Council Directive 2010/24/EU of 16 March 2010 concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures (The 'Directive') establishes a mutual assistance framework which allows tax authorities of EU Member States to request assistance from other EU Member State tax authorities for the purposes of recovering taxes.
The Directive is a powerful tool which allows a competent authority of an EU Member State (the 'Applicant Authority') to seek the recovery of inter alia, claims relating to taxes and duties, administrative penalties, fines and interest in other EU jurisdictions by means of a uniform instrument permitting enforcement. Through this uniform instrument (which is an Annex to the Directive to be filled in by the applicant authority), the applicant authority may request the competent authority of another EU Member State to recover the relevant tax claim as if it was its own, the latter of which, in accordance with the text of the Directive, is obliged to do so.
Enforcement of tax claims in Malta in terms of the Directive and transposing legislation
The underlying rationale of the Directive is to streamline and facilitate cross-border enforcement of tax claims. In fact, the Directive provides that the instrument permitting enforcement should not be subject to any act of recognition in the requested Member State. However, the transposing legislation, ie. the Mutual assistance for the recovery of claims relating to taxes, duties and other measures order, Subsidiary Legislation 460.08, requires the requested authority to file a court application to register the instrument permitting enforcement.
In a recent decision in the names of Kummissarju tat-Taxxi vs Enetsport Service Limited,1 the Court of Appeal (Superior Jurisdiction) affirmed that the additional procedure of filing a court application which was introduced by the transposing legislation should not be required and consequently the judgement was sent to the Ministry for Finance and the Ministry for Justice so that the current procedure is amended. In this regard, this procedure could be substituted by requiring the CfR to simply notify the taxpayer by means of a judicial letter.
Although the Directive creates a system of automatic enforcement of cross-border tax claims within the EU without imposing hefty administrative burdens (in similar fashion to the enforcement of foreign judgements under Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) ('Brussels 1 Recast Regulation')), iit nonetheless contemplates mechanisms for challenge against such enforcement.
Remedies in the Applicant Member State
The first category relates to remedies which fall within the jurisdiction of the Courts of the applicant Member State and these include disputes concerning:
(a) the claim;
(b) the initial instrument permitting enforcement in the applicant Member State;
(c) the uniform instrument permitting enforcement in the requested Member State; or
(d) the validity of the notification made by a competent authority in the applicant Member State.
Generally, the Applicant Authority cannot file a request for recovery if the claim itself or the instrument permitting enforcement are contested in the applicant Member State. However, by way of exception, the Directive provides that the Applicant Authority may still file a request for the recovery of a claim which is being contested, insofar as the law of the requested Member State allows for the recovery of a contested claim.
Remedies in the Requested Member State
The second category relates to remedies which fall within the ambit of the Courts of the requested Member State, and these include disputes concerning:
(a) the enforcement measures taken in the requested Member State; or
(b) the validity of the notification made by a competent authority in the requested Member State.
Therefore, in some limited instances, the enforcement of a tax claim under the Directive may indeed be challenged before the Courts of the requested Member State. Moreover, the Court of Justice of the European Union (the 'CJEU') and the First Hall Civil Court, have confirmed that the enforcement of a tax claim under the Directive may also be contested on the grounds of public policy ('ordre public'), although this is not explicitly mentioned in the Directive.
In a preliminary ruling given in the names of Eamonn Donnellan v The Revenue Commissioners2, the CJEU acknowledged the existence of the public policy ('ordre public') defence, even though such defence is not contemplated within the text of the Directive.
The aforementioned line of reasoning was also substantiated by the First Hall Civil Court in the judgement of Kummissarju tat-Taxxi vs Ricardo Diaz Y Fernandez3 and by the Court of Appeal (Superior Jurisdiction) in the judgement of Kummissarju tat-Taxxi vs Enetsport Service Limited. In essence, the Courts confirmed that the enforcement of a claim under the Directive may be refused if such enforcement would contradict with the public policy ('ordre public') of the Member State in which the enforcement of the claim is being sought, such as where the debtor is not duly notified.
Therefore, in addition to the remedies listed under the Directive, it is imperative for taxpayers to be aware of the additional defence introduced by CJEU and the Maltese Courts. In this regard, one could argue that the introduction of the public policy ('ordre public') defence effectively renders the grounds of challenge under the Directive, more akin to the existing grounds of refusal of recognition and enforcement of foreign judgements within the EU in terms of the Brussels I Recast Regulation.
Footnotes
1. Kummissarju tat-Taxxi vs Enetsport Service Limited, Court of Appeal, dated 18 January 2024, 1/2023/1 BS.
2. Eamonn Donnellan v The Revenue Commissioners, Case 34/17
3. Kummissarju tat-Taxxi vs Ricardo Diaz Y Fernandez, First Hall Civil Court, dated 4 March 2022, 1055/2021.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.