Brussels, 08/09/2015 (Agence Europe) - The Court of Justice of the EU ruled on Tuesday 8 September (case C-105/14) that, because its overall limitation period in cases of VAT fraud is too short, Italian legislation creates a situation where such misdeeds may go unpunished as a result of failure to come to a definitive judgment within the set time, thereby harming the financial interests of the European Union (VAT being an own resource that funds the EU budget). In such a case, the Court ruled, the Italian court must, if need be, disapply the national overall limitation system in favour of European law.
The Court was asked by the Tribunale di Cuneo (District Court, Cuneo, Italy), which was hearing a case involving “carousel” VAT fraud in which it is alleged that, between 2005 and 2008, individuals illegally deducted the VAT on invoices issued by shell companies for non-existent transactions. Under Italian law, in this case, the limitation period begins from the date on which the infringement is brought to an end and extends to a period corresponding to the maximum sentence that the law can impose (six years) with the possibility of extension by up to a quarter of this period (one and a half years). The result was that criminal proceedings were time-barred before a final ruling could be delivered on appeal and other charges will be similarly time-barred by 8 February 2018 at the latest. Thus it was that the Italian court asked if, in ultimately granting impunity to persons and undertakings which commit criminal offences, Italian law has created a new VAT exemption which is not provided for by EU law.
In its ruling, the Court says the Italian court must determine whether the Italian law at issue allows the effective and dissuasive penalisation of cases of serious fraud affecting the financial interests of the European Union, as prescribed by the Treaty (Article 325 of the TFEU). It says that this would not be so if, in a considerable number of cases, the commission of serious fraud escaped criminal punishment because the rules on limitation periods generally prevent the imposition of final judicial decisions. It states, too, that the Italian law would be contrary to the above-mentioned TFEU Article if it provided for longer limitation periods in respect of cases of fraud affecting Italy's financial interests (for example, duty on tobacco) than in respect of those affecting the financial interests of the European Union (such as VAT fraud). It notes that in these latter cases, by virtue of the same Article, the Italian court must ensure that EU law is given full effect, if need be by disapplying the rules on limitation periods. (Francesco Gariazzo)