Barely a month apart, the 3rd Section of the Contentious-Administrative Chamber of the Supreme Court (SC), in judgment no. 4300/2022, of November 21, has reiterated its doctrine on this issue, maintaining a position contrary to that adopted by the Court of Justice of the European Union (CJEU) in the judgment of October 20, 2022 (case C-585/20), which, however, has been subsequently modified in the recent judgment of the same Section no. 4581/2022, of December 5, 2022.
As we will recall, the CJEU concluded, resolving the questions referred for a preliminary ruling by the Administrative Court No. 2 of Valladolid and interpreting Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011, establishing measures to combat late payment in commercial transactions, that:
The fixed minimum amount of €40, as compensation to the creditor for the recovery costs incurred due to late payment by the debtor, must be paid for each commercial transaction not paid on its due date, evidenced by an invoice, even when that invoice is submitted together with other invoices in a single administrative or judicial claim.
National regulations – as is the case with Article 198.4 of the LCSP – which establish, as a general rule, in respect of all commercial transactions between companies and public authorities, a payment period of a maximum duration of 60 calendar days, even when that period is composed of an initial period of 30 days for the procedure of acceptance or verification of the conformity with the contract of the goods delivered or services rendered and an additional period of 30 days for the payment of the agreed price, are in conflict with the aforementioned Directive.
The computation, as the amount due, of the amount of value added tax appearing on the invoice or equivalent request for payment is independent of whether, on the date on which the delay in payment occurs, the taxable person has already paid said amount to the Tax Authorities.
However, our SC, we now understand in view of the cassation judgment that due to ignorance of the CJEU judgment at the time of issuing its ruling, maintained a contrary position, as we will explain below.
The judgment of the SC upholds the appeal no. 3193/2020 filed by the GENERALITAT DE CATALUÑA against judgment no. 840/2019, of October 22, 2009, of the 5th Section of the Contentious-Administrative Chamber of the Superior Court of Justice (TSJ) of Catalonia, which it upholds and annuls. Said judgment had partially upheld the contentious-administrative appeal filed by a contractor against the presumptive rejection, by silence of the Generalitat de Cataluña, of the claim for late payment interest arising from the late payment of invoices corresponding to its services contract.
The issues that have had an objective interest for the formation of jurisprudence are the three indicated below, which the SC resolved by analyzing the doctrine that had already been examined by this Chamber in judgments no. 1344/2020 and 1345/2020, both of October 19, 2020 (both of October 19, 2020), both of October 19, 2020 (appeals 2258/2019 and 7382/2018), no. 427/2021, of March 24 (appeal 6689/2019), no. 37/2022, of January 19 (appeal 4188/2020), no. 120/2022, of February 2 (appeal 1540/2020) and no. 120/2022, of February 2 (appeal 1540/2020), among others.
Firstly, whether or not to include the value added tax (VAT) quota in the basis for calculating the interest for late payment due to the Administration’s delay in the payment of certain invoices of an administrative contract, in this case, a service contract.
In this regard, the SC states that it is the criterion of this Chamber, for reasons already expressed in STS 427/2021, of March 24 and 37/2022, of January 19, to consider it appropriate to include the amount of VAT in the basis for calculating interest for late payment.
And this is because the accrual of VAT that gives rise to the birth of the tax obligation takes place, in this case, with the provision of the service, then the tax is payable (cfr. Article 75.1.2 LIVA); for its part, the invoice is the statement or documented proof of the realization of the taxable event and the accrual in its different modalities (cfr. judgment of the Second Section of this Chamber, of March 20, 2012, appeal 6208/2008).
The accrued VAT is passed on to the person for whom the taxable service or operation is carried out when the invoice is issued, as expressly stated in Article 88.Three of the VAT Law, and not before (cfr. paragraph five of said precept).
Such rules are combined with the provisions of article 216.4 of the LCSP 2011 and reiterated in the current article 198.4 of the LCSP 2017. It is thus provided that with the presentation of the invoice to the Contracting Administration the thirty-day period of verification and approval begins and, if once approved thirty days elapse without making the payment, it incurs in arrears and the accrual of interest begins.
In the event of default, interest is calculated on the total amount of the invoice, i.e. on the amount referring to the consideration for the service rendered plus the accrued VAT. However, the inclusion of the amount of the tax will depend on the contractor having declared and paid the VAT without prior payment of the invoice, only in this way can the interest for late payment fulfill its compensatory purpose (cf. judgment of this Chamber and Section of 12 July 2004, appeal in cassation 8082/1999).
The aforementioned requires that the payment of the VAT before the collection of the invoice is recorded, plus the proof that the contractor is not under the special regime of the cash criterion regulated in Chapter X in Title IX LIVA introduced by Law 14/2013.
In accordance with the above, the Court concludes that the VAT quota must be included in the basis for calculating the late payment interest due to the delay of the Administration in the payment of the invoice derived from the administrative contract. For this purpose, it is necessary that the contractor proves that it has paid the tax before collecting the invoice; in turn, for the calculation of the interest on the VAT installment, the dies a quo will be that of the payment or collection of the same.
Secondly, whether, in order to meet said VAT payment, the contractor must prove that it has effectively made the payment or deposit of said tax with the Public Treasury and whether it can be considered proven that the VAT has already been paid when the invoice is presented for collection, taking into account the certificate issued by the AEAT (Spanish Tax Agency) stating that it is up to date with the payment of its tax obligations.
The SC recalls, as we have already mentioned above, that it is a reiterated criterion to consider that the prior payment of the tax to the Tax Authorities is a necessary requirement for the inclusion of the VAT quota in the basis for calculating the interest for late payment, and that such accreditation corresponds to the contractor.
It considers, in the present case, that a generic certificate from the AEAT of being up to date with tax obligations does not prove that on a given date the contractor had paid the VAT quota, which could have been proved with a specific certificate such as that provided for in Article 41.1 of the General Collection Regulations approved by Royal Decree 939/2005, of 29 July, or by providing the document of payment of the VAT quota dated prior to the payment of the invoice.
Finally, whether the dies a quo for calculating late payment interest on the VAT item should be computed from the date of actual payment of the VAT to the Treasury or from the expiry of the 60-day period from the presentation of the invoice in the corresponding records of the Contracting Administration.
The SC considers that the computation of the late payment interest on the VAT installment must start on the day of payment of said installment, although in the present case it is not applicable since the contractor has not accredited the payment of the tax, as explained above.
What criterion should prevail in these cases of contradiction between judgments of the CJEU and the SC? We must remember the principle of primacy of Community Law and that, in accordance with the provisions of Article 4 bis of the Organic Law of the Judiciary, the Judges and Courts must apply European Union Law in accordance with the case law of the Court of Justice of the European Union.
The principle of primacy was established by the Court of Justice of the European Communities in the Costa v. Enel[1] judgment. According to this principle, the law of the European Union has a higher value than the national laws of the Member States, so that the Member States and national judges are under the obligation not to apply a national rule that is contrary to the law of the European Union.
Thus, the rules of European Union law prevail over any other rule that opposes them, and therefore these Community rules must be applied in preference regardless of the rank of the internal national rule and regardless of whether this internal rule has been adopted subsequently.
The Court based its statement on the fact that the attribution of competences to the European Union limits the sovereign rights of the States, and also relied on the principle of direct effect, which would be frustrated if a State were able to derogate from it by means of a national provision contrary to European Union law. Finally, the Court pointed out that the principle of loyalty and solidarity of the Member States with respect to the European Union project also leads to the requirement of this primacy.
It should be said that the principle of the primacy of European Union law is a rule addressed essentially to national judges and courts, which must monitor the legality of Community acts and provisions (not only national ones) that they must apply to the disputes before them, so that if a national judge or court comes to the conclusion that the Community rule may be invalid because it is contrary to another Community rule, it must refer the matter to the Court of Justice of the European Union for a preliminary ruling[2]. Moreover, the Court of Justice has pointed out that the States are under an autonomous obligation to repeal national law that is incompatible with European Union law, thereby seeking to guarantee the principle of legal certainty.
Secondly, it is necessary to point out that primacy includes any rule of Community law, whether it be original or secondary law, as is the case of the Directives on public procurement.
Thirdly, it must be said, in relation to internal rules, that the European Court of Justice has also affirmed that primacy operates over any internal rule, even over internal Constitutions[3].
In line with the above, on December 5, 2022, the Contentious-Administrative Chamber of the Supreme Court has issued judgment no. 4581/2022, in which it changes its position, in accordance with the judgment of the Court of Justice of the European Union (CJEU) of October 20, 2022 (case C-585/20), in ruling on the contentious-administrative appeal brought by the Generalitat de Catalunya against judgment no. 1230/2020, of 8 May, of the 5th Section of the Contentious-Administrative Chamber of the High Court of Justice of Catalonia (contentious-administrative appeal 383/2017).
The issues in which it has been understood that there is objective house interest for the formation of jurisprudence are:
1ª.- Whether or not to include the value added tax (VAT) quota in the basis for calculating the interest for late payment due to the delay of the Administration in the payment of certain invoices of an administrative contract, in this case, a service contract. And the SC ruled that the value added tax (VAT) must be included in the basis for calculating the interest for late payment due to the Administration’s delay in the payment of certain invoices of an administrative contract (in this case, a service contract).
2ª.- If in order to meet said VAT payment, the contractor must prove that it has effectively paid or paid said tax to the Public Treasury and if it can be considered proven that the VAT has already been paid when presenting the invoice for collection, taking into account the certificate issued by the AEAT of being up to date with the payment of tax obligations. In this sentence the SC declares that it is not required, in order to proceed with the payment of such interests, that the contractor accredits that it has effectively paid the tax to the Public Treasury.
3ª.- Whether the dies a quo for calculating the late payment interest on the VAT item should be calculated from the date of the effective payment of the VAT to the Treasury or from the expiry of the 60-day period from the presentation of the invoice in the corresponding registers of the contracting Administration. Regarding this issue, the SC refers to the legal grounds contained in the STJUE judgment of 20 October 2022 and considers that it is not appropriate to make any statement or pronouncement, as there has been no debate on it in the appeal.
In short, the structure of the judicial system of the European Union is formed by the Court of Justice of the European Union (meaning the two courts that compose it: the Court of Justice and the General Court) together with the judges and courts of the different Member States, whose incorporation into this structure is an immediate consequence of the principles that articulate the relations between the European Union Law and the national domestic laws, the principles of autonomy, direct effect and primacy of the European Union Law.
Thus, bearing in mind what has been said so far and that, as we know, the principle of primacy of European Union Law is a rule addressed fundamentally to the national Judges and Courts for the defense of the rights and legitimate interests of the citizens. This is the most important mechanism of the decentralized system of Community jurisdictional control, which turns the national Judges and Courts into the ordinary guarantors of the European Union Law, also allowing to ensure the uniform interpretation of the European Union Law by the Court of Justice of the European Union and the control of the legal application of the Community acts and rules through an examination of the validity of such acts and rules. Consequently, the review of the legality of Community rules does not fall within the exclusive competence of the Court of Justice of the European Union, even though it has a monopoly on the declaration of invalidity.
Because the control of the actions of the Member States is normally carried out by the national judges and courts, which may even disapply national provisions that are contrary to Community rules; The fact is that the task of the national courts and tribunals as ordinary guarantors of European Union law is not exhausted, as is clear from the case law of the Court of Justice of the European Union, in the proceedings for preliminary rulings, but continues in the obligation of the national court to interpret the domestic law which it is called upon to apply as far as possible in conformity with the requirements of European Union law (see, in particular, the judgments of the Court of Justice of the European Union in Van Munster [4], paragraph 34, and Engelbrecht [5], paragraph 39). If such an interpretation in conformity is not possible, the national court must apply Community law in its entirety and protect the rights which it confers on individuals, refraining, where appropriate, from applying any national provision in so far as such application would lead, in the circumstances of the dispute, to a result contrary to Community law (see, in particular, Solred[6], paragraph 30, and Engelbrecht, cited above, paragraph 40).
Bravo then for the immediate response of the Supreme Court in cassation of its own doctrine to bring it into line with the Community acquis.
[1] Judgment of 15 July 1964, Case 6/64, Costa v. Enel.
[2] This figure is similar to the question of unconstitutionality contained in Article 163 of the Spanish Constitution of 1978 in the case of national law, an article which is expressed in the following terms “when a judicial body considers, in any proceeding, that a rule with the rank of law, applicable to the case, on whose validity the ruling depends, may be contrary to the Constitution, it shall raise the question before the Constitutional Court in the cases, in the manner and with the effects established by law, which in no case shall be suspensive”.
In order for a preliminary ruling to be given, the national judge or judicial body must be seized of a question relating to the interpretation or assessment of the validity of a Community rule in a case that is still pending a decision, and a ruling from the European Court is required in order to be able to issue a ruling. If these conditions are met, the national judge is empowered to ask the question for a preliminary ruling, a power that becomes an obligation for the courts of last instance.
Once the Court of Justice of the European Union has ruled on a preliminary ruling on a question of interpretation, this ruling has the effects of res judicata, binding not only the national judge or court that has requested it, but all the courts of the Member States. If the ruling is on a preliminary ruling on a question of validity, the declaration of validity or invalidity made by the Court of Justice will have a general scope, which implies not only the obligation for the national court not to apply the rule in question, but also the production of effects against all, since the rule will be valid or invalid in any case.
[3] An example of this in Spain was the need to amend the Spanish Constitution of 1978 to allow the entry into force of the Maastricht Treaty on November 1, 1993. For this purpose, on August 28, 1992, Article 13.2 of the Constitution was amended to allow the passive suffrage of citizens of the Member States of the European Union in municipal elections.
Judgment of October 5, 1994, Van Munster, C-165/91, Rec. p. I-4661.
Judgment of 26 September 2000, Engelbrecht, C-262/97, ECR I-7321.
Judgment of 5 March 1998, Solred, Case C-347/96, ECR I-937.