VAT debt in case of arrangement with creditors: new perspectives of the ECJ

By Prof Stefano Loconte and Giusy Antonelli, Loconte & Partners

Recently the Advocate General of the ECJ expressed an opinion in case C-546/2014, Degano Trasporti, which was favourable to the extinguishment of debts arising from VAT in the case of composition with creditors.

ECJ case law has traditionally prohibited partial payment of VAT debts under the tax settlement procedure and established that this is also applicable in the context of arrangement proposals.

It appears that this position has been justified inter alia on the basis of the ECJ’s interpretation of Article 4(3) TEU and of the present VAT Directive’s predecessor, the Sixth Directive.

The ECJ has observed on several occasions that it follows from the common system of VAT that every Member State is obliged to implement all legislative and administrative measures necessary to ensure collection of all the VAT due in its territory. In that regard, Member States are required to check taxable persons’ returns, accounts and other relevant documents, and to calculate and collect the tax due.

The Advocate General ultimately stated that according to the EU directive on the common system of VAT, there are no obstacles to national rules in allowing an undertaking in financial difficulties to enter into an arrangement with creditors involving liquidation of its assets without offering full payment on the State’s claim in respect of VAT.

Nevertheless, an independent expert has to ascertain that no greater payment of that claim would be obtained in the event of bankruptcy and that the arrangement is validated by a court.

Prof. Avv. Stefano Loconte

Prof. Avv. Stefano Loconte

Loconte & Partners, Bari, Italy
T: +39 080 572 2880
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Stefano Loconte is founder and managing partner of the Loconte & Partners. He was admitted to the Italian Bar and has rights of audience/representation before the Italian High Court. He is a Law and Tax Consultant at the Ministry of Labor. Moreover Mr. Loconte, was appointed counsel to the Chair of the VI Permanent Commission - Finance of the Italian Chamber of Deputies - Hon. Maurizio Bernardo in order to coordinate the working group on taxation of trust and islamic finance.
He is speaker at numerous conferences and author of numerous articles published in newspapers and specialized magazines and he is also Professor and holder of the chair of Tax Law, International Tax Law and Trust Law at the Faculty of Economics and Law and at the School for Legal Professions at the University LUM “Jean Monnet” Casamassima (BA), as well as teacher on Tax and Trust Law at leading Italian business school “Wolters Kluwer Italia-IPSOA” and “Sole 24 Ore”.
Giusy Antonelli

Giusy Antonelli

Loconte & Partners, Bari, Italy
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Published: March 2016 l Photo: Prykhodko

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