Increasingly frequent are the situations in practice when the High Court of Cassation and Justice finds certain inadequacies of the Romanian legislator. This was also the case of the provisions that unlawfully restricted the categories of persons who are exempt from VAT for the activity of “vocational training of adults”, according to Article 292 para. (1) (f) of the Tax Code.
Thus, the High Court of Cassation and Justice was recently asked to rule on the legality of the provisions referred to in the Implementing Rules of the Tax Code, i.e. on the annulment of Article 42 para. (1) sentence I approved by GD no. 1/2016 regarding the phrase “according to Government Ordinance no. 129/2000 on vocational training of adults, republished, with subsequent amendments and additions”.
The discussion starts, of course, from the existing legal rules in the Tax Code in conjunction with the Methodological Norms for the application of the Tax Code. We thus note that the previous form (unchanged at this time) provides:
Art. 292 para. (1) lit. f) Tax Code:
“The following operations of general interest are exempt from tax:
- f) The educational activity provided for in the National Education Law no. 1/2011, as subsequently amended and supplemented, the vocational training of adults, as well as the provision of services and supplies of goods closely related to these activities, carried out by public institutions or authorised entities. The exemption is granted under the conditions laid down in the methodological rules.
Paragraph 42 of the Methodological Rules:
“The exemption provided for in Article 292(2)(a) of Regulation (EC) No. (1) letter f) of the Tax Code for vocational training of adults is applied by persons authorised for this purpose under Government Ordinance No 129/2000 on vocational training of adults, republished, with subsequent amendments and additions, (…)”.
(2) The exemption provided for in Article 292 para. (1) (f) of the Tax Code shall not apply to studies or research carried out for payment by schools, universities or any other educational institution for other persons. This was the ruling of the European Court of Justice in Case C-287/00.
(3) The exemption provided for in Article 292 para. (1) (f) of the Tax Code shall also apply to supplies of goods and services closely related to educational services, such as the sale of school textbooks, the organisation of conferences related to educational activities, carried out by public institutions or other entities authorised for educational activities or adult vocational training, the provision of examination services with a view to obtaining access to educational services or adult vocational training.
(4) The exemption provided for in Article 292 (4) shall apply to the following (1) (f) of the Tax Code shall not apply to purchases of goods or services made by public institutions or other entities authorised for educational activities or for vocational training of adults for the tax-exempt activity referred to in Article 292 (1) (f) of the Tax Code. (1) (f) of the Tax Code.
In other words, it shows that the legislator, when legislating the rules referred to above, restricted the categories of persons who are exempt from VAT under Article 292(2)(a) of the VAT Code to those who are not. (1)(f) of the Tax Code, although a simple reading of the provisions of the Tax Code clearly shows that the VAT exemption will generally be granted for the activity of ‘adult vocational training’, without, however, being conditional on the authorisation of the General Order 129/2000 on adult vocational training.
The High Court of Cassation and Justice has definitively ruled that the exemption provided for in Article 292 para. (1)(f) of the Fiscal Code to be granted only to persons authorised under GC No 129/2000 is a restrictive one, with a direct effect on at least one category of vocational training providers. As a result, paragraph 42(1)(b) was annulled. (1) sentence I of the Methodological Norms for the application of the Tax Code as regards the phrase “in accordance with Government Ordinance No 129/2000 on vocational training for adults, republished, as subsequently amended and supplemented”.
In our opinion, the Court of Appeal of Mures correctly decided that although the provisions of the Tax Code provide for exemption from VAT for adult vocational training activities, the methodological rules issued for its implementation stipulate as a condition the authorisation of the economic agent for this purpose in accordance with Government Ordinance No 129/2000.
We thus show that the provisions of the Tax Code represent a transposition into national law of Article 132 para. (1) lit. (i) of Directive 2006/112/EC on the common system of value added tax, which provides that: ‘Member States shall exempt the following transactions … the education of children and young people, school or university education, vocational training and retraining, including the provision of services and the supply of goods closely linked thereto, by bodies governed by public law which have that purpose or by other organisations recognised by the Member State concerned as having similar purposes’.
In this context, we argue that the methodological rules issued to implement the Tax Code have restricted the scope of the VAT exemption. Although the right of the State to grant the exemption in question only to authorised legal persons cannot be denied, it should be noted that the legislation currently under consideration unjustifiably excludes from the exemption a number of legal persons which are authorised to carry out vocational training activities, albeit on the basis of other special legislation derogating from G.O. No 129/2000.
The Court of Appeal of Mures correctly pointed out that there is a lack of predictability and stability in the situation of service providers. At the same time, the methodological rules actually added to the legal text contained in the Tax Code.
Moreover, by making the exemption from VAT payment conditional on authorisation only on the basis of G.O. No 129/2000, when it has already been proven that there are providers of vocational training programmes which must be authorised on the basis of other legislation, the legislature’s intention to exempt these entities from payment of the tax has in fact been distorted, in view of the activity they carry out and not the authorisation they must have.
As a consequence of the above, the Târgu-Mureș Court of Appeal definitively annulled the annulment of Art. 42, para. (1), sentence I of Chapter IX of the H.G. no. 1/2016 for the approval of the Methodological Norms for the application of Law no. 227/2015 on the Fiscal Code, regarding the phrase “according to Government Ordinance no. 129/2000 on the vocational training of adults, republished, with subsequent amendments and additions”.
Taking into consideration the annulment of these legal provisions by the Court of Appeal of Targu-Mures, a decision which has been definitively consolidated and published in the Official Gazette, Part I, on 25.09.2023, the Romanian Government will be obliged to reformulate the annulled text as to meet the terms of the court ruling.
This article was prepared for the blog of the law firm Costaș, Negru & Asociații by Ms. Larisa Mărginean of the Arad Bar Association and Ms. Beatrice Ursache, a student taking part into a professional internship programme.
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