The European Court of Justice (7 April 2016) contradicts the
Italian Court of Cassation and Constitutional Court and rules that
a partial payment of VAT is possible, provided that an independent
expert certifies that there is no better alternative for the Tax
A company filed a concordato preventivo proposal with
the Court of Udine, providing for full payment of certain secured
creditors and for partial payment of some lower ranking secured
creditors, including VAT claims, which would receive no payments in
the alternative of a bankruptcy liquidation. In doubt whether the
proposal would be admissible, with respect to the rule of Art.
182-ter IBL which requires full payment of VAT within a
so-called "tax settlement", the Court of Udine called on
the European Court of Justice (ECJ) to rule whether European Law
indeed mandates such a rule at Member State level.
The ECJ faces the issue whether a partial payment of VAT is
admissible in a concordato preventivo proposal: both the
Court of Cassation (with the decisions Nos. 22931 and 22932 of 4
November 2011) and the Constitutional Court (with the decision No.
225 of 24 July 2014) ruled out this, sticking to the rule set forth
in Art. 182-ter IBL, which was considered based on a
European Law principle binding Member States to fully recover VAT
It may be noted that some Italian lower courts have departed
from these precedents (see recently the decision of the Court of
Santa Maria Capua Vetere). [inserire collegamento a newsletter n.
The decision of the Court
According to the ECJ, European law does not bar a
concordato proposal offering a partial payment of VAT
claims, upon two conditions: (i) the Tax Authorities claim cannot
be better satisfied in the alternative of a bankruptcy liquidation
and (ii) this is certified by an independent expert.
The ECJ recalls that Art. 4 third para. of the UE Treaty and
Articles 2, 250 and 273 of the VAT Directive require each Member
State to take any appropriate measures in order to attain full
collection of VAT and that Member States enjoy some flexibility as
to the choice of such measures, provided that a threshold is met,
namely to ensure that collection activity is effective and to avoid
discrimination among taxpayers.
Based on the foregoing, the ECJ allows a partial payment of VAT,
underlying that a safeguard is provided by the certification by the
independent expert in the sense that, due to the insolvency of the
debtor, the Member State would not be in any case in a position to
collect VAT for a higher amount than that offered under the
concordato proposal. According to the ECJ, this does not
violate Member States' duty to guarantee full collection of
VAT, since it does not amount to a general and unconditional waiver
to collect the tax.
The ECJ contradicts therefore the Court of Cassation and the
Constitutional Court of Italy, which reached opposite conclusions
based on the rule set by Art. 182-ter IBL ("with
respect to VAT [...], the proposal can offer exclusively a
delayed payment") supposedly imposing a bar to partial
payment of VAT as a general rule in concordato preventivo,
applicable also when no "tax settlement" is proposed. The
ECJ based instead its ruling solely at European law level, not
considering the argument based on Italian national laws on which
the local Courts had focused.
The rationale offered by the ECJ is in line with the opinion
– which is certainly to be followed – of those who had
termed as unreasonable a solution imposing to impair the chances of
recovery of the VAT claim, through an inevitable bankruptcy
liquidation which can only limit recovery levels for the creditors:
indeed, the ranking of the VAT claim within secured claims does
allow distributions to the Tax Authorities in bankruptcy only after
all higher ranking claims have been fully satisfied.
The decision of the Court will hopefully influence future case
law on this issue, allowing concordato proposals offering
only a partial payment of VAT without resorting to a "tax
settlement" scheme. The decision cannot instead limit further
application of the provision of Art. 182-ter IBL, which is
a rule of national law which will remain in force, although it was
clearly based on an apparent principle of European law, which the
ECJ has now ruled out.
This article was first published on April
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