Radu si Asociatii is a member firm of Ernst & Young Global Ltd
Bucharest Tower Center, etaj 22 B-dul Ion Mihalache
nr. 15-17 011171 Bucuresti, sector 1, Romania
+40 21 402 4000
RO || EN

The CJEU confirms that the Romanian law infringes the European law on the right of non-resident taxpayers to obtain the VAT refund in Romania. This is the second favorable CJEU ruling obtained by the tax litigation practice of EY Romania, after C-441/16 SMS Group.

Chep Equipment Pooling NV was assisted before the CJEU by the team of lawyers of Radu si Asociații SPRL, led by Emanuel Bancila, together with the indirect tax team of EY Romania, led by Jean-Marc Cambien. The ruling was issued in case C-242/19.

In short, Chep Equipment Pooling NV ('Chep'), a company established in Belgium, operates a pallet rental business in Europe. To this end, Chep purchases pallets in different Member States, which are subsequently leased to other Chep group entities established in various Member States, which further on subleases them to customers in the respective Member State.

In Romania, the non-resident company leases to Chep Romania pallets that were acquired from Romanian producers as well as pallets that have been previously shipped to Romania from other EU Member States. In order to recover the VAT paid to the Romanian producers, the Belgian company submitted a VAT refund request under the EU Directive 2008/9 laying down detailed rules for the refund of value added tax, provided for in Directive 2006/112/EC, to taxable persons not established in the Member State of refund but established in another Member State (hereinafter, EU Directive 2008/9).

The Romanian tax authorities rejected the right to VAT refund for the non-resident company on the ground that it was liable to register for VAT purposes in Romania due to the shipment of pallets from the other EU Member States to Romania. The Romanian tax authorities based their decision on the provisions of article 147^2 para. (1), letter a) of the Law 571/2003 regarding the Old Fiscal Code, which stipulates the condition of not being registered or liable to register for VAT purposes in Romania in order to have the right to obtain the VAT refund. 

Further to the request made by the lawyers from Radu si Asociatii SPRL, the Bucharest Tribunal decided to refer the matter to the CJEU, with the view of clarifying whether the above-mentioned decision of the tax authorities is in line with the EU VAT legislation.

By its ruling, the CJEU has invalidated the opinion of the Romanian tax authorities, concluding that „contrary to the position expressed by the Romanian Government, a Member State cannot exclude the right to obtain the VAT refund of a taxable person established in another Member State for the simple reason that that respective taxable person is or should be registered for VAT purposes in the Member State of refund.”

CJEU has shown that such a decision is contrary to the EU Directive 2008/9 and the European fundamental principles on VAT. As regards the VAT treatment applicable to the shipment of pallets from the other EU Member States to Romania and thus, the existence of the obligation to register for VAT purposes in Romania, the CJEU left for the national court to analyze, based on all the circumstances of the case.

This ruling has a major impact for all the taxable persons not established in Romania but established in another EU Member States, which have requested the refund of VAT under the EU Directive 2008/9 and where the tax authorities have dismissed their claims on the grounds that the respective taxpayer is registered or is liable to register for VAT purposes in Romania.

In addition, since the CJEU confirmed that the very national legal provision imposing this condition is contrary to Directive 2008/9, this decision is important for the Romanian State, given that this provision is still in force in national law, being taken over in Law 227/2015 regarding the new Fiscal Code at art. 302 paragraph 1) letter a). Thus, if the Romanian State does not correct the transposition of Directive 2008/9 into national law, in accordance with the interpretation of the CJEU given in Case C-242/19, it risks initiating infringement proceedings against it.

In the light of all the above, we hope that this ruling will stop the unlawful behavior of the tax authorities when dismissing the VAT refunds based on unlawful reasons and will contribute to a national legal environment in line with the relevant EU legislation.

The lawyers that managed this project were Corina Muresan and Calin Stan, together with Cristina Galin, a tax consultant specialized on VAT matters.