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Abuse of rights

C-255/02 Halifax

Andrea Brignoli

Opinion of A.G. Maduro C-255/02 HALIFAX

Par. 2. Two questions for the ECJ: 1) transaction with the sole purpose of enabling input vat deduction are “economic activity”; 2) possible applicability of “abuse of rights”

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• Halifax is a banking Company.• Less than 5% of imput VAT deductible.• £ 7.000.000,00 VAT

The facts of the main proceedings

Opinion of A.G. Maduro C-255/02 HALIFAXPar. 45. [...] the principle of fiscal neutrality precludes a

generalised differentiation between lawful and unlawful activities.

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Par. 64. [...] In C-212/97 Centros the Court stated that “Community law cannot be relied on for abusive or fraudulent ends”.

Par. 66. In C-110/99 Emsland-Stärke about customs compensations forbidden in the case of “abuse”.

IV. A.G. CONCLUSION1) the supply is made with the sole intention of obtaining a tax

advantage is immaterial;2) not conferring on a taxable person the right to deduct or

recover input VAT [...] prohibiting the abuse of Community law

Judgment of the Court C-255/02 HALIFAX

The Court (Grand Chamber) is concerned in par. 72 and 73 about the legal certainty and freedom to minimise the tax burden

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Ruling:1. Supply of goods and service are objective in nature;2. The VI Directive must be interpreted as precluding any

right […] to deduct input VAT where the transactions from which that right derives constitute an abusive practice [...];

3. In the case of abuse re-estabilish the situation

After Halifax???C-321/05 KOFOED: general principle it is forbidden to

abuse the EU law (art. 11 Directive 90/434).

Halifax is still a leading case about abuse of law in VAT mattes (for example see the recent C-277/09 HMRC v. RBS Deutshland)

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Some authors suggest that EU law provides two different abuse concept: one for harmonised law (VAT) and one for fundamental freedoms

Abuse of law approach by domestic EU Courts

• Italian Supreme Court Corte di Cassazione, basing its interpretation on Halifax, affirmed the existence in the Italian Tax System of an anti-abuse clause directly from EU. not harmonized sector???Breaking Italian news: to enforce abuse of law concept in the Italian Tax Code???…

• German Court Bundesverfassungsgericht tries to protect German sovereignty and place certain boundaries to its erosion from EU law

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Paper submitted by the Confédération Fiscale Européenne to the European Commission and Parliament in 2007

Halifax represents a significant landmark in tax matters and in particular in VAT area.

It is important that this principle is not converted into the ultimate but systematic weapon to be used against the taxpayers.

New interpretation principle?However it cannot be used to violate constitutional principles of

strict legality and prohibition of analogy.

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