The first and third questions
28 By its first and third questions, which should be examined together, the referring court asks, in essence, whether the VAT Directive and the principle of fiscal neutrality preclude, in a transaction subject to the reverse charge regime, the recipient of the services from being deprived of the right to deduct the VAT not due which he paid to the service supplier on the basis of an incorrectly drawn up invoice, even where the correction of that error is impossible because that supplier is insolvent.
29 It must be recalled to begin with that, under the reverse charge regime, no VAT payment takes place between the supplier and the recipient of the services, the recipient being liable, in respect of the transactions carried out, for the input VAT, while being able, in principle, to deduct that tax so that no amount is payable to the tax authorities.
30 It must also be pointed out, first, that the right to deduct forms an integral part of the VAT mechanism and in principle cannot be limited (Bockemühl, paragraph 38, and Case C-368/09 Pannon Gép Centrum [2010] ECR I-7467, paragraph 37 and the case-law cited).
31 The rules governing deduction are meant to relieve the taxable person entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT consequently ensures neutrality of taxation of all economic activities, whatever their purpose or results, provided that those activities are themselves subject in principle to VAT (see Case C-408/98 Abbey National [2001] ECR I-1361, paragraph 24, and Joined Cases C-439/04 and C-440/04 Kittel and Recolta Recycling [2006] ECR I-6161, paragraph 48).
32 As regards, secondly, the procedures for exercising the right to deduct VAT listed in Article 178 of the VAT Directive, only that set out in Article 178(f) of that directive is applicable since a reverse charge procedure under Article 199(1)(a) of that directive is at issue.
33 In this connection, a taxable person who is liable as the recipient of services for the VAT relating thereto is not obliged to hold an invoice drawn up in accordance with the formal requirements of the VAT Directive in order to be able to exercise his right to deduct, and only has to fulfil the formalities laid down by the Member State concerned in the exercise of the option conferred by Article 178(f) of that directive (see, to that effect, Bockemühl, paragraph 47).
34 It is also apparent from the Court’s case-law that the scope of the formalities laid down by the Member State concerned, which must be complied with by a taxable person in order to be able to exercise the right to deduct VAT, should not exceed what is strictly necessary for the purposes of verifying the correct application of the reverse charge procedure and ensuring that the VAT is collected (see, to that effect, Bockemühl, paragraph 50, and Case C-392/09 Uszodaépítő [2010] ECR I-8791, paragraph 38).
35 Thus, the Court has already held that, in the context of the reverse charge procedure, the principle of fiscal neutrality requires deduction of input tax to be allowed if the substantive requirements are satisfied, even if the taxable person has failed to comply with some of the formal requirements (Joined Cases C-95/07 and C-96/07 Ecotrade [2008] ECR I-3457, paragraph 63, and Uszodaépítő, paragraph 39).
36 However, contrary to what Fatorie claims, the circumstances of the case in the main proceedings differ from those of Bockemühl.
37 In the case in the main proceedings, it is apparent from the order for reference that the invoice of 3 March 2008 does not contain the words ‘reverse charge procedure’, contrary to the requirements of Article 160(3) of the Tax Code, and that Fatorie did not take the measures necessary to put that omission in order as provided for in Article 160(5). Furthermore, Fatorie incorrectly paid the VAT, wrongly referred to in that invoice, to Megasal whereas, under the reverse charge regime, it should, as the recipient of the services, have paid the VAT to the tax authorities in accordance with Article 199 of the VAT Directive. Thus, besides the fact that the invoice at issue does not meet the formal requirements provided for by the national legislation, a substantive condition of the reverse charge regime has not been satisfied.
38 Such a situation prevented the tax authorities from investigating the application of the reverse charge regime and led to a risk of a loss of tax revenue for the Member State concerned.
39 Moreover, it is settled case-law that the right to deduct can be exercised only in respect of taxes actually due, that is to say, the taxes corresponding to a transaction subject to VAT or paid in so far as they were due (Case C-342/87 Genius Holding [1989] ECR 4227, paragraph 13, and Case C-454/98 Schmeink & Cofreth and Strobel [2000] ECR I-6973, paragraph 53).
40 Thus, since the VAT paid by Fatorie to Megasal was not due and that payment was made in breach of a substantive requirement of the reverse charge regime, Fatorie cannot claim the right to deduct that VAT.
41 In this connection, the fact that Megasal is insolvent cannot call into question the refusal to allow deduction of VAT as a result of Fatorie’s failure to fulfil essential obligations for the application of the reverse charge regime.
42 However, the recipient of the services which paid VAT that was not due to the service supplier can request repayment of the VAT from it in accordance with the national law.
43 Regarding the fact that the tax authorities did not order Megasal to correct the incorrectly drawn-up invoice, it must be pointed out that the main proceedings concern the Direcţia’s refusal to grant the right to deduct to Fatorie, and that it is not necessary, in order to answer the questions raised, to rule on a potential obligation of the tax authorities to a third party.
44 Having regard to the foregoing considerations, the answer to the first and third questions is that, in a transaction subject to the reverse charge regime, in circumstances such as those in the main proceedings, the VAT Directive and the principle of fiscal neutrality do not preclude the recipient of the services from being deprived of the right to deduct the VAT which he paid when that tax was not due to the service supplier on the basis of an incorrectly drawn-up invoice, even where the correction of that error is impossible because that supplier is insolvent.
The second question
45 By its second question, the referring court asks, in essence, whether the principle of legal certainty precludes an administrative practice of the national tax authorities whereby they revoke a decision by which they granted the taxable person the right to deduct VAT and then, following a fresh investigation, order him to pay that VAT together with default interest.
46 First of all, it must be acknowledged that the principle of legal certainty, requires the tax position of the taxable person, having regard to his rights and obligations vis-à-vis the tax authorities, not to be open to challenge indefinitely (see, to that effect, Ecotrade, paragraph 44).
47 In this connection, in its written observations the Romanian Government refers to Article 105(3) of Government Order No 92/2003 on the Tax Procedure Code which allows, in exceptional circumstances, before the expiry of the limitation period, a new investigation to be carried out concerning a particular period where additional information unknown to the tax investigators at the date of the investigation or errors in calculation having an effect on the results of that investigation come to light.
48 It must be conceded that such rules, the clarity of which and the predictability of which for the taxable person have not been seriously called into question, comply with the principle of legal certainty.
49 It is, however, for the referring court to determine whether the provision of national legislation cited in paragraph 47 above is applicable to the case before it.
50 Concerning the default interest, it must be observed that, in the absence of harmonisation of European Union legislation in the field of the penalties applicable in cases where conditions laid down by arrangements under such legislation are not complied with, Member States retain the power to choose the penalties which seem to them to be appropriate. They must, however, exercise that power in accordance with European Union law and its general principles, and, consequently, in accordance with the principle of proportionality (see, to that effect, inter alia, Case C-210/91 Commission v Greece [1992] ECR I-6735, paragraph 19 and the case-law cited; Case C-213/99 de Andrade [2000] ECR I-11083, paragraph 20; and Rodopi-M 91, paragraph 31).
51 Having regard to the foregoing, the answer to the second question is that the principle of legal certainty does not preclude an administrative practice of the national tax authorities whereby, within a limitation period, they revoke a decision by which they granted the taxable person the right to deduct VAT and then, following a fresh investigation, order him to pay that VAT together with default interest.