The Binding Force of CJEU Jurisprudence in Domestic Tax Law
Remedies for Taxpayers Confronting National Noncompliance with EU Law
The accession of Member States to the European Union carries with it a structural commitment to the primacy and uniform application of EU law. For Poland, as for every Member State, this commitment entails not merely the transposition of directives into national legislation but, more fundamentally, adherence to the authoritative interpretations of EU law rendered by the Court of Justice of the European Union (CJEU). The significance of this obligation is nowhere more acutely felt than in the domain of taxation, where domestic fiscal regimes must operate within the constraints of an increasingly harmonized European legal order.
Three foundational principles govern this relationship: the autonomy of the EU legal order, the primacy of EU law over conflicting domestic provisions, and the doctrine of direct effect, by which individuals may invoke sufficiently clear and unconditional provisions of EU law before national courts. The practical consequences for taxpayers are considerable. A preliminary ruling from the CJEU on a question of EU law interpretation may fundamentally alter the trajectory of ongoing tax proceedings or provide grounds for reopening those already concluded before administrative courts.
The influence of CJEU decisions on national legal orders operates through two principal mechanisms. First, EU law provisions may possess direct effect (effet direct), enabling individuals to rely upon them before domestic courts where those provisions are sufficiently precise, clear, and unconditional. Second, even where a provision does not satisfy the criteria for direct effect, national courts remain bound by the obligation of consistent interpretation (indirect effect) — that is, the duty to construe domestic law, so far as possible, in conformity with the objectives of the relevant directive, as established in Marleasing (Case C-106/89).
This article examines the mechanisms by which CJEU jurisprudence shapes domestic tax law, the consequences that flow from incompatibility between national legislation and EU law, and the remedies available to taxpayers who find themselves subject to provisions that contravene the European legal order.
II. The Preliminary Reference Procedure
Among the CJEU’s central functions is the adjudication of questions concerning the compatibility of national law with the requirements of the EU legal order. Where a national court entertains doubt as to whether a domestic provision conforms with EU law, it may — and in certain circumstances must — refer a preliminary question to the CJEU pursuant to Article 267 of the Treaty on the Functioning of the European Union (TFEU).
It is well established in the case law that the decision whether to refer lies within the discretion of the national court, which must assess whether resolution of the EU law question is necessary for the disposition of the case before it. A party to tax proceedings cannot compel a reference, but may — and often does — submit reasoned arguments demonstrating the inconsistency of national provisions with EU law, thereby furnishing the administrative court with a substantive basis for initiating the preliminary reference procedure.
It bears noting, separately, that under Article 258 TFUE, the European Commission may itself bring infringement proceedings before the CJEU where it concludes that a Member State has failed to fulfill its obligations under the Treaties. This power extends, inter alia, to cases in which a Member State has enacted fiscal legislation constituting unauthorized de minimis aid — a mechanism that operates independently of, and in addition to, the preliminary reference procedure available to national courts.
III. The Legal Authority of CJEU Decisions
A. The Nature of Binding Force
The proposition that CJEU decisions do not constitute autonomous, generally binding legal norms within the Polish legal order is, as far as it goes, correct. Yet it demands immediate qualification. Preliminary rulings possess erga omnes effect with respect to the interpretation of EU law: they bind the courts and administrative authorities of all Member States as to the meaning of the EU provision in question, not merely the referring court. To characterize CJEU decisions as mere “guidelines” would therefore substantially understate their normative force.
The CJEU’s interpretive authority exerts a direct and largely uncontested influence upon national tax jurisdictions. Tax authorities and administrative courts are accordingly expected to give effect to the propositions established in CJEU case law, so as to ensure outcomes consistent with the requirements of the EU legal order.
B. The Doctrine of Primacy
The foundational principle governing the relationship between EU law and national law is the doctrine of primacy, articulated in Costa v. ENEL (Case 6/64) and subsequently reinforced in Simmenthal (Case 106/77). Under this doctrine, where a conflict arises between a domestic provision and EU law, the national court is obliged to disapply the former — without awaiting its formal repeal by the legislature.
It should, however, be acknowledged that the doctrine of primacy operates within certain constitutional limits in the Polish legal order. The Polish Constitutional Tribunal, in common with its counterparts in several other Member States, has declined to accept the unconditional supremacy of EU law over the national constitution. This reservation notwithstanding, the doctrine retains considerable practical significance in tax litigation, where a taxpayer may invoke the provisions of a directive directly where the Member State has failed to transpose them correctly.
C. The Obligation of Consistent Interpretation (Effet Utile)
Even where CJEU decisions do not generate autonomous legal norms, national courts remain bound by the obligation of consistent interpretation — the duty, established in Marleasing (Case C-106/89), to construe domestic law so far as possible in conformity with the objectives pursued by the relevant directive. This obligation, grounded in the principle of effet utile, requires administrative courts to prefer an interpretation of national legislation that gives practical effect to the aims of the directive, even where the literal text of the domestic provision diverges from it. For the taxpayer, this furnishes a powerful argumentative tool — one that the highest administrative courts are, in principle, bound to take seriously.
IV. The Influence of CJEU Jurisprudence on National Tax Legislation
A. CJEU Decisions as a Catalyst for Legislative Reform
Although CJEU decisions do not, of themselves, possess the force of generally binding legislation, they frequently serve as the impetus for legislative change. National courts and tax authorities regularly invoke CJEU case law, and in a number of instances, CJEU rulings have supplied the direct basis for the introduction of new fiscal provisions.
A notable illustration is the case of Oil Trading Poland (Judgment of 12 February 2015, Case C-49/13), in which the CJEU’s interpretation of EU excise and customs law provided the foundation for subjecting lubricating oils to excise duty under Polish law. The relevant domestic provisions were subsequently enacted in conformity with the Court’s ruling.
In such cases, the CJEU does not, strictly speaking, declare a conflict between national and EU law. Rather, it provides an authoritative interpretation of EU law that creates an obligation on the part of the national legislature to bring domestic tax law into conformity with that interpretation.
B. CJEU Decisions as a Reorientation of Judicial Practice
The CJEU’s influence extends beyond the legislative sphere to encompass the reorientation of established lines of judicial authority. The judgment in Budimex SA (Judgment of 2 May 2019, Case C-224/18) provides a particularly instructive example, bearing as it does upon the determination of when the taxable event in respect of construction services is deemed to have occurred.
Prior to this judgment, prevailing business practice treated the date of execution of a construction service as the date on which the acceptance protocol was signed. This approach was displaced by the judgment of the Supreme Administrative Court of 18 April 2013 (Case I FSK 943/12), which held that the relevant date was that of the factual completion of the works, irrespective of any formal acceptance procedure.
The CJEU in Budimex introduced a further refinement, ruling that a construction service may not be regarded as completed where its final stage consists of a formal acceptance procedure during which defects may be identified — provided that such acceptance constitutes an integral and materially significant element of the contractual arrangement. The effect of this ruling was to restore, in defined contractual circumstances, the significance of the acceptance protocol as the determinative moment for tax purposes — a material development relative to the position that had obtained between 2013 and 2019.
It is worth noting that following the CJEU’s judgment, the Polish Ministry of Finance took the position that its earlier General Interpretation of 1 April 2016 (Ref. PT3.8101.41.2015.AEW.2016.AMT.141) remained in force and was consistent with the CJEU’s ruling — the judgment having refined and supplemented, rather than overruled, the Ministry’s existing guidance.
V. Incompatibility of National Law with EU Law
A. The VAT Exemption for Educational Services: MDDP (Case C-319/12)
The case of MDDP (Case C-319/12) offers a paradigmatic illustration of the consequences that flow from incompatibility between national tax legislation and EU law. In its judgment of 28 November 2013, the CJEU held that the scope of the VAT exemption for educational services provided for under the Polish VAT Act was irreconcilable with the requirements of Council Directive 2006/112/EC on the common system of value added tax.
The Court confined itself, however, to a declaration of incompatibility, declining to prescribe the manner in which the defect should be remedied — a matter left to the competence of the national authorities. The practical consequence is that, notwithstanding the finding of incompatibility, the defective domestic provisions continued to bind taxpayers in the assessment of their right to deduct input VAT. At the same time, such a judgment may constitute a ground for the reopening of concluded tax proceedings.
It should, however, be noted that the availability of this remedy is not automatic. The application of Article 240(1)(11) of the Tax Ordinance as a basis for reopening following a CJEU judgment remains a matter of some controversy in practice, and the satisfaction of the statutory conditions is assessed on a case-by-case basis by tax authorities and administrative courts.
B. Remedies: Reopening of Proceedings and State Liability
A finding by the CJEU that national law is incompatible with EU law opens two principal avenues of recourse for the aggrieved taxpayer.
Reopening of tax proceedings. First, a CJEU judgment may furnish the basis for reopening concluded tax proceedings under Article 240(1)(11) of the Tax Ordinance — even where the underlying tax decision has become final. The taxpayer must, however, demonstrate that the specific conditions for reopening are satisfied in the circumstances of the case.
State liability for breach of EU law. Second, and more fundamentally, the Member State may incur liability in damages toward the individual harmed by the breach. The principle of state liability was established in the joined cases of Francovich (Cases C-6/90 and C-9/90) and subsequently refined in Brasserie du Pêcheur / Factortame (Cases C-46/93 and C-48/93), which articulated the conditions for liability in their mature form. The judgment in Köbler (Case C-224/01) further extended the doctrine to encompass the particular case of a breach of EU law attributable to a court of last instance.
Under the established case law, four conditions must be satisfied for state liability to arise: (i) the rule of EU law infringed must be intended to confer rights upon individuals; (ii) the breach must be sufficiently serious; (iii) the individual must have sustained damage; and (iv) there must exist a direct causal link between the breach and the damage suffered. Where all four conditions are met, the taxpayer may pursue a claim for damages against the State Treasury — a remedy that exists independently of, and in addition to, the possibility of reopening administrative proceedings.
VI. Practical Guidance: Remedies Available to the Taxpayer
Where a taxpayer has reason to believe that the domestic provision on the basis of which a tax assessment was issued is incompatible with EU law, several courses of action merit consideration.
Arguments based on EU law in administrative tax proceedings. Already at the stage of proceedings before the tax authority, a party may raise the objection that the provisions being applied are inconsistent with EU law. Although administrative tax authorities lack competence to refer preliminary questions to the CJEU, they are nonetheless bound by the obligation of consistent interpretation and must construe domestic provisions in conformity with the requirements of EU law.
Application for a preliminary reference in proceedings before the administrative court. Should the tax authority render an unfavorable decision, the taxpayer may, in the course of an appeal to the Regional Administrative Court, request that the court refer a preliminary question to the CJEU under Article 267 TFEU. While the court is not bound by such an application, a well-reasoned submission identifying a genuine question of EU law interpretation materially enhances the prospect of a reference being made.
Reopening of concluded proceedings. Where the CJEU has already rendered a judgment establishing the incompatibility of national law with EU law, the taxpayer may apply for the reopening of tax proceedings under Article 240(1)(11) of the Tax Ordinance — including in respect of proceedings concluded by a final and binding decision. The satisfaction of the statutory conditions is, however, subject to individual assessment.
An action for damages against the State Treasury. Where the taxpayer has suffered loss as a consequence of the application of provisions that contravene EU law, a claim for damages against the State Treasury may lie under the principles established in Francovich and its progeny — provided that all four conditions of state liability are satisfied.
VII. Conclusion
In adjudicating the compatibility of national law with the requirements of the EU legal order, the CJEU exercises a function of considerable constitutional significance — one that reverberates well beyond the individual case to shape the development of tax law across the Member States. Although the Court’s rulings are rendered upon specific facts, they bind the courts and authorities of all Member States as to the interpretation of the EU provisions at issue, and are accordingly treated as authoritative throughout the Union’s constituent jurisdictions.
The practical consequences for taxpayers are substantial. CJEU decisions affecting the content of tax assessments may furnish the basis for the reopening of concluded proceedings under Article 240(1)(11) of the Tax Ordinance, and — where the conditions of the Francovich doctrine are satisfied — for the recovery of damages from the State Treasury. The influence of the Court’s jurisprudence thus extends, by what one might term a form of juridical osmosis, into the domestic legal order, shaping the rights and obligations of taxpayers in proceedings to which the Court is not itself a party.
For the practitioner, the lesson is clear: familiarity with the evolving body of CJEU case law is no longer a matter of academic interest but a practical necessity — an indispensable element of effective advocacy in any tax dispute that touches upon the interface between national and European law.
Robert Nogacki – licensed legal counsel (radca prawny, WA-9026), Founder of Kancelaria Prawna Skarbiec.
There are lawyers who practice law. And there are those who deal with problems for which the law has no ready answer. For over twenty years, Kancelaria Skarbiec has worked at the intersection of tax law, corporate structures, and the deeply human reluctance to give the state more than the state is owed. We advise entrepreneurs from over a dozen countries – from those on the Forbes list to those whose bank account was just seized by the tax authority and who do not know what to do tomorrow morning.
One of the most frequently cited experts on tax law in Polish media – he writes for Rzeczpospolita, Dziennik Gazeta Prawna, and Parkiet not because it looks good on a résumé, but because certain things cannot be explained in a court filing and someone needs to say them out loud. Author of AI Decoding Satoshi Nakamoto: Artificial Intelligence on the Trail of Bitcoin’s Creator. Co-author of the award-winning book Bezpieczeństwo współczesnej firmy (Security of a Modern Company).
Kancelaria Skarbiec holds top positions in the tax law firm rankings of Dziennik Gazeta Prawna. Four-time winner of the European Medal, recipient of the title International Tax Planning Law Firm of the Year in Poland.
He specializes in tax disputes with fiscal authorities, international tax planning, crypto-asset regulation, and asset protection. Since 2006, he has led the WGI case – one of the longest-running criminal proceedings in the history of the Polish financial market – because there are things you do not leave half-done, even if they take two decades. He believes the law is too serious to be treated only seriously – and that the best legal advice is the kind that ensures the client never has to stand before a court.
