P)
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"[65] Thus, in its recent case-law, the Court has increasingly emphasised that the European Union is composed of States which recognise and share the values referred to in Article 2 TEU. ( 32 ) The values referred to in Article 2 TEU, on which the European Union is founded, include the rule of law in particular. The principle of the rule of law requires, firstly, that interferences by the State must always have a legal basis. That legislative proviso is expressed in tax law through the principle of legality of taxation ( 33 ) just as it finds expression in criminal law through the principle of nulla poene sine lege certa (the principle of legality in connection with criminal offences and penalties) and is understood by the Court as a specific expression of the general principle of legal certainty. ( 34 )" (UP Caffe C-171/23, AG Kokott)
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Principle of legality in criminal matters​
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- Applicable where Member States empowered to lay down penalties that may be criminal in nature
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"[38] As regards the principle of legality in criminal matters, it should be noted that, although amended Directive 2011/16 does not itself lay down any penalty for infringement of the reporting obligation, Article 25a of that directive provides, in that respect, that the Member States must determine effective, proportionate and dissuasive penalties, that is to say, penalties that may be criminal in nature, and the referring court states, moreover, that that is the case as regards the penalties provided for in Belgian law. To that extent, any lack of clarity or precision in the concepts and time limits to which the second and third questions relate, concepts and time limits which determine the conduct with which the individuals concerned must comply if they are to avoid those penalties being imposed, is liable to undermine the principle of legality in criminal matters." ​(Belgian Association of Tax Lawyers C-623/22)
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- Respected where individual in a position to know based on provisions + interpretations by courts
"[40] Legality in criminal matters is respected where the individual concerned is in a position, on the basis of the wording of the relevant provision and, if necessary, with the help of the interpretation made by the courts, to know which acts or omissions will make him or her criminally liable (judgment of 5 December 2017, M.A.S. and M.B., C‑42/17, EU:C:2017:936, paragraph 56 and the case-law cited)." ​(Belgian Association of Tax Lawyers C-623/22)
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- Recognition that wording of legislation necessarily general and cannot be absolutely precise
"[42] In that regard, it is clear from the case-law of the European Court of Human Rights (‘the ECtHR’) on Article 7 of the ECHR that, because of the necessarily general nature of legislative acts, their wording cannot be absolutely precise. It follows that, while the use of the legislative technique of referring to general categories, rather than to exhaustive lists, often leaves grey areas at the fringes of a definition, those doubts in relation to borderline cases are not sufficient, in themselves, to make a provision incompatible with Article 7 of that convention, provided that that provision proves to be sufficiently clear in the large majority of cases (see, to that effect, inter alia, ECtHR, 15 November 1996, Cantoni v. France, CE:ECHR:1996:1115JUD001786291, §§ 31 and 32).
[43] Similarly, it is apparent from the case-law of the Court that the principle nulla poena sine lege certa cannot be interpreted as prohibiting the gradual clarification of rules of criminal liability by means of interpretations in the case-law, provided that those interpretations are reasonably foreseeable (judgment of 28 March 2017, Rosneft, C‑72/15, EU:C:2017:236, paragraph 167 and the case-law cited).
[44] In view of the above, the fact that legislation refers to broad concepts which must be clarified gradually does not, in principle, preclude that legislation from being regarded as laying down clear and precise rules allowing individuals to predict which acts and omissions are liable to be subject to penalties of a criminal nature (see, to that effect, judgment of 5 May 2022, BV, C‑570/20, EU:C:2022:348, paragraph 42). In that regard, what matters is whether any ambiguity or vagueness in those concepts may be dispelled by using the ordinary methods of interpretation of the law. In addition, when those concepts correspond to those employed in relevant international agreements and practices, those agreements and practices may provide further guidance to the court responsible for that interpretation (see, to that effect, judgment of 25 November 2021, État luxembourgeois (Information on a group of taxpayers), C‑437/19, EU:C:2021:953, paragraphs 69 to 71)." ​(Belgian Association of Tax Lawyers C-623/22)
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EFFECT
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- Must be observed by Community Institutions and Member States
"[39] In the first place, it should be recalled that the principle of legal certainty forms part of the EU legal order and that, as such, must be observed by the Member States in the exercise of the competences referred to in paragraphs 31 and 32 of the present judgment (see, to that effect, judgments of 10 December 2015, Veloserviss, C‑427/14, EU:C:2015:803, paragraph 30 and the case-law cited, and of 20 May 2021, BTA Baltic Insurance Company, C‑230/20, not published, EU:C:2021:410, paragraph 45)." (Napfény-Toll C-615/21)
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"[48] The principle of legal certainty, which forms part of the Community legal order, must be observed both by the Community institutions and by the Member States when they exercise the powers conferred on them by Community directives (see Case C‑376/02 ‘ Goed Wonen ’ [2005] ECR I‑3445, paragraph 32)." (Isle of Wight C-288/07)
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- Prefer interpretation consistent with legal certainty
"[51] That said, in construing a provision of secondary EU law, such as Article 20 of the Sixth Directive, preference should as far as possible be given to the interpretation which renders the provision consistent with the general principles of EU law and, more specifically, with the principles of legal certainty and of the protection of legitimate expectations (see, to this effect, judgment of 29 April 2010 in M and Others, C‑340/08, EU:C:2010:232, paragraph 64)." (Wolfgang C-332/14)
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- Avoid interpretation liable to give rise to numerous disputes
"[50] Such a situation is capable, consequently, of giving rise to numerous disputes following any change affecting the conditions of competition prevailing on a given local market.
[51] Thus, neither the local authorities nor the private operators will be in a position to provide, with the required certainty, for the conduct of their affairs if, on a given local market, the provision by the local authorities of off-street parking will or will not be subject to VAT.
[52] That situation is therefore likely to jeopardise the principles of fiscal neutrality and legal certainty." (Isle of Wight C-288/07)
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- Does not prevent purposive interpretation
""[70] We consider that our conclusion is consistent with the principle of legal certainty. The principle of legal certainty requires that community legislation must be "certain and its application foreseeable" particularly in the context of fiscal measures (Finanzamt Sulingen v Sudholz C-17/01 paragraph 34). However, such certainty or foreseeability can be derived from the purposive interpretation of the provision in context. That conclusion is confirmed in Sir Andrew Morritt's rejection of an argument advanced by Vodafone in Vodafone 2 v HMRC [2009] EWCA Civ 446 that conforming interpretation with an element of retrospectivity breached the principle of legal certainty (see paragraphs 55 – 57). In our view, there can be nothing more legally certain than that a certificate with a stated expiry date ceases to be valid on that date. We consider that the language of the ADD Reg, when read purposively, is sufficiently clear in this regard." ​(Push Investment Group Limited v. HMRC [2025] UKFTT 1534 (TC), Judge Brown KC)
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- Does not override need for consistent interpretation of national law
"[53] It is clear from settled case-law that, when the Member States apply the provisions of their domestic law transposing a directive, they are required to interpret them, as far as possible, in accordance with that directive (see, to this effect, judgment of 27 June 2000 in Océano Grupo Editorial and Salvat Editores, C‑240/98 to C‑244/98, EU:C:2000:346, paragraph 31).
[54] It follows that the principles of legal certainty and of the protection of legitimate expectations cannot be interpreted as meaning that, in order for an adjustment of the deduction entitlement to be capable of being imposed in the event of the method of calculating that entitlement being amended, the national legislation by virtue of which that amendment was made must have expressly pointed out that such adjustment is mandatory." (Wolfgang C-332/14)
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EVIDENCE REQUIREMENTS​
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- Member state required to lay down conditions for exemption that are clear, precise and foreseeable
"[55] As regards the principle of legal certainty, it should be recalled that that principle, the corollary of which is the principle of the protection of legitimate expectations and compliance with which, as has been noted in paragraph 37 of the present judgment, obliges Member States to lay down the conditions in regard to exemptions requires, on the one hand, that rules of law must be clear and precise and, on the other, that their application must be foreseeable by those who are subject to them (judgment of 9 October 2014, Traum, C‑492/13, EU:C:2014:2267, paragraph 28 and the case-law cited)." (Cartrans Spedition C-495/17)
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- Determine evidence requirements based on conditions expressly laid down and general practice for similar transactions
"[57] The Court has also stated that the obligations imposed on taxable persons with regard to evidence must be determined in the light of the conditions expressly laid down in that regard by national law and in accordance with the general practice established in respect of similar transactions (judgment of 9 October 2014, Traum, C‑492/13, EU:C:2014:2267, paragraph 30 and the case-law cited)." (Cartrans Spedition C-495/17)
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- Contrary to legal certainty to insist on particular type of evidence not laid down in national law
"[58] In the present case, as the referring court points out, the requirement to produce a customs export declaration does not follow from the wording of the national legislation at issue in the main proceedings, which provides, in that regard, only for the production of otherwise unspecified documents proving that the transported goods have been exported.
[59] In those circumstances, the tax practice at issue in the main proceedings does not comply with the requirements arising from the principle of legal certainty referred to in paragraphs 55 to 57 of the present judgment." (Cartrans Spedition C-495/17)
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- Contrary to legal certainty to prescribe evidence of export, accept the evidence and later reject where supplier had no knowledge
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"[31] Accordingly, it would be contrary to the principle of legal certainty if a Member State which has laid down the conditions for the application of the VAT exemption in respect of intra-Community supplies by prescribing, among other things, a list of the documents to be presented to the competent authorities, and which has accepted, initially, the documents presented by the supplier as evidence establishing entitlement to the exemption, could subsequently require that supplier to account for the VAT on that supply, where it transpires that, because of the purchaser’s fraud, of which the supplier had and could have had no knowledge, the goods concerned did not actually leave the territory of the Member State of supply (see judgment in Teleos and Others, EU:C:2007:548, paragraph 50)." (Traum C-492/13)
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"[26] Likewise, it would be contrary to the principle of legal certainty if a Member State which has laid down the conditions for the application of the exemption of supplies of goods for export to a destination outside the Community by prescribing, among other things, a list of the documents to be presented to the competent authorities, and which has accepted, initially, the documents presented by the supplier as evidence establishing entitlement to the exemption, could subsequently require that supplier to account for the VAT on that supply, where it transpires that, because of the purchaser’s fraud, of which the supplier had and could have had no knowledge, the conditions for the exemption were in fact not met (see, to that effect, Teleos and Others, paragraph 50)." (Netto Supermarket C-271/06)
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- Reassessing evidence already accepted gives rise to uncertainty
"[32] The Court’s case-law states that, in such a situation, although there appears to be no tangible evidence to substantiate the conclusion that the goods concerned have been transferred out of the territory of the Member State of supply, to oblige taxable persons to provide conclusive proof of this does not ensure the correct and straightforward application of the VAT exemptions. On the contrary, that obligation places taxable persons in an uncertain situation as regards the possibility of applying the exemption to their intra-Community supplies or as regards the need to include VAT in the sale price (see judgments in Teleos and Others, EU:C:2007:548, paragraphs 49 and 51, and Mecsek-Gabona, EU:C:2012:547, paragraph 41)." (Traum C-492/13)
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- Tax authority who issued refund on basis of documents not entitled to require proof of authenticity in later tax inspection
"[33] In the present case, it is apparent from the order for reference that the Bulgarian tax authorities issued an offset and refund notice on the basis of the documents submitted by Traum in accordance with Article 45 of the regulation implementing the ZDDS, but without requiring evidence of the authenticity of the purchaser’s signature on those documents or presentation of the power of representation of the signatory. It was only in a later tax inspection that those requirements, which according to the referring court constitute ‘additional requirements’, were imposed by those authorities.
[35] It would be contrary to the principle of legal certainty to refuse to grant a VAT exemption in respect of the transactions at issue in the main proceedings on the ground that the supplier did not produce such additional evidence when those transactions were subsequently scrutinised, where the documents presented by Traum in support of its declaration were consistent with the list of documents to be presented to the Bulgarian tax authorities under Article 45 of the regulation implementing the ZDDS and were accepted by those authorities, initially, as evidence establishing entitlement to the exemption. This is a matter for the referring court to ascertain." (Traum C-492/13)
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RETROACTIVITY
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- Measures generally not permitted to take effect prior to publication, save for exceptional circumstances
"[33] In that regard, it should be pointed out that in general the principle of legal certainty precludes a Community measure from taking effect from a point in time before its publication. It may exceptionally be otherwise where the purpose to be achieved so demands and where the legitimate expectations of those concerned are duly respected (Case 98/78 Racke [1979] ECR 69, paragraph 20, and Case C‑110/97 Netherlands v Council [2001] ECR I-8763, paragraph 151)." (Sudholz C-17/01)
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- EU decision authorising reverse charge did not have retroactive effect
"[37] Therefore, having regard to the rule laid down in Article 297(2), third paragraph, TFEU, and in the absence of any indication in the Implementing Decision regarding its retroactive application, it cannot be held that that decision is applicable retroactively. It follows that the Hungarian Government was not in a position to introduce the reverse charge procedure for services which are not mentioned by Article 199(1)(a) of the VAT Directive before Hungary was notified of the Implementing Decision authorising that reverse charge procedure." (Human Operator C-434/17)
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- Council Decision retroactively approving legislation derogating from PVD contrary to legitimate expectation
"[40] Inasmuch as Article 3 of Decision 2000/186 provides for the retroactive application of Paragraph 15(1b) of the UStG, it is clear that it authorises the introduction of a national law which may infringe the legitimate expectations of those concerned. The Court has already held that a national legislative amendment retroactively depriving a taxable person of a right to deduct which he has derived from the Sixth Directive is incompatible with the principle of the protection of legitimate expectations (Case C-62/00 Marks & Spencer [2002] ECR I-6325, paragraph 45).
[41] By permitting the retroactive application of Paragraph 15(1b) of the UStG, Article 3 of Decision 2000/186 accordingly infringes the principle of the protection of legitimate expectations and must therefore be declared to be invalid.
[42] The argument of the German authorities that the Council’s authorisation was not given timeously because of delays on the Commission’s part in processing the request submitted by the Federal Republic of Germany does not justify the retroactive nature of Decision 2000/186.
[43] The answer to the second question must therefore be that Article 3 of Decision 2000/186 is invalid in that it provides for the authorisation granted by the Council to the Federal Republic of Germany to have retroactive effect from 1 April 1999." (Sudholz C-17/01)
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- Taxpayer not entitled to retroactively opt for small trader exemption
"[47] In that regard, it must be found that to allow taxable persons to opt for an exemption scheme after the time limit set would confer on them an undue competitive advantage, to the detriment of operators who duly complied with the procedural obligations laid down in the national legislation at issue in the main proceedings. Those taxable persons would be in a position to choose after the event and, consequently, on the basis of the actual results of their activity, the tax arrangements which seem most advantageous to them.
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[52] In addition, as mentioned in paragraph 31 above, given that the beneficiaries of the individual tax exemption do not pay VAT and do not, therefore, need to pass it on to their customers, it may be essential for the tax authorities to have advance knowledge of the taxable persons who have opted for that exemption scheme.
[53] Consequently, the national legislation at issue in the main proceedings is consistent with the principle of legal certainty." (Vamos C-566/16)
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CHANGES OF RULES/PRACTICE
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- May require time to adapt to new rules
"[58] Thus, as the referring court points out, the Court has held that a national legislature may breach the principles of legal certainty and of the protection of legitimate expectations when it suddenly and unexpectedly adopts a new law which withdraws a right that taxable persons enjoyed until then, without allowing them the time necessary to adjust, when the objective to be attained did not so require (see, to this effect, judgment of 29 April 2004 in Gemeente Leusden and Holin Groep, C‑487/01 and C‑7/02, EU:C:2004:263, paragraph 70).
[59] In particular, taxable persons must have time to adapt when withdrawal of the right which they enjoyed until then obliges them to carry out consequential economic adjustments (see, to this effect, judgment of 11 June 2015 in Berlington Hungary and Others, C‑98/14, EU:C:2015:386, paragraph 87).
[60] Even assuming that an amendment of the national legislation defining the method of calculating the deduction entitlement can be regarded as sudden and unexpected, it does not appear that the conditions, recalled in the previous two paragraphs of the present judgment, that justify the adoption of appropriate transitional arrangements are satisfied in circumstances such as those at issue in the main proceedings." (Wolfgang C-332/14)
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LEGITIMATE EXPECTATION
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- Tax authority entitled to change past view based on new legal and factual elements and apply that historically
"[46] As regards the principle of legal certainty, the Court has held that it does not preclude the tax authorities from carrying out, within the limitation period, an assessment for VAT relating to the deducted tax or to services already provided which should have been subject to VAT (judgment of 12 October 2016, Nigl and Others, C‑340/15, EU:C:2016:764, paragraph 48)." (Idealmed III C-211/18)
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"[50] In those conditions, the fact that the Tax Office initially granted the benefit of the flat-rate scheme to multiple civil-law partnerships is not capable of affecting the answer to be given to the question posed, since the legal and factual elements on which that office’s new appraisal is based arose subsequent to that grant and took place within the limitation period for action on its part." (Nigl C-340/15)
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- Recognition as taxable person cannot be withdrawn with retrospective effect
"[38] The arising of the right to deduct the VAT paid on the first investment expenditure is thus in no way dependent upon formal recognition of the status of taxable person by the tax authority. The only effect of that recognition is that such status, once recognised, cannot, save in situations of fraud or abuse, be withdrawn from the taxpayer with retrospective effect, without infringing the principles of the protection of legitimate expectations and legal certainty." (Breitsohl C-400/98)
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- Retroactive removal of trader from register does not prevent customer relying on register at time of transaction
"[36] However, given that the obligation to check the status of the taxable person must be discharged by the competent national authority before it assigns that person a VAT identification number, possible irregularities affecting the register cannot deprive a trader who has relied on the information entered in that register of the right of exemption from VAT to which it is entitled. Thus, the Court has held that it is contrary to the principle of proportionality that the supplier be held liable for the VAT solely on the ground that the purchaser’s VAT identification number was removed from the register with retroactive effect (see, to that effect, judgment in Mecsek-Gabona, EU:C:2012:547, paragraphs 63 and 64)." ​(Traum C-492/13)
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- Mere acceptance of tax return not including tax on certain transactions is not a precise assurance
"[92] The mere acceptance, even for several years, by the Luxembourg tax authority of the VAT returns submitted by EQ, which did not include the amounts relating to the transactions at issue in the main proceedings, does not amount to a precise assurance provided by that authority that VAT is not to be applied to those transactions and cannot, therefore, give rise to a legitimate expectation on the part of that taxable person that the transactions concerned are not taxable."(EQ C-846/19)
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TIME LIMITS​
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General​
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- For Member States to establish rules on limitation periods
"[34] In the absence of applicable provisions of EU law, it is for Member States to establish and apply rules on limitation periods in relation to the right of tax authorities to assess VAT due, including the procedures for suspension and/or interruption of that limitation period (see, by analogy, judgment of 21 January 2021, Whiteland Import Export, C‑308/19, EU:C:2021:47, paragraph 45)." (Napfény-Toll C-615/21)
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- Reasonable time limits to protect both taxable person and authority
"[35] However, while establishing and applying those rules falls within the competence of the Member States, the Member States must exercise that competence in a manner consistent with EU law, which requires reasonable time limits to be laid down which protect both the taxable person and the authority concerned (see, by analogy, judgment of 8 September 2011, Q-Beef and Bosschaert, C‑89/10 and C‑96/10, EU:C:2011:555, paragraph 36)." (Napfény-Toll C-615/21)
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- Tax position not to be open indefinitely
"[40] In accordance with settled case-law, that principle is aimed at ensuring foreseeability of situations and legal relationships and requires, inter alia, that the tax position of a taxable person having regard to his or her rights and obligations vis-à-vis the tax or customs authorities should not be open to challenge indefinitely (judgment of 10 December 2015, Veloserviss, C‑427/14, EU:C:2015:803, paragraph 31 and the case-law cited), which means that, in order for that taxable person to be able effectively to rely on that principle being applicable, that taxable person must be able to rely on a specific legal situation." (Napfény-Toll C-615/21)
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- Possibility of exercising right without temporal limit would be contrary to legal certainty
"[46] However, the possibility of exercising the right to deduct VAT without any temporal limit would be contrary to the principle of legal certainty, which requires the tax position of the taxable person, having regard to his rights and obligations vis-à-vis the tax authority, not to be open to challenge indefinitely (judgment of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 33 and the case-law cited)." ​(Volkswagen AG C-533/16)
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- Limitation rules need to strike a balance
"[42]... Accordingly, the national rules laying down the rules for the suspension of the limitation period in respect of the right of the tax authority to assess the VAT due must be devised in such a way as to find a balance between, on the one hand, the requirements inherent in applying that principle and, on the other hand, those enabling Directive 2006/112 to be implemented effectively and efficiently, since it is necessary to evaluate that balance by taking into consideration all elements of the national limitation rules (see, by analogy, judgment of 21 January 2021, Whiteland Import Export, C‑308/19, EU:C:2021:47, paragraphs 49 and 50)." (Napfény-Toll C-615/21)
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Limits on tax authority​
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- Fact that T is out of time to collect VAT from customers not a reason for not assessing T
"[93] As regards, moreover, the situation, referred to by the referring court, in which the person supplying services supplied services without collecting the VAT for which that person is liable, and in which that person would not be in a position to recover from those who have paid those supplies the VAT subsequently required by the tax authority, it is necessary, if that is the case, to take the view that the remuneration received in that regard by the person supplying services already includes the VAT due, so that the collection of VAT is compatible with the basic principle of the VAT Directive that the VAT system is aimed at taxing only the end consumer (see, to that effect, judgment of 7 November 2013, Tulică and Plavoşin, C‑249/12 and C‑250/12, EU:C:2013:722, paragraphs 34, 42 and 43)." (EQ C-846/19)
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- 5 year time limit to raise assessments reasonable
"[37] In the light of that case-law, a limitation period regarding the right of the tax authority to assess the VAT due which, as in the case in the main proceedings, ran for five years from the last day of the calendar year in which the declaration or notification relating to that tax should have been made, or, where there is no such declaration or notification, after the last day of the calendar year in which the tax should have been paid, must, by analogy, be regarded as compatible with EU law." (Napfény-Toll C-615/21)
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Suspending time limits​
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- Reasonable to suspend time limit where T informed within assessment time limit of intention to re-examine
"[41] Since before the expiry of the limitation period laid down for that purpose, the tax authority has notified the taxable person concerned of its intention to re-examine that taxable person’s tax position and, thereby, implicitly, to withdraw its decision to accept that taxable person’s declaration, that taxable person can no longer rely on the situation which arose on the basis of that declaration, with the result that the principle of legal certainty cannot, in such a case and in the absence of other circumstances, be infringed (see, to that effect, judgment of 9 July 2015, Cabinet Medical Veterinar Dr. Tomoiagă Andrei, C‑144/14, EU:C:2015:452, paragraph 40)." (Napfény-Toll C-615/21)
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- At least where suspension is limited by reference to duration of a legal challenge
"[43] While national legislation and administrative practice such as those described by the referring court – the foreseeability of the application of which vis-à-vis individuals is not contested in the dispute in the main proceedings – are capable of causing the duration of such a limitation period to be extended, they are, however, not capable, in principle, of causing the situation of the taxable persons concerned to be under challenge indefinitely. By contrast, such a suspension makes it possible to ensure the effective and efficient implementation of Directive 2006/112 cannot be jeopardised by dilatory actions being brought and therefore that such implementation is not undermined by reason of a systemic risk that acts constituting infringements of that directive may go unpunished (see, by analogy, judgment of 21 January 2021, Whiteland Import Export, C‑308/19, EU:C:2021:47, paragraphs 53 and 56).
...
[49]
The suspension of the limitation period in respect of the right of the tax authorities to assess that tax for the whole duration of judicial review in no way prevents that taxable person from relying on the rights conferred by the EU legal order and, in particular, by Directive 2006/112, but by contrast is intended to enable that taxable person effectively to assert the rights which he derives from EU law, while at the same time preserving the rights of the tax authorities." (Napfény-Toll C-615/21)
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Limits on taxpayer​
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- Possibility of producing evidence without temporal limit would be contrary to legal certainty
"[33] As regards, in the first place, the principle of effectiveness, it must be observed that the possibility of providing additional evidence, in a VAT adjustment procedure, without any temporal limit would be contrary to the principle of legal certainty, which requires the tax position of the taxable person, having regard to his or her rights and obligations vis-à-vis the tax authorities, not to be open to challenge indefinitely (see, by analogy, judgment of 9 September 2021, GE Auto Service Leasing, C‑294/20, EU:C:2021:723, paragraph 60 and the case-law cited)." (Nec Plus Ultra Cosmetics C-664/21)
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"[33] However, the possibility of exercising the right to deduct without any temporal limit would be contrary to the principle of legal certainty, which requires the tax position of the taxable person, having regard to his rights and obligations vis-à-vis the tax authority, not to be open to challenge indefinitely (judgments of 8 May 2008 in Ecotrade, C‑95/07 and C‑96/07, EU:C:2008:267, paragraph 44, and 12 July 2012 in EMS-Bulgaria Transport, C‑284/11, EU:C:2012:458, paragraph 48)." (Astone C-332/15)
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- Time limit that penalises person who has not been sufficiently diligent is compatible
"[47] The Court has thus already held that a limitation period the expiry of which has the effect of penalising a taxable person who has not been sufficiently diligent and has failed to claim deduction of the input VAT, by making him forfeit his right to deduct, cannot be regarded as incompatible with the regime established by Directive 2006/112, in so far as, first, that limitation period applies in the same way to analogous rights in tax matters founded on domestic law and to those founded on EU law (principle of equivalence) and, second, that it does not render in practice impossible or excessively difficult the exercise of the right to deduct VAT (principle of effectiveness) (judgment of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraphs 34 and 35 and the case-law cited)." (Volkswagen AG C-533/16)
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- Time limit for deduction cannot run from period prior to T having invoice
"[49] In the present case, it is apparent from the order for reference that, even though the supply of goods at issue was carried out during 2004 to 2010, the Hella Companies did not make an adjustment of the VAT until 2010 when they drew up invoices including the VAT, sent supplementary tax returns to the competent national authority and paid the amount of VAT that was due to the State treasury. It is equally apparent that the risk of tax evasion or non-payment of VAT has been excluded. In these circumstances, it was objectively impossible for Volkswagen to exercise its right to a refund before this adjustment, as, prior to that, it had neither been in possession of the invoices nor aware that the VAT was due.
[50] Indeed, it was only following that adjustment that the substantive and formal conditions giving rise to a right to deduct VAT were met and that Volkswagen could therefore request to be relieved of the VAT burden due or paid, in accordance with Directive 2006/112 and the principle of fiscal neutrality. Accordingly, since Volkswagen did not demonstrate a lack of diligence, and in the absence of an abuse or fraudulent collusion with the Hella Companies, a limitation period which began from the date of supply of the goods and which, for certain periods, expired before this adjustment, cannot validly deny Volkswagen the right to a refund of VAT." ​(Volkswagen AG C-533/16)
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- 5-year time limit for overpayment claims reasonable
"[35] In that regard, the Court has found that a five-year limitation period, applicable to applications for reimbursement of VAT overpayments which began to run from the end of the calendar year in which the time limit for paying the tax expired was consistent with EU law (see, to that effect, judgment of 20 December 2017, Caterpillar Financial Services, C‑500/16, EU:C:2017:996, paragraph 43)." (Napfény-Toll C-615/21)
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Finality of litigation​
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- Not required to reopen administrative procedure that has become final
"[55] Furthermore, it follows from the case-law that, when reviewing whether the rights of the defence were respected in the context of related administrative procedures, account must also be taken of legal certainty, which is also a general principle of EU law. Since the finality of an administrative decision contributes to legal certainty, in principle, EU law does not require that administrative bodies be placed under an obligation to reopen an administrative decision which has become final in that way (see, to that effect, judgment of 16 October 2019, Glencore Agriculture Hungary, C‑189/18, EU:C:2019:861, paragraphs 45 and 46)."(MB C-277/24)
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- Subject to the rights of the defence of a person not part of that procedure
"[56] That being said, the finality of an administrative decision cannot justify an impairment of the very essence of the rights of the defence. Thus, it cannot be accepted that, because of the finality of decisions taken at the close of related administrative procedures, the tax authority is relieved of the obligation to disclose to the taxable person the evidence, including that originating in those procedures, on the basis of which they intend to take a decision in that regard, and that that taxable person is thus deprived of the right effectively to call into question, during the procedure of which he or she is the subject, those findings of fact and those legal classifications (see, to that effect, judgment of 16 October 2019, Glencore Agriculture Hungary, C‑189/18, EU:C:2019:861, paragraphs 47 and 49).
...
[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."(MB C-277/24)
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FRAUD AND ABUSE
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- Legal certainty gives way to the anti-abuse principle
"[73] As to legal certainty, the effect of the CJEU's jurisprudence is that it effectively gives way to the inherent nature of the Halifax abuse principle. This was summarised in Italmoda as follows at [60]:
"… a taxable person who has created the conditions for obtaining a right only by participating in fraudulent transactions is clearly not justified in invoking the principles of protection of legitimate expectations or legal certainty in order to oppose the refusal to grant the right in question …"
(See also Cussens at [40] and [43].)" ​(Impact Contracting Solutions Ltd v. HMRC [2025] EWCA Civ 623, Falk LJ)
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- Person assisting with fraud cannot rely on legal certainty
"[54] Furthermore, the finding in paragraph 51 of the present judgment is not called into question by the principles of fiscal neutrality or legal certainty, or by the principle of the protection of legitimate expectations. Those principles cannot legitimately be invoked by a taxable person who has intentionally participated in tax evasion and who has jeopardised the operation of the common system of VAT." ​(R C-285/09)
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