The Court of Justice of the European Union (CJUE) decided on July 9, 2015 to rule in favor of Messrs. Salomie and Oltean in the dispute they had with the General Directorate of Finance Cluj.
In short, the situation was as follows: during 2007, Mr. Salomie and Mr. Oltean teamed up with five other individuals to carry out a construction project and sell four buildings in Romania. This association had no legal personality and was not declared or registered for VAT purposes in Romania.
In 2008 and 2009, out of a total of 132 apartments built, 122 were sold, without these sales being subject to VAT.
During 2010, following a tax inspection carried out by the tax administration, it considered that the above-mentioned operations constituted an economic activity of a continuity nature and that VAT should have been subject to VAT, with deliveries exceeding the exemption ceiling of EUR 35,000.
Consequently, the tax administration requested payment of the VAT due, as well as the related delay increases.
Although the right to deduct VAT is a fundamental principle of the common system of VAT, and the deduction of VAT upstream must be granted if the substantive requirements are met, Romanian legislation is not compatible in this respect with the provisions of Directive 2006/112.
Thus, the Fiscal Code stipulates that a person registered late as a taxable person for VAT purposes cannot exercise the right to deduct VAT until after his situation has been regularized by registering him for VAT purposes and submitting a return.
The registration for VAT purposes provided for in Article 214 of Directive 2006/112 is only a formal requirement, which cannot call into question the right to deduct VAT in so far as the material conditions giving rise to that right are satisfied.
Therefore, a taxable person from the point of view of VAT cannot be prevented from exercising his right to deduct on the ground that he was not registered for VAT purposes before using the goods acquired in the course of his taxed activity.
Taking into account all the above aspects, the Court of Justice of the European Union ruled in Judgment 183 that the provisions of Directive 2006/112 / EC must be applied, to the detriment of the regulations in Romanian law, according to which the right to deduct VAT due or paid upstream for goods and services used in taxed transactions, the taxable person is allowed only if he is registered for VAT purposes and submits a VAT return.