Analysis: “Losing the general statute of limitations period of tax reimbursements in breach of EU law jeopardizes the EU principle of equivalence – Valoris” by Ricardo García Antón
The case Valoris (C-677/19) concerns a Romanian company which claimed the reimbursement of certain environmental stamp duty on motor vehicles levied in breach of EU law. Whilst Romanian Order (L’OUG num 52/2017) provided for a strict one year time-limit to lodge of the application for the refund of this environmental stamp duty in breach of EU law, no time-limit was applied for the exercise of the right to reimbursement of sums levied in breach of domestic law. For the latter claims, Romanian law provided only for a general five year statute of limitations.
For the refund of the environmental stamp duty on motor vehicles levied in breach of EU law, the L’OUG num 52/2017 repealed the five year statute of limitations period provided in Romanian law for domestic refunds claims and replaced it with a one year time-limit. The referring court asked the Court of Justice of the EU (CJEU) whether the Romanian law was in breach of the EU principle of sincere cooperation (Article 4(3) TEU) together with the principles of equivalence and effectiveness. These principles limit the procedural autonomy of the Member States (Rewe, Case 33/76, paragraph 71).
The principle of sincere cooperation precludes the Member State from adopting specific provisions for the refund of a tax in breach of EU law subject to less favourable conditions than those that would apply in the absence of such specific provision. Whilst the principle of equivalence means that domestic procedural rules cannot be less favourable than those rules governing similar domestic actions, the effectiveness principle precludes domestic law that makes the exercise of rights conferred by Community law virtually impossible or excessively difficult.
In Valoris, the Court assessed the principle of sincere cooperation united with the principle of effectiveness on one hand, and, the principle of equivalence, on the other. In relation to effectiveness, the Court ruled that the one year time-limit to lodge the refund was not in breach of the principle of effectiveness combined with the principle of sincere cooperation. That time-limit did not make the refund procedure excessively difficult or impossible in practice to exercise rights derived EU law. Like in Edis (C‑231/96), in which a three year time-limit was considered reasonable by the Court, in Valoris, the one year time-limit preserves legal certainty, thereby protecting both the taxpayer and the tax administration. It seems that the principle of effectiveness does not hinge on the duration of the time-limit, but as preserving legal certainty.
In relation to the principle of equivalence, the Court traditionally limits itself to providing certain guidelines (Dilexport, C-343/96, paragraph 32; Câmpean, C‑200/14, paragraph 56), whilst the referring national court is the one competent to verify the potential breach of this principle. In Valoris, the national court already made the comparison between both actions for reimbursement of taxes, the one in breach of domestic law and the one provided by L’OUG num 52/2017, in order to determine if they have a similar purpose and cause of action. Therefore, the Court does not simply give guidelines to the national court, but provides a direct answer to the case.
Since the Order L’OUG num 52/2017 repealed the general five year statute of limitations period for the refund of this environmental stamp duty in breach of EU law and replaced it with a one year time-limit, the taxpayer suffers a serious disadvantage in comparison with domestic refund claims. The Court dismissed the budgetary argument provided by the Romanian government to justify the different treatment.
In a nutshell, this judgment can be interpreted as a warning from the Court to the Member States in current times in which the rule of law is threatened. Replacing the general statute of limitations period for a time-limit in cases of reimbursement of taxes in breach of EU law seriously jeopardises the principle of equivalence.
Ricardo García Antón is an Assistant Professor of Tax Economics at Tilburg University (Fiscal Institute Tilburg) and former Associate Researcher at the IBFD.