Summary of the facts
Appellants submitted an application to the Tallinn Enterprise Office, Estonia requesting the adjusted return for the last three quarters of 2010 and the four quarters of 2011 and requested repayment of the amounts already paid.
Tallinn Enterprise Office stated that the appellants were liable to pay that sales tax and only partially uphold their claims for repayment.
Thereupon, the appellants filed a complaint with the tax authority which confirmed in essence that they were liable for the sales tax.
The Tallinn Administrative Court dismissed the actions brought by Vikings Motors, TKM Beauty Eesti OÜ,TKM King and in respect to the action brought by Kaubamaja AS, Selver AS upheld their claims but only in regard to the sales tax had been applied to sales of goods subject to exercise duty.
The appellants filed an appeal and the Courts dismissed the latter on that ground that the court of first instance did not lack clarity with regard to the fact that a tax applicable in a Member State infringes Article 401 of the VAT Directive only if it corresponds to each of the four essential characteristics of VAT sets out by the court. Lastly, the appellants brought an action to the Supreme Court, the latter pointed out that the sales tax at issue in the main proceedings did not have the third and fourth characteristics of VAT for the purposes of the case-law of the Court.
Questions referred to the ECJ
Is Article 401 of [the VAT] Directive to be interpreted as precluding a national tax which applies generally and is proportionate to the price, but which, pursuant to the relevant provisions, is to be levied only at the stage of the sale of goods or services to a consumer, with the result that the final tax burden rests ultimately with the consumer, and which compromises the operation of the common system of value added tax and distorts competition?
Conclusion by the ECJ
Article 401 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted to the effect that it does not preclude the maintenance or introduction of a tax such as the sales tax at issue in the main proceedings.
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