Origin and scope of right of deduction EU VAT case law

108 cases of the Court of Justice and the General Court of the European Union on this point of VAT law, from 2010 to 2025.

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Provisions these cases interpret most

Article 168 of Directive 2006/112/EC Origin and scope of right of deduction · 80 of these cases
Article 167 of Directive 2006/112/EC Origin and scope of right of deduction · 36 of these cases
Article 17 of Sixth Directive 77/388/EEC Deductions · 27 of these cases
Article 2 of Directive 2006/112/EC Subject matter and scope · 25 of these cases
Article 178 of Directive 2006/112/EC Rules governing exercise of the right of deduction · 22 of these cases
Article 9 of Directive 2006/112/EC Taxable persons · 21 of these cases
Article 273 of Directive 2006/112/EC Obligations of taxable persons and certain non-taxable persons · 14 of these cases
Article 14 of Directive 2006/112/EC Supply of goods · 9 of these cases

The 108 cases, most recent first

Under each case, what the Court decided, from its summary. The summaries are AI-generated and are not official documents: open the case for the Court’s own text.

C-475/24 Fashion TV RO and Maestro

Order · 12 November 2025 · Romania

Use of criminal evidence in deduction disputes after proceedings against directors are discontinued

By reasoned order under Article 99, the Court held that the national court must verify that the substantive and formal conditions for deduction are met and may, to that end, examine evidence obtained in earlier criminal proceedings against persons distinct from the taxable person, provided the rights guaranteed by EU law, notably equality of arms and the rights of the defence, are respected. Discontinuance of those proceedings is irrelevant. The ne bis in idem question was inadmissible. Directors are not the same person as the company. The legal certainty limb was inadmissible for inadequate reasons. Confirms that a discontinued or time-barred criminal case against directors gives a company no immunity in the parallel VAT assessment.

C-726/23 Arcomet Towercranes

Judgment · 4 September 2025 · Romania

Transfer pricing adjustments as consideration for intra-group services

Contractually detailed intra-group services remunerated by reference to the margin above 2.74%, calculated on an OECD-recommended method, are consideration for a supply of services for consideration. The remuneration is variable but neither voluntary nor uncertain, being fixed in advance on precise criteria. The authority may require evidence beyond the invoice that the services were actually supplied and used for taxed output transactions, provided it is necessary and proportionate. It may not require proof that the services were necessary or economically appropriate. A group treating a year-end transfer pricing true-up as a pure profit adjustment outside VAT cannot maintain that position where the payment is tied to identified services under an intra-group agreement. Relevant to transfer pricing and indirect tax teams in multinational groups, and to advisers handling Romanian and other reverse-charge intra-group management fee audits.

C-501/24 Klinka-Geo Trans

Order · 2 May 2025 · Hungary

Refusing deduction where the transaction never took place, without testing knowledge of fraud

Ruling by order, the Court held that the Directive does not preclude a refusal made without any examination of the recipient's knowledge where the authority establishes that the transaction did not take place. The knowledge test belongs to cases where a real transaction is tainted by fraud elsewhere in the chain, not to cases where there was no supply at all. The Court declared itself manifestly without jurisdiction on the second question and the fourth and sixth questions manifestly inadmissible, and confirmed that the national court must disapply directions it considers contrary to clear case law without needing to make a prior reference. The distinction it draws is the one that decides many Hungarian and Romanian disputes.

C-640/23 Greentech

Judgment · 13 March 2025 · Romania

Deduction refused after reclassification as a transfer of a going concern

Deduction may be refused. The right to deduct exists only for tax actually due, so where the transaction is definitively outside the scope of VAT there is nothing to deduct, and the absence of any risk of revenue loss does not change that. The qualification is that a claim for reimbursement is distinct from a deduction claim. Where recovery from the seller is impossible or excessively difficult, neutrality and effectiveness require the buyer to be able to apply directly to the tax authorities for repayment. Where an acquisition is recharacterised as a transfer of a going concern, the point is not a deduction dispute but a direct repayment claim against the tax authorities, once recovery from the seller is time-barred or otherwise blocked. Relevant to asset deals and intra-group transfers of business assets, and to Member States whose rules rely solely on invoice correction plus a civil claim.

C-270/24 Granulines Invest

Order · 14 February 2025 · Hungary

A fictitious invoice label does not replace proof of the buyer knowledge of fraud

The Court answers no on both counts. To refuse deduction the authority must establish to the requisite legal standard that the taxable person actively participated in VAT fraud, or knew or should have known that the invoice issuer had committed such a fraud. A defective date on the invoice cannot found a refusal where the authority has all the information needed to check the substantive conditions, and correcting the invoice cannot be made a precondition. A recent restatement, in a reasoned order, of the two pillars of the deduction case law.

C-262/24 Pegazus Busz

Order · 12 February 2025 · Hungary

Evidence of fraud must be put to the taxable person, and a lower court may depart from binding directions

Ruling by order, the Court declared several of the questions manifestly inadmissible or answerable from existing case law. On the merits it held that Article 47 of the Charter requires the taxable person to have knowledge of, and to be able to debate on an adversarial basis before the national court, the evidence on which the administration relies to find participation in evasion. It further held that the primacy of EU law and Article 267 TFEU oblige the national court to set aside directions it considers contrary to EU law, without being required to make a preliminary reference first. Two points of real practical weight in fraud cases.

C-527/23 Weatherford Atlas Gip

Judgment · 12 December 2024 · Romania

Deduction of VAT on intra-group administrative services

Article 168 precludes such a refusal where it is established that the services are used by the taxable person for the purposes of its own taxed output transactions. Simultaneous supply to other group members is irrelevant, as is the necessity or economic profitability of the purchase. But the national court must verify that the share of costs borne corresponds to the services actually received for its own transactions. VAT on expenditure serving third parties' transactions is not deductible. Useful for groups operating shared service or management charge arrangements across borders, where local authorities challenge deduction on "benefit to the group" or "no business need" grounds.

C-475/23 Voestalpine Giesserei Linz

Judgment · 4 October 2024 · Romania

Deduction on equipment provided free of charge to a subcontractor

Free provision to the subcontractor does not of itself break the link. Deduction must be allowed where the cost forms a component of the taxable person's output transactions or general costs. The qualification is that if the making available goes beyond what is necessary for that purpose, the link is partly broken and deduction is limited to the objectively necessary part. Absence of separate accounts is a formal failing and cannot bar deduction where the authorities can verify the substantive conditions. Penalties may be imposed instead. Useful for manufacturers and toll processing structures where the principal supplies plant, tooling, cranes or premises to contractors at no charge, a common pattern in automotive, foundry and construction supply chains.

C-83/23 H GmbH (Direct right to a refund of VAT)

Judgment · 5 September 2024 · Germany

Limits of the direct claim against the tax authority for VAT wrongly invoiced

The recipient has no direct claim against the tax authority in those circumstances. Where the tax authority has already refunded the wrongly invoiced VAT to the supplier, it cannot be required to pay it a second time to the recipient, and the Reemtsma case law does not apply. The supplier's liquidation is irrelevant because that case law does not disturb the ranking of creditors, and the authority need not absorb the disruption to the normal refund chain. The direct claim remains an exception, available only where the recipient has exhausted its available remedies against the supplier. Recipients of invoices bearing the wrong Member State's VAT must act promptly against the supplier, including suing for a corrected invoice showing the VAT of the place of supply, before the supplier is refunded or dissolved. Relevant to cross-border leasing and sale and leaseback structures, and to anyone relying on HUMDA.

C-696/22 C (Court-appointed administrators and liquidators)

Judgment · 13 June 2024 · Romania

Chargeability on continuous services and proof of the link for input deduction

Such continuous services fall within Article 64(1) where they give rise to successive statements of account or payments, so VAT becomes chargeable on expiry of each period irrespective of non-payment. Article 90(1) governs non-payment. Increased turnover or volume of taxable transactions is irrelevant to the deduction link. The objective content, actual use and exclusive reason for the purchase decide. A hearing breach requires annulment only if the outcome might have differed, suspension of enforcement being irrelevant. Suppliers billing periodically, insolvency practitioners, professional firms and any provider with milestone or periodic fee arrangements, cannot defer chargeability by making payment conditional on the customer's cash position.

C-341/22 Feudi di San Gregorio Aziende Agricole

Judgment · 7 March 2024 · Italy

Denial of deduction to "non-operating" companies

Status as a taxable person depends solely on whether an economic activity is actually carried on. It cannot be made conditional on output transactions exceeding a pre-set income threshold. Nor may deduction be refused on the ground that output transactions are insufficient. A volume-based presumption is unconnected to the criteria for establishing fraud or abuse and goes beyond what is necessary under Article 273. Deduction may still be refused where fraud or abuse is established on objective evidence, not by assumption. Italian companies caught by the Article 30 Law No 724/1994 shell company regime can challenge refusals of VAT credits, refunds, offsets and carry-forwards based purely on turnover falling short of the asset-based threshold.

C-537/22 Global Ink Trade

Judgment · 11 January 2024 · Hungary

Due diligence and the burden of proof in denying deduction

A lower court must disregard higher court rulings inconsistent with the Court's interpretation, whether given by judgment or reasoned order. An obligation merely to give reasons for departing is permissible. Refusal for lack of diligence assessed by circular is allowed only if the authority still proves, by objective evidence, fraud and the taxable person's knowledge. No complex, far-reaching checks on counterparties may be required. The authority must follow its own circular, which must be unequivocal and foreseeable. Establishing a circular invoicing chain alone is insufficient. Fraud must be accurately described, though not every operator identified. Relevant to traders facing Hungarian (and comparable) deduction denials based on supplier unreliability or "passive fraud".

C-114/22 Dyrektor Izby Administracji Skarbowej w Warszawie (VAT – Fictitious acquisition)

Judgment · 25 May 2023 · Poland

Deduction refused because the transaction is void under national civil law

The Court held that those provisions preclude such legislation. Invalidity under national civil law cannot in itself justify refusal. The authority must either show that the criteria for a fictitious transaction under EU law are met (no actual supply, chargeability under Article 63 never arising) or, where the transaction did take place, that the deduction is claimed fraudulently or abusively. Civil-law sham status may be evidence of fraud or abuse, but nothing more. Relevant wherever national anti-abuse or anti-avoidance rules key deduction off civil-law nullity, notably Article 88(3a)(4)(c) of the Polish VAT Law.

C-127/22 Balgarska telekomunikatsionna kompania

Judgment · 4 May 2023 · Bulgaria

Adjustment of input VAT on goods written off, scrapped or destroyed

Sale of written-off goods as waste subject to VAT is no change in the deduction factors, even if waste sales are outside the taxpayer's usual activity and the value is reduced. Voluntary destruction is a change under Article 185(1), but falls within "destruction" under the first subparagraph of Article 185(2), so no adjustment, provided it is duly proved or confirmed and the goods had objectively lost all usefulness. Disposal counts where it causes irreversible disappearance. National rules requiring adjustment in those cases are precluded. Businesses scrapping obsolete or defective plant and stock can resist adjustment demands, whether the items are sold on as scrap or destroyed.

C-519/21 DGRFP Cluj

Judgment · 16 February 2023 · Romania

Unregistered association without legal personality, who is the taxable person and who deducts

The parties to an association contract without legal personality that was not registered with the tax authorities before the activity began cannot be treated as taxable persons alongside the person liable on the taxable transaction. The sales' legal effects concerned only the registered owners. Absence of an invoice in the claimant's own name is not fatal, but deduction depends on objective evidence that the goods and services were actually supplied to her by taxable persons for her own taxed transactions, avoiding double deduction. The third question was inadmissible. Relevant to property developers and joint ventures structured as contractual associations or silent partnerships, particularly where individuals pool land and finance.

C-289/22 A.T.S. 2003

Order · 9 January 2023 · Hungary

Deduction refused for fraud, regulatory breaches up the chain and the taxable person's duty of care

By reasoned order under Article 99. Cost reduction is legitimate because refusal requires a wholly artificial arrangement whose sole or essential aim is a tax advantage contrary to the Directive. A breach of national sector rules is not itself proof of fraud, but may be one indication in an overall assessment. The authority must characterise the fraud and prove participation or knowledge, though not identify every perpetrator. Taxable persons need not verify upstream compliance, unless indications of irregularity call for greater care.

C-512/21 Aquila Part Prod Com

Judgment · 1 December 2022 · Hungary

Proving participation in carousel fraud and the limits of the duty of diligence

The authority cannot rely merely on the existence of a circular invoicing chain. It must accurately describe the constituent elements of the fraud, prove the fraudulent conduct and establish either active participation or that the taxable person knew or ought to have known, though it need not identify every operator. Where fraud indicators exist, greater diligence may be required, but not complex checks equivalent to the authority's own investigations. Food safety breaches cannot alone justify refusal, but may be one element among others. Relevant to any business facing deduction refusals in chain transaction cases, particularly in Hungary and in the food sector.

C-596/21 Finanzamt M (Scope of the right to deduct VAT)

Judgment · 24 November 2022 · Germany

Refusal of deduction in full where the buyer ought to have known of upstream fraud

Deduction may be refused to the second purchaser who knew or ought to have known of the original seller's VAT fraud, and the first purchaser's own knowledge of that fraud does not prevent this. Refusal is not limited to the amount of the fraud or the tax loss. The right to deduct must be refused in its entirety, because absence of such knowledge, after checks reasonably required of any operator, is an implied material condition of deduction. No risk of revenue loss need be shown. Confirms that the knowledge test operates as an all or nothing material condition, not a proportionate sanction, and is separate from penalties under Article 273. Relevant to anyone dealing in high value movable goods, notably motor vehicles.

C-227/21 HA.EN.

Judgment · 15 September 2022 · Lithuania

Deduction where the vendor is insolvent and cannot pay the output VAT

Article 168(a), read with fiscal neutrality, precludes such a practice. Mere failure to pay duly declared VAT is not fraud, so the purchaser cannot be treated as knowingly participating in fraud, nor is there abuse, since a secured creditor taking over the property after a failed auction pursues debt recovery, not a tax advantage. The Court distinguished ALTI is that a purchaser in a court supervised compulsory sale is not in the position of a contractual counterparty of the principal VAT debtor. Member States may instead use the Article 199(1)(g) reverse charge. Purchasers of real estate in enforcement and insolvency sales, and secured creditors taking assets in satisfaction of debt, keep their deduction even where the vendor's inability to pay is obvious. Relevant to distressed debt, restructuring and property advisers.

C-98/21 Finanzamt R (Deduction of VAT linked to a shareholder contribution)

Judgment · 8 September 2022 · Germany

Input VAT on services supplied as a shareholder contribution in kind

The holding company has no right to deduct that input tax. Although supplying management and accounting services for consideration makes the holding company a taxable person, the bought-in services were the very object of the shareholder contribution, which is part of share holding and not an economic activity. Their actual use was in the subsidiaries' transactions, so they had no direct and immediate link with the holding company's own supplies and were not general costs. The abuse question did not need answering. The reliance on the contribution sustaining the subsidiaries' need for management services was irrelevant. Groups using a managing holding company to buy in construction, planning or marketing services and inject them into exempt-supplying subsidiaries cannot recover that input VAT, even where the holding company also invoices genuine management fees.

C-188/21 Megatherm-Csillaghegy

Order · 3 June 2022 · Hungary

Forfeiture of input VAT deduction on revocation of a tax identification number

Ruling by reasoned order under Article 99, the Court held that those provisions and the principles of neutrality and proportionality preclude such automatic forfeiture where the substantive conditions for deduction are met and the taxable person has not acted fraudulently or improperly. The qualification is that refusal remains possible where the breach of formal obligations prevents conclusive proof that the substantive conditions are satisfied, or where fraud or abuse is established by the authorities. The national court must verify these matters. Confirms Siemens Gamesa and Promexor Trade for pre-revocation periods. Relevant to advisers handling Hungarian deregistration cases and any businesses whose VAT numbers have been cancelled and later reinstated, including historic claims.

C-582/20 SC Cridar Cons

Judgment · 24 February 2022 · Romania

Suspension of a tax appeal pending criminal proceedings

No preclusion, subject to three conditions: the suspension must not push the complaint beyond a reasonable time. The suspension decision must state its reasons in fact and law and be open to judicial review, and, if the refusal turns out to breach EU law, the taxable person must be repaid within a reasonable time with default interest where appropriate. Suspension of enforcement need not be automatic, but must be available where there is serious doubt as to lawfulness and serious, irreparable harm would otherwise result. Confirms that tax authorities may pause appeal proceedings to await criminal evidence, but fences the practice.

C-9/20 Grundstücksgemeinschaft Kollaustraße 136

Judgment · 10 February 2022 · Germany

Timing of input tax deduction where the supplier accounts for VAT on a cash basis

Article 167 precludes such legislation. Where a Member State uses the Article 66(b) derogation so that VAT becomes chargeable to the supplier only on receipt of payment, the customer's right of deduction likewise arises on payment. The link between chargeability and deduction may be severed only within the optional and much narrower scheme of Article 167a, which Germany had not adopted. The second question did not require an answer. Where a supplier accounts for VAT on a cash basis under an Article 66(b) derogation, the customer's deduction right follows the supplier's chargeability and not the time of supply.

C-156/20 Zipvit

Judgment · 13 January 2022 · United Kingdom

Deduction of VAT on supplies mistakenly treated as exempt

The recipient has no right to deduct in those circumstances. Where the contract made the price exclusive of VAT and the recipient liable for any VAT, and it was not legally impossible for the supplier to recover the tax but it never did, the invoiced price is a price exclusive of VAT. Tulica and Plavosin does not apply. "Due" requires an enforceable claim, so no demand means no deductible tax. Articles 90 and 185 are irrelevant where VAT was never charged. Third question left unanswered. Recipients of supplies retrospectively found to be taxable cannot gross up historic exempt-treated prices and claim input tax where no VAT was ever charged or demanded, even if the mistake originated with the tax authority and recovery is now time-barred. Relevant to postal, financial, education, health and welfare sectors and to any business relying on published administrative guidance later found to misstate an exemption.

C-154/20 Kemwater ProChemie

Judgment · 9 December 2021 · Czechia

Deduction where the true supplier is unidentified

Deduction must be refused, without proof of fraud or knowledge of fraud, where the true supplier has not been identified and the taxable person fails to show that the supplier was a taxable person. The qualification is that refusal is only permissible if, on the factual circumstances and the evidence produced, the information needed to verify that status is lacking. Taxable person status is a material condition and may follow from the facts, for example where the volume and price of supplies show the small business exemption cannot apply. Naming the supplier on the invoice is formal.

C-334/20 Amper Metal

Judgment · 25 November 2021 · Hungary

Deduction of VAT on advertising services said to be overpriced and ineffective

Deduction is available where the advertising is a supply subject to VAT under Article 2 and has a direct and immediate link with taxable output transactions or with the taxable person's economic activity as a whole, as general costs. Neither an excessive price against an authority's reference value nor the absence of any turnover increase is relevant. Article 80 does not apply between independent parties. The national court must still verify the link, and whether the spending is entertainment expenditure outside strictly business expenditure under Article 176. Tax authorities cannot use profitability, economic rationality or benchmark pricing to deny deduction on arm's length purchases.

C-358/20 Promexor Trade

Judgment · 18 November 2021

Deregistration for VAT, continued trading, and the right to deduct that follows

The Court held that those provisions and principles do not preclude such national legislation, where the identification has been revoked because no taxable transactions were indicated in the returns filed for six consecutive months and the taxable person continues its activities notwithstanding the revocation, provided that the taxable person is able to re-register for VAT purposes and to deduct the input VAT paid. The Court added that the fact that the director of the taxable person is a partner in another company which is the subject of insolvency proceedings cannot, in itself, be relied on to refuse systematically the re-registration of that taxable person for VAT purposes. Identification is a formal requirement and not a substantive condition of the right to deduct, and the judgment keeps that distinction workable by making the compatibility of the national regime conditional on a real route back to registration.

C-281/20 Ferimet

Judgment · 11 November 2021 · Spain

Deduction where the invoice names a fictitious supplier under the reverse charge

Naming the supplier is a formal condition, but the supplier's status as a taxable person is a material one. Deduction must be refused where, on the facts and the evidence the taxable person produces, the information needed to verify that the true supplier was a taxable person is lacking, or where it is established to the requisite legal standard that the taxable person committed VAT fraud or knew or should have known the transaction was connected with such fraud. Neither a risk of revenue loss nor a tax advantage need be shown. Relevant to scrap, metals and waste traders and anyone self-billing under domestic reverse charges.

C-45/20 Finanzamt N and Finanzamt G (Communication of the allocation decision)

Judgment · 14 October 2021 · Germany

Deadline for communicating the allocation of mixed-use assets to business assets

The allocation decision itself is a substantive condition. Communicating it is only formal. Nevertheless, a Member State may refuse deduction where, by expiry of the statutory annual return deadline, the authority has not been put in a position to establish allocation by an express decision or sufficient evidence, unless the arrangements for exercising the option breach proportionality. Intention may be shown implicitly, so the national court must weigh less onerous penalties such as administrative fines against outright refusal. Time limits for signalling allocation of mixed-use capital goods survive, but only subject to a proportionality review that national courts must actually carry out.

C-21/20 Balgarska natsionalna televizia

Judgment · 16 September 2021 · Bulgaria

Public broadcasting funded by State subsidy and the scope of deduction

The activity is not a supply for consideration. There is no legal relationship of reciprocal performance with viewers and no direct link between the services and the subsidy, which is set per programme hour regardless of viewership. Le Rayon d'Or is distinguished. The exemption question therefore falls away. Under Article 168, input VAT is deductible on purchases used for activities giving rise to deduction and not deductible on purchases used for out-of-scope activities. The method of financing is irrelevant. Member States set the apportionment method, respecting proportionality. Public broadcasters and comparable subsidy-funded bodies must treat free-to-air public service output as outside the scope of VAT, not exempt, and exclude it from the Articles 173 to 175 pro rata. Relevant to advisers to public bodies, cultural and media organisations and any taxable person with substantial grant funding alongside taxable supplies.

C-248/20 Skellefteå Industrihus

Order · 18 May 2021 · Sweden

Abandoned property project and the option to tax

By reasoned order under Article 99, the Court held that those provisions preclude national legislation requiring immediate repayment of the whole input VAT plus interest merely because the project produced no taxed activity. The discretion under Article 137(2) cannot revoke a right of deduction already acquired. They do not, however, preclude national legislation imposing an obligation to adjust the input VAT deducted, since abandoning the intended taxed use breaks the direct link required by Articles 184 to 185.

C-108/20 Finanzamt Wilmersdorf

Order · 14 April 2021 · Germany

Deduction may be refused for known upstream fraud even without active participation

The Court holds that the directive does not preclude that practice. A taxable person who knew or should have known that by his purchase he was taking part in a transaction connected with VAT fraud must be regarded as a participant in that fraud, irrespective of whether he profits from it or plays any active role. Refusing the deduction in those circumstances is compatible with the directive. A reasoned order that closes off a line of argument sometimes run in defence.

C-573/20 Casa di Cura Città di Parma

Order · 14 April 2021 · Italy

Italian health provider could not deduct input tax attributable to exempt care

The Court holds that it does not preclude such legislation. Deduction is available only in so far as the inputs are used for taxed transactions, so tax attributable to exempt supplies is not recoverable, and including those supplies in the denominator of the deductible proportion is what the directive itself provides. The second to fourth questions were held manifestly inadmissible. Decided on the same day and to the same effect as Debiasi, this order confirms that the exempt status of healthcare carries its familiar cost.

C-42/19 Sonaecom

Judgment · 12 November 2020 · Portugal

Deduction on abortive acquisition costs, but not on a bond loan that was on-lent

The Court answers yes to the first and no to the second. The consultancy costs are deductible even though the acquisition never happened, since the intention to carry out taxable transactions is what counts. The loan commission is not deductible, because the capital was in fact used for a different purpose, an exempt on-lending to the parent, which broke the link with the intended taxable activity. The judgment draws the line by reference to what actually happened to the resources.

C-621/19 Weindel Logistik Service

Order · 29 October 2020 · Slovakia

An importer without ownership and without bearing the cost cannot deduct import VAT

The Court holds that Article 168(e) precludes granting the deduction in those circumstances. Deduction of import VAT requires the imported goods to be used for the purposes of the taxable person taxed transactions, which means the cost of the import must be a component of the price of its output supplies. Being the person liable for the tax at importation is not by itself sufficient. The order is decisive for logistics providers, tollers and warehousing operators who act as importer of record for goods belonging to someone else.

C-405/19 Vos Aannemingen

Judgment · 1 October 2020 · Belgium

Deduction where costs also benefit a third party

An ancillary benefit to a third party, flowing from services acquired in the taxable person's own interest, does not restrict deduction. That holds equally where the costs attach to particular output transactions rather than overheads, but only in so far as a direct and immediate link with the taxable person's own taxable transactions is maintained. No deduction arises for the part of the expenditure linked to transactions carried out by the third party. The unexercised ability to on-charge is one relevant factor, not decisive. Relevant to property developers building on third party land, and more widely to any business bearing marketing, agency or administrative costs from which a counterparty also profits.

C-528/19 Mitteldeutsche Hartstein-Industrie

Judgment · 16 September 2020 · Germany

Input tax on infrastructure works carried out for a municipality

Deduction is available where the road serves both the taxable person's economic activity and the public, provided the works did not exceed what was objectively necessary for that activity and their cost is reflected in the price of the taxable output transactions. Excess works break the link in part. A unilateral operating authorisation is not consideration but a condition sine qua non, so the works are not made for consideration. Nor are they a deemed supply under Article 5(6), given the actual end-use benefits the taxable person.

C-610/19 Vikingo Fővállalkozó

Order · 3 September 2020 · Hungary

Refusal of deduction where invoices are held implausible in a supply chain

Ruling by reasoned order under Article 99, the Court held that the Directive precludes that national practice. None of those four grounds, alone or together, justifies refusal. The concept of supply of goods is objective and is satisfied even if the goods were neither made nor supplied by the invoice issuer and the actual source is unidentified. Refusal requires the authorities to prove, on objective evidence, active participation in fraud or that the taxable person knew or should have known of fraud upstream. The penalty and Charter questions were inadmissible. A further restatement, in order form, of Mahagében and Signum Alfa for advisers handling Hungarian and other chain-supply deduction denials, especially in goods trading and machinery purchases.

C-611/19 Crewprint

Order · 3 September 2020 · Hungary

Fraud cannot be inferred from contractual structure, subcontracting chains or personal links

The Court holds that the directive precludes that practice. To justify a refusal it must be established, otherwise than by suppositions based on predetermined criteria, that the taxable person actively participated in a fraud or that it knew or should have known that the transactions were connected with a fraud committed by the invoice issuer. Verifying that is a matter for the referring court. The order is the clearest statement that the indicia so often relied on by tax authorities, an unusual contractual route, a long subcontracting chain, related parties, are starting points for an investigation and not findings of fraud.

C-430/19 C.F. (Tax inspection)

Judgment · 4 June 2020 · Romania

Access to the audit file and evidence beyond the invoice

Denial of access to file information relied on requires annulment only where the national court finds that, absent the irregularity, the outcome of the procedure might have been different. Where the authority has merely uncorroborated doubts that the invoiced transactions occurred, deduction cannot be refused for want of evidence additional to the invoice. Refusal requires objective evidence that the taxable person knew or should have known of fraud, established by the authority without imposing checks that are not the customer's responsibility. Useful for anyone facing assessments built on suppliers' apparent lack of resources or a more favourable tax status.

C-707/18 Amărăşti Land Investment

Judgment · 19 December 2019 · Romania

Land registration costs borne by the purchaser as a deemed supply to the vendor

The Directive does not prevent the parties from agreeing that the purchaser bears some or all of the administrative costs, but such a clause is not decisive for the purchaser's right of deduction. Because first registration and entry of the proprietor are a statutory obligation of the vendor, a purchaser acting in its own name who performs those steps acts on behalf of the vendor and is deemed under Article 28 to have supplied the services to the vendor, even though the price excludes the value of the land-registration work and nothing was re-invoiced. Purchasers of unregistered immovable property who absorb the vendor's registration, notarial and surveying costs cannot simply treat the input VAT as their own investment expenditure.

C-189/18 Glencore Agriculture Hungary

Judgment · 16 October 2019

Findings made against suppliers, and the conditions for using them against the customer

The Court held that such legislation or practice is not precluded, subject to three conditions. First, it must not relieve the tax authority of the obligation to disclose to the taxable person the evidence, including evidence originating in the related procedures, on which it intends to base its decision, and the taxable person must not be deprived of the right effectively to challenge those findings of fact and legal classifications in the procedure brought against him. Second, the taxable person must be able to have access, during that procedure, to all the evidence obtained in the related or other procedures on which the authority intends to rely or which may assist the exercise of the rights of the defence, unless objectives of public interest justify restricting access. Third, the court hearing the action against the decision must be able to review the legality of the way that evidence was obtained and used, and the findings in the decisions taken against the suppliers that are decisive for the outcome. The judgment accepts the administrative economy of reusing findings made against suppliers, but attaches to it a set of conditions that operate at three separate stages: disclosure by the authority, access by the taxable person, and review by the court.

C-329/18 Altic

Judgment · 3 October 2019 · Latvia

Food traceability duties and the right to deduct

Deduction cannot be refused on the sole ground of breach of the food traceability identification duty. That duty serves food safety, not fraud detection, and identification by name and address normally suffices. Such a breach may nonetheless be one of several consistent indications of knowledge of fraud, particularly where circumstances should have raised serious doubts about the supplier's existence or identity. Failure to verify suppliers' food business registration is irrelevant. That is a check the purchaser cannot be required to make. Relevant to agri-food, feed and commodity traders and their advisers facing denial of deduction based on sectoral regulatory failings.

C-273/18 Kuršu zeme

Judgment · 10 July 2019 · Latvia

Refusing deduction in a supply chain requires proof of an undue tax advantage

Those two facts, a chain of successive sales and collection from a warehouse of someone other than the invoiced supplier, are not in themselves sufficient to establish an abusive practice. The authority must identify the undue tax advantage obtained by the taxable person or the other participants. Where no such evidence is adduced, deduction cannot be refused. Separately, the national court must still determine to which supply in the chain the single intra-Community transport is ascribed, which governs the extent of the deduction or refund right. Useful for anyone facing a Baltic or wider EU audit where deduction is denied simply because intermediaries appear economically pointless.

C-316/18 The Chancellor, Masters and Scholars of the University of Cambridge

Judgment · 3 July 2019 · United Kingdom

Costs of managing an endowment fund are not deductible overheads

The Court holds that it is not entitled to deduct that input tax. The investment activity falls outside the scope of VAT, and the costs of collecting and placing the donations attach to that non economic activity rather than to the economic activity. The mere fact that the income is then used to fund the whole range of activities does not make the management fees a cost component of the taxable output supplies. The judgment tightens the overheads route opened by Kretztechnik and Cibo.

C-566/17 Związek Gmin Zagłębia Miedziowego

Judgment · 8 May 2019 · Poland

Apportionment of input tax where national law provides no method

Article 168(a) precludes such a practice. The obligation to apportion follows from the wording of Article 168(a) itself, and the absence of national apportionment rules cannot extend the right of deduction to costs of activities outside the scope of VAT. Fiscal legality, as a general principle of EU law, requires only the essential features of the tax to be laid down by law, not every technical aspect. Apportionment is an ancillary pre-condition, particularly where the taxable person can choose a method or seek a ruling. Relevant to public bodies, associations of municipalities, waste and utilities operators, charities and holding structures carrying on both economic and non-economic activities.

C-712/17 EN.SA.

Judgment · 8 May 2019 · Italy

Circular fictitious invoicing, liability under Article 203 and proportionality of penalties

Both denial of deduction and liability of the invoice issuer are inherent in the Directive and may apply cumulatively to the same trader, even where the issuer acted in bad faith. However, Member States must allow the Article 203 liability to be adjusted where the issuer has, in sufficient time, wholly eliminated the risk of loss of tax revenue. A fine equal to the full amount deducted, imposed without regard to the output VAT paid and the absence of any Treasury loss, breaches proportionality and neutrality. Relevant to anyone facing assessments on carousel-style or round-tripping invoicing where the flows cancel out, including intra-group trading structures in energy and commodities.

C-225/18 Grupa Lotos

Judgment · 2 May 2019 · Poland

Standstill clause and the block on deducting VAT on accommodation and catering

Article 168(a) precludes the exclusion in so far as its scope was extended after accession, so a taxable person supplying tourism services cannot be denied deduction on accommodation and catering re-invoiced to other taxable persons. It does not preclude the exclusion, as it stood before accession and was maintained, for a taxable person not supplying tourism services who re-invoices such services. The standstill clause covers adequately defined categories, including strictly business expenditure. Confirms that pre-accession blocks on deduction survive even where the expenditure is wholly business related and is on-charged, provided the category is defined by reference to the nature of the services. Relevant to advisers in Poland and other later acceding States with sectoral deduction blocks, and to groups that recharge hotel and catering costs internally.

C-165/17 Morgan Stanley & Co International

Judgment · 24 January 2019 · France

Deductible proportion of a branch serving its foreign principal establishment

Branch and principal establishment are one taxable person, so internal flows are disregarded. For expenditure used exclusively for the principal establishment's transactions, the fraction's denominator is the turnover of those transactions alone. The numerator only its taxed transactions which would also give a right to deduct in the branch's Member State, including where deduction arises from an option exercised there. For the branch's general costs, the denominator covers the transactions of both establishments, the numerator the branch's taxed transactions plus those of the principal establishment meeting the same double test. Directly relevant to banks, insurers and other partly exempt groups operating through cross-border branches, and to anyone computing branch recovery rates.

C-491/18 Mennica Wrocławska

Order · 13 December 2018 · Poland

An error in describing the goods on an invoice does not defeat deduction

The Court holds that those provisions preclude such a refusal, where the taxable person supplied the authorities, before their decision, with the documents and explanations needed to determine the real subject matter of the transactions and to show that they had actually taken place. Deduction may still be refused where the right is invoked fraudulently or abusively, but the referring court had found no fraud here. A clear application of Barlis 06 and Senatex.

C-664/16 Vădan

Judgment · 21 November 2018 · Romania

Proving input tax without invoices

No deduction may be granted solely on the basis of an assessment resulting from a court-commissioned expert report where the taxable person cannot evidence the input VAT actually paid by invoices or any other document. Formal defects need not be fatal where the authorities have the information to verify the substantive conditions, but the burden of proof rests on the claimant. Objective evidence, including documents held by suppliers, is required. An expert report may supplement or reinforce such evidence, never replace it. Relevant to property developers and any taxable person reconstructing historic input tax after a retrospective registration or assessment, and to advisers arguing substance over form.

C-502/17 C&D Foods Acquisition

Judgment · 8 November 2018 · Denmark

Deduction on an abandoned sale of shares in a sub-subsidiary

A share disposal falls within the scope of VAT only where its direct and exclusive reason is the taxable economic activity of the company concerned, or where it is the direct, permanent and necessary extension of that activity, for instance where the proceeds are allocated to that activity or the group's economic activity. Here the proceeds were intended to settle debt owed to the new group owner, so the transaction was outside the scope and the VAT not deductible. That the sale never completed, and that the management services would have ceased, changed nothing. For holding companies and private equity structures what has to be established, before the deal costs are incurred, is the purpose to which the sale proceeds are destined.

C-153/17 Volkswagen Financial Services (UK)

Judgment · 18 October 2018 · United Kingdom

Residual input tax on vehicle hire purchase, apportionment method

General costs actually incurred, at least in part, for the taxable vehicle supplies are cost components of those supplies for VAT purposes, even though the taxable person passed them on only in the exempt interest. The commercial result is irrelevant. A special method which disregards an actual and non-negligible allocation of overheads to taxable supplies cannot be more precise than the turnover key and is therefore not permitted. Banco Mais is confined to its own circumstances. Relevant to lessors, hire purchase providers and captive finance companies with agreed special methods, and to tax authorities imposing use based apportionment.

C-249/17 Ryanair

Judgment · 17 October 2018 · Ireland

Deduction of deal costs on an abortive takeover

Preparatory acts count as economic activity, so a company intending to acquire shares in order to supply the target with management services subject to VAT acts as a taxable person when it incurs the bid costs. The input VAT is deductible in full even though the intended activity never materialised and produced no taxable output. The qualification is that the exclusive reason for the expenditure must lie in the intended economic activity. If it is partly attributable to exempt or non-economic activity, deduction is only partial. Confirms that failed or partial acquisitions do not of themselves destroy recovery on deal fees, for corporate acquirers, holding companies and their M&A and VAT advisers.

C-16/17 TGE Gas Engineering

Judgment · 7 August 2018 · Portugal

Head office and branch as a single taxable person for deduction

Those provisions do not permit a company and its branch to be treated as two taxable persons on that ground. A company and its branch in another Member State form a single taxable person unless the branch carries out an independent economic activity bearing its own economic risk, and holding two tax identification numbers does not change that. Deduction cannot be refused solely because one number was used to join the group and the other for the re-invoicing. The referring court must still verify that the substantive conditions in Article 168(a) are met. Useful where a non-resident registers twice in the same Member State, first for an isolated transaction and later as a branch, and the authorities treat the numbers as separate persons.

C-459/17 SGI and Valériane

Judgment · 27 June 2018 · France

Deduction where no actual supply took place

It is sufficient for the authorities to establish that the transactions covered by the invoice were not actually carried out. The right to deduct arises only when the tax becomes chargeable, that is on actual delivery, and does not extend to tax due merely because it appears on an invoice. The good or bad faith of the recipient is irrelevant to whether a supply occurred. The concept of supply is objective. Stroy trans and LVK concerned different facts, where non-delivery had not been established. A clear separation of two lines of case law.

C-660/16 Kollroß and Wirtl

Judgment · 31 May 2018 · Germany

Input VAT on advance payments for goods never delivered

Deduction cannot be refused where the advance was paid and received and, at that time, all relevant information about the future supply was known to the buyer and the supply appeared certain. An unfixed delivery date does not create uncertainty. Deduction may be refused if objective evidence shows the buyer knew or should reasonably have known the supply was uncertain. Articles 185 and 186 do not preclude national rules making adjustment conditional on the supplier refunding the advance. Advance payment deductions are tested at the moment of payment, so later non delivery through supplier fraud or insolvency does not retrospectively destroy the right where the goods and price were identified. Relevant to plant and equipment purchasers, prepayment arrangements generally, and any adviser handling failed supplier claims.

C-628/16 Kreuzmayr

Judgment · 21 February 2018 · Austria

Ascribing the transport in a chain supply and deduction of wrongly invoiced VAT

The transport is ascribed to the second supply where the final purchaser obtained the right to dispose of the goods as owner before the transport began. Article 32 therefore applies to that second supply. The first supplier's misinformed classification and the intermediary's destination-State VAT number are irrelevant, because both the intermediary and the final purchaser knew the objective facts. VAT due only because it appears on an invoice is not deductible, and legitimate expectations cannot be invoked against a supplier. Recovery lies against the invoicing party under national law. Confirms that chain-transaction analysis rests on objective evidence known to the intermediary and final purchaser, not on the first supplier's treatment or the VAT number quoted. Relevant to commodity and fuel traders, distribution chains using collection numbers and ex works terms, and advisers reviewing invoicing positions in triangular sales.

C-507/16 Entertainment Bulgaria System

Judgment · 15 November 2017 · Bulgaria

Deduction where registration is only for cross-border services and the small enterprise exemption applies

The Court distinguishes two situations. Deduction cannot be refused merely because the person is identified for VAT under Article 214(1)(d) or (e). Identification is a formal requirement for control purposes and cannot defeat deduction where the substantive conditions are met. But if the taxable person is eligible for the exemption scheme in its own Member State, Article 289 denies deduction there, so the Article 169(a) condition (that VAT would be deductible had the transactions been domestic) is not satisfied and refusal is lawful. Which situation applies is for the national court. Relevant to small enterprises within a national exemption threshold that nonetheless register because they receive or make cross-border B2B services.

C-552/16 Wind Inovation 1

Judgment · 9 November 2017 · Bulgaria

Deemed supply on deregistration of a company in liquidation

Article 176 was not engaged, as no exclusion from deduction was at issue. The Court drew the line by reference to Article 18(c). A Member State may require VAT on available assets to be calculated and paid on court-ordered dissolution only where the company no longer carries out economic transactions. Where it continues to carry out economic transactions while in liquidation it retains taxable person status, and conditioning deduction on actual payment of that tax restricts the right to deduct contrary to Article 168. Relevant to insolvency practitioners, liquidators and advisers dealing with companies wound up or dissolved while still trading, particularly in Member States that treat dissolution as an automatic ground for deregistration.

C-101/16 Paper Consult

Judgment · 19 October 2017 · Romania

Deduction refused because the supplier was declared an inactive taxpayer

The Directive precludes such rules where the refusal is systematic and final and leaves the customer no opportunity to show that there was no evasion or loss of tax revenue. Requiring a trader to make the straightforward check of the published list is a legitimate and proportionate anti-fraud measure. Failure to file returns is indicative of evasion but does not prove it. No limitation of temporal effects. The Romanian authorities could not claim good faith.

C-132/16 Iberdrola Inmobiliaria Real Estate Investments

Judgment · 14 September 2017 · Bulgaria

Deduction on works to infrastructure owned by a third party

Deduction is available where there is a direct and immediate link with the taxable person's taxed output transactions, and the free benefit to the third party does not defeat it. Two qualifications: the works must not exceed what is necessary to enable the taxable person's taxable output transactions, and their cost must be included in the price of those transactions. If the works go further, the link is partially broken and deduction is limited to the objectively necessary part. Article 26 was not engaged. Confirms that a blanket national denial of deduction because a supply is free of charge, or because the improved asset belongs to someone else, cannot stand.

C-564/15 Farkas

Judgment · 26 April 2017 · Hungary

Reverse charge applied to the wrong transaction, deduction and penalty

Article 199(1)(g) applies only to immovable property sold by a judgment debtor in a compulsory sale. Deduction of VAT that was not due may be refused even though the seller paid it to the Treasury. The purchaser must seek reimbursement from the seller. But where that is impossible or excessively difficult, notably on the seller's insolvency, he must be able to claim directly from the tax authority. A 50% penalty for a purely administrative error causing no revenue loss appears disproportionate, subject to the national court's assessment. Confirms that domestic reverse charges cannot be extended beyond the categories listed in Article 199 without an Article 395 derogation, which is where national insolvency and auction regimes are exposed.

C-28/16 MVM

Order · 12 January 2017 · Hungary

Deduction by a holding company managing subsidiaries free of charge

Ruling by reasoned order under Article 99, the Court held that involvement in managing subsidiaries without any remuneration is not an economic activity, so no deduction arises for services relating to transactions outside the Directive. Deduction as general overheads was not excluded in principle, but the referring court must verify the direct and immediate link with the leasing activity, which the Court thought difficult to envisage. Later charging of a margin (from 2015) cannot revive deduction for 2008 to 2010 costs. Confirms that active holding status depends on actually supplying services for consideration, not on de facto management.

C-446/15 Signum Alfa Sped

Order · 15 December 2016 · Hungary

Doubts about who really performed the service do not by themselves defeat deduction

The Court holds that the directive precludes that practice, unless it is established on the basis of objective evidence, and without requiring of the taxable person checks which are not his responsibility, that he knew or should have known that the services were connected with VAT fraud. That is for the referring court to verify. The unreliability of the invoice issuer is not by itself a sufficient ground. A short order that matters because of how common the practice was.

C-432/15 Baštová

Judgment · 10 November 2016 · Czechia

Race prize money, deduction and the reduced rate for sporting facilities

No supply for consideration where only placed horses receive a prize, even a prize fixed in advance, because the payment is uncertain. There is a supply for consideration where the organiser pays remuneration for participation regardless of placing. Input VAT on racing one's own horses is deductible as general costs only where the horses are actually intended for sale or racing objectively promotes the business. Prize money then stays outside the taxable amount. The reduced rate cannot apply where training is a main or equal-status component. Relevant to racing stables, breeders and equestrian centres, and by analogy to other prize-based sporting participation.

C-400/15 Landkreis Potsdam-Mittelmark

Judgment · 15 September 2016 · Germany

Scope of the German 10% derogation and non-economic use

The derogation does not apply where the goods or services acquired are used more than 90% for non-economic activities falling outside the scope of VAT. "Non-business purposes" bears its Sixth Directive meaning. Use for purposes other than the business, which may be taxed, is distinct from non-economic activity, which is outside the system altogether. Excluding deduction where economic use is below 10% breaches fiscal neutrality. The earlier interpretation applies retroactively, so no different reading applies before 12-02-2009. Public bodies and other entities in Germany with mixed economic and non-economic activity can rely on the ruling to claim a proportional deduction for the economic part, however small, since the 10% floor in Paragraph 15(1) UStG cannot be applied to non-economic use.

C-267/15 Gemeente Woerden

Judgment · 22 June 2016 · Netherlands

Full deduction where a building is sold below cost price

The taxable person may deduct all the input VAT on construction. Article 168 imposes only two conditions: the inputs must be supplied by another taxable person and used by the taxable person for its own taxed transactions. The sale for consideration was such a transaction, so the purchaser's subsequent use, including free use by third parties, is irrelevant. A supply price below cost does not restrict deduction proportionately, unless the price is purely symbolic. Confirms that a supplier's deduction right is not policed through the recipient's use, which matters for municipalities and other public bodies transferring schools, sports halls and cultural buildings to foundations at below cost, and for group structures generally.

C-393/15 ESET

Order · 21 June 2016 · Poland

A branch may deduct input tax used for its head office taxed transactions abroad

The Court holds that it does have that right. The branch and the head office are a single taxable person, so input tax incurred by the branch on goods and services used for the taxed transactions of the company in the Member State where it is established is deductible in the branch State of registration, under Article 169(a). The order confirms the practical consequence of FCE Bank.

C-126/14 Sveda

Judgment · 22 October 2015 · Lithuania

Deduction on assets provided free to the public as a means of attracting customers

The input VAT on those capital goods is deductible. A person incurring investment expenditure with an intention, confirmed by objective evidence, of carrying out economic activity acts as a taxable person, and the immediate provision of the assets to the public free of charge neither exempts nor takes the transaction outside VAT. The link may be with a particular output transaction or with the economic activity as a whole. Establishing that link on objective evidence is for the national court. The subsidy condition and adjustment periods do not affect the origin of the right. Useful for any business that constructs infrastructure open to the public without charge as a customer draw.

C-277/14 PPUH Stehcemp

Judgment · 22 October 2015 · Poland

Deduction where the invoicing supplier is treated as non-existent

The Court held that the Directive precludes such national legislation. Existence or entitlement to issue invoices is not a condition of deduction. Taxable person status is a factual test and does not depend on registration, returns, tax payment, published accounts or a fuel licence. Goods actually delivered and used for taxed transactions constitute a supply, whatever the supplier's legal power to dispose of them. Deduction may be refused only if objective evidence shows the buyer knew or should have known of a connection with VAT fraud, without imposing checks that are not its responsibility. Confirms that national "non-existent trader" tests cannot be used as a shortcut to deny input VAT.

C-123/14 Itales

Order · 15 July 2015 · Bulgaria

Deduction cannot be refused for unproven origin of the goods without evidence of fraud

The Court holds that they do preclude it. A tax authority may not refuse the deduction on those grounds where it has not established that the purchaser took part in VAT fraud and knew or should have known that the transaction was involved in such a fraud. The burden of showing the objective evidence of participation in fraud lies with the authority, not with the taxable person. One of the reasoned orders applying Mahageben and David and Bonik to Bulgarian practice.

C-159/14 Koela-N

Order · 15 July 2015 · Bulgaria

Deduction where goods go straight to the final customer, and what proves knowledge of fraud

Ruling by reasoned order, the Court held that the principle of fiscal neutrality precludes the authorities from denying that a supply took place, and from refusing deduction on that basis, merely because the goods travelled directly to the ultimate customer without passing through the hands of the intermediate acquirers. On the second question, it held that those two circumstances are not by themselves sufficient objective evidence of knowledge or means of knowledge, although both may be taken into account in an overall assessment of all the facts and circumstances. Two points that recur in Bulgarian and Romanian deduction disputes.

C-183/14 Salomie and Oltean

Judgment · 9 July 2015 · Romania

Retrospective taxation of property sales and deduction before VAT registration

Retrospective assessment within the limitation period is permissible provided the national rules were clear and precise and the authority's practice gave no precise assurances creating a reasonable expectation of non-taxation. A mere non-systematic practice of not taxing such sales is not enough, especially for property professionals dealing on this scale. Surcharges must be proportionate, a matter for the national court. Deduction cannot be refused or deferred merely because the taxable person was not registered when the transactions were carried out. Relevant to property developers, joint ventures and unincorporated partnerships facing reclassification as taxable persons, and to advisers arguing legitimate expectations.

C-187/14 DSV Road

Judgment · 25 June 2015 · Denmark

Import VAT deduction by the carrier under a transit procedure

No customs debt arises under Article 203 merely from the return and non-presentation, provided the same goods were later carried to destination under a correctly discharged second procedure. If identity cannot be established, a debt arises. Late presentation under the second procedure triggers Article 204 unless Article 356(3), or the no obvious negligence and reasonable time conditions in Article 859, are met. Article 168(e) does not preclude refusing deduction to a carrier that is neither importer nor owner. The value of the goods is not a cost component of its transport charges. Confirms that freight forwarders and hauliers made liable for import VAT under national law cannot deduct it where they merely transport the goods and handle customs formalities, since the goods' value does not enter their pricing. Relevant to logistics operators in Member States designating carriers as persons liable on importation.

C-499/13 Macikowski

Judgment · 26 March 2015 · Poland

Obligations of the court enforcement officer as paying agent on compulsory sales

None of these provisions precludes the Polish mechanism. The officer is a mere intermediary collecting tax on the taxable person's behalf, not a person liable, jointly liable or a tax representative under Article 204. The scheme falls within Article 273. Personal liability with all his assets is proportionate only if the officer actually has all the legal means to discharge the obligation in time, which the national court must verify. The supplier retains its right to deduct and may claim repayment of any overpayment. Confirms that Member States may use third party collection agents under Article 273 without engaging the liability rules in Articles 193 to 205. Relevant to enforcement officers, insolvency practitioners and auctioneers in Member States operating similar withholding mechanisms, and to advisers on compulsory sales of land.

C-107/13 FIRIN

Judgment · 13 March 2014 · Bulgaria

Adjustment of VAT deducted on a prepayment where the supply never happens

Deduction taken on a prepayment invoice must be adjusted where the supply is ultimately not made. That is a change in the factors determining the deduction under Article 185(1). It is irrelevant that the supplier remains liable under Article 203 and has not refunded the advance. The two traders need not be treated alike. Article 65 does not apply at all where the chargeable event was uncertain at the time of payment, for instance in fraud. Whether the taxpayer knew or should have known is for the national court. Relevant wherever advance payments are invoiced and deducted, notably commodity trading and construction.

C-204/13 Malburg

Judgment · 13 March 2014 · Germany

Deduction by a partner on assets provided free of charge to a new partnership

The partner cannot deduct that input VAT. Making the client base available free of charge is neither a supply for consideration under Article 2(1) nor exploitation of property for continuing income under Article 4, so it falls outside VAT entirely and there is no direct and immediate link with a deductible output transaction. Polski Trawertyn is distinguished because there the contribution was an exempt transaction within the scope of VAT and neither partners nor partnership could deduct. Fiscal neutrality is an interpretative principle only and cannot extend the right of deduction. Relevant to professional partnerships and family businesses restructuring by splitting client bases, goodwill or other intangibles between partners.

C-18/13 Maks Pen

Judgment · 13 February 2014 · Bulgaria

Deduction refused where the invoiced supplier did not make the supply

Deduction may be refused on those facts only subject to a twofold condition: the facts amount to fraudulent conduct, and the authorities establish by objective evidence that the taxable person knew or should have known that the transaction was connected with that fraud. The absence of resources, missing cost entries and false signatures are not in themselves enough. Courts that may raise national law points of their own motion must do the same for the EU fraud rule. Article 273 permits accounting requirements based on international standards, but a revenue recognition test for the time of supply is precluded. Useful where an assessment rests solely on the invoiced supplier's lack of substance or defective paperwork. Relevant to businesses buying subcontracted services and to advisers handling deduction denials in Bulgaria and other Member States using substance-based challenges.

C-424/12 Fatorie

Judgment · 6 February 2014 · Romania

Deduction where reverse charge VAT is wrongly paid to the supplier

The right to deduct may be refused in those circumstances. This was not merely a formal invoicing defect. By paying the VAT to the supplier instead of accounting for it to the tax authorities, the recipient breached a substantive condition of the reverse charge regime, and deduction is available only for tax actually due. The supplier's insolvency does not alter that. The recipient's remedy is a civil claim against the supplier under national law. Legal certainty does not preclude revocation of an earlier favourable decision and reassessment with default interest within the limitation period, subject to proportionality. Confirms the limit of the Bockemühl and Ecotrade line. Relevant to construction and other domestic reverse charge sectors, where the remedy for a recipient is correction of the invoice rather than payment of tax shown in error.

C-33/13 Jagiełło

Order · 6 February 2014 · Poland

Deduction refused because the invoice issuer was a front company

The Court holds that it does preclude such a refusal, unless it is established on the basis of objective evidence, and without requiring of the taxable person checks which are not his responsibility, that he knew or should have known that the supply was connected with VAT fraud. Verifying that is for the referring court. The conduct of the invoice issuer is not, on its own, a sufficient ground for refusal. A reasoned order applying Mahageben and David and Bonik to front company arrangements.

C-388/11 Le Crédit Lyonnais

Judgment · 12 September 2013 · France

Foreign branch turnover in the partial exemption fraction

No on all three points. The deduction system rests on the territoriality of the applicable national rules. A taxable person is subject to as many deduction regimes as there are Member States in which it has fixed establishments, so turnover of EU branches cannot enter the head office's proportion. Nor can turnover of third country branches, whose supplies to non-EU customers are not treated as made by the principal establishment. "Sectors of business" means types of economic activity, not geographic areas, so no national option can permit it. Removes the FCE Bank single entity argument as a route to improving head office recovery.

C-26/12 PPG Holdings

Judgment · 18 July 2013 · Netherlands

Employer's deduction of VAT on pension fund administration and asset management costs

The employer may deduct the VAT, provided a direct and immediate link is apparent from all the circumstances. Here the services were acquired solely for the purposes of the employer's taxable activity in discharging a statutory obligation, and the costs form part of its general costs, which the national court must verify. Denying deduction because of the legislative choice to separate employer and fund would breach neutrality. The exemption question did not need answering, having been covered by Wheels. Confirms that employers, not just the fund, can recover VAT on pension administration and asset management costs where they contract for and bear those costs and the costs sit in general overheads. Relevant to any employer operating a separate trustee or foundation pension vehicle, and to advisers reviewing historic assessments and contracting arrangements.

C-572/11 Menidzherski biznes reshenia

Order · 4 July 2013 · Bulgaria

No deduction on invoices for transactions that never took place, even if the issuer paid the tax

The Court holds that they do not preclude such a refusal. The right of deduction is linked to the actual carrying out of the supply, and it does not extend to tax which is due solely because it appears on an invoice under Article 203. That the issuer paid the tax, so that no loss of revenue arises, does not change the position. The referring court must make a global assessment of the facts. The order marks the boundary of the substance over form case law.

C-444/12 Hardimpex

Order · 16 May 2013 · Hungary

An upstream irregularity does not defeat deduction absent proof of knowledge

The Court holds that it does preclude that refusal, where it has not been established to the requisite legal standard that the taxable person knew or should have known of the irregularity. The mere fact that the company did not check where the goods came from cannot be a ground for refusing deduction. Subject to the verifications for the referring court, no such knowledge had been shown. One of the Hungarian orders that consolidated the Mahageben and David line into settled practice.

C-563/11 Forvards V

Order · 28 February 2013 · Latvia

Deduction and an invoice from a company treated as fictitious

Ruling by reasoned order, the Court held that Article 17(2)(a) does preclude such a refusal, unless it is established on the basis of objective evidence, and without requiring of the recipient checks which are not its responsibility, that the recipient knew or should have known that the transaction was connected with VAT evasion. Whether that is so is for the referring court to verify. Squarely within the Mahagében and Dávid line.

C-104/12 Becker

Judgment · 21 February 2013 · Germany

Deduction of criminal defence costs of company directors

The link depends on the objective content of the goods or services acquired. Lawyers' services aimed at avoiding criminal penalties against natural persons who are managing directors of a taxable undertaking give that undertaking no right to deduct. The exclusive reason for the transaction may be taken into account, but only as a criterion of objective content. A mere causal connection with the taxable activity is not a direct and immediate link. The second question was not answered. Companies bearing the legal costs of directors' or employees' personal criminal defence cannot deduct the VAT, even where the alleged conduct arose entirely in the course of the business, the company is contractually the client and the invoice is addressed to it. Relevant to construction, procurement and any sector facing bribery or competition investigations, and to VAT group controlling entities.

C-642/11 Stroy trans

Judgment · 31 January 2013 · Bulgaria

Asymmetry between invoice issuer's liability and recipient's deduction

VAT entered on an invoice is payable by the issuer regardless of whether a taxable transaction exists, and no acknowledgement of a real transaction can be inferred from the mere absence of correction in a notice addressed to the issuer. Refusal of deduction to the recipient is not precluded by neutrality, proportionality or legitimate expectations. But where non-performance rests on fraud or irregularities of the issuer or upstream, it must be shown on objective factors that the recipient knew or should have known of the connection with fraud. Confirms that a supplier's unadjusted VAT assessment is only one evidential factor, not proof of supply, so recipients cannot rely on the tax treatment of their supplier to secure deduction. Relevant to fuel, commodity and other chain trading where authorities allege missing supplies from documentary gaps upstream.

C-643/11 LVK

Judgment · 31 January 2013 · Bulgaria

Asymmetric treatment of issuer and recipient of an invoice where no supply took place

VAT entered on an invoice is payable under Article 203 regardless of whether a taxable transaction exists, and no inference of acceptance arises from the authorities leaving the issuer's declaration unadjusted. Issuer and recipient are not in comparable situations. Deduction may therefore be refused for want of an actual transaction. But where the finding of no supply rests on fraud or irregularities by the issuer or upstream, the authorities must establish on objective factors that the recipient knew or should have known of the fraud, without demanding checks that are not his responsibility. Customers cannot defend a deduction simply by pointing to the supplier having declared and been assessed on the same VAT. Relevant to agricultural, commodity and other chain-supply trades facing missing-trader challenges.

C-560/11 Debiasi

Order · 13 December 2012 · Italy

Input tax on exempt medical activities is not deductible and enters the pro rata

The Court holds that those provisions do not preclude such legislation. Denying deduction for inputs used in exempt transactions is the ordinary consequence of the system, since deduction is available only in so far as goods and services are used for taxed transactions, and including exempt supplies in the denominator of the fraction is exactly what Article 19 prescribes. A confirmation of orthodoxy rather than a development.

C-285/11 Bonik

Judgment · 6 December 2012 · Bulgaria

Deduction refused because upstream supplies could not be traced

Deduction may not be refused on the ground that, in view of fraud or irregularities committed upstream or downstream, the supply is deemed not to have taken place, unless it is established on objective evidence that the taxable person knew or should have known that his transaction was connected with VAT fraud in the chain. The national court must still verify that the supplies were actually made and the goods used for taxed output transactions, and whether the authorities have produced that objective evidence. Confirms Mahagében and Dávid for Bulgarian-style "absence of actual supply" reasoning.

C-257/11 Gran Via Moineşti

Judgment · 29 November 2012 · Romania

Deduction on buildings acquired for demolition

The purchaser has the right to deduct the VAT on the buildings. The acquisition is a preparatory act in its property development activity, and the land continues to be used for taxed transactions, so replacing dilapidated structures with modern ones does not break the direct link. Demolition is not a change in the factors determining the deduction under Article 185(1), because it was intended from the outset. No adjustment is therefore due, absent fraud or abuse. Confirms for developers and their advisers that VAT on a demolition purchase (land plus existing buildings) is fully deductible where the intended taxed use of the site is evidenced objectively, here by the transferred demolition permit, the actual demolition works and the planning certificate.

C-324/11 Tóth

Judgment · 6 September 2012 · Hungary

Deduction where the subcontractor's trading licence was withdrawn and its workers undeclared

No refusal on any of those grounds alone. Status as a taxable person under Article 9(1) turns on facts, not on any licence or registration, so deduction stands where the invoice carries the Article 226 particulars. Undeclared workers by the supplier, and the customer's failure to check the workforce, do not of themselves show knowledge of fraud absent material grounding suspicion. Where the authority produces specific evidence of fraud, the national court may examine whether the issuer performed the supply, but refusal still requires objective evidence of knowledge. Confirms and extends Mahagében and Dávid to services and to withdrawn trading licences.

C-496/11 Portugal Telecom

Judgment · 6 September 2012 · Portugal

Input VAT recovery by a holding company that on-charges services to subsidiaries

Full deduction under Article 17(2) is available where the inputs have a direct and immediate link with output economic transactions carrying a right to deduct, and that right cannot be restricted merely because national law treats those taxed supplies as ancillary to the main activity. If the inputs serve both deductible and non-deductible economic transactions, Article 17(5) pro rata methods may be imposed. If they serve economic and non-economic activities, Article 17(5) does not apply. Member States set an objective apportionment method. Confirms that a holding company that intervenes in the management of its subsidiaries for consideration is entitled to full recovery on costs re-invoiced to them, and that the statutory object of the company is not a basis for imposing a turnover pro rata. Relevant to Portuguese SGPS and to holding and group service companies generally, and to advisers resisting blanket pro rata assessments.

C-334/10 X

Judgment · 19 July 2012 · Netherlands

Deduction on permanent alterations made for temporary private use

Deduction is available on the alteration expenditure notwithstanding that the alterations were made with temporary private use in mind, and irrespective of whether VAT was charged and deducted on acquiring the underlying item. The alterations may constitute a separate capital item, and initial private followed by business use is mixed use. But deduction depends on the national court finding, on objective evidence (nature of the goods, later business use, lifespan), an intention to use the item for business purposes. Private use is then taxed under Article 6(2)(a), not (b). Relevant wherever fit-out or conversion works on business premises serve a temporary private or non-business purpose before reverting to business use, including owner-managed businesses, farms and mixed residential/commercial property.

C-80/11 Mahagében and Dávid

Judgment · 21 June 2012 · Hungary

Refusal of deduction for the supplier's misconduct and the buyer's duty of enquiry

The Directive precludes both national practices. Where the substantive and formal conditions for deduction are met, refusal requires the authority to establish, on objective evidence, that the taxable person knew or ought to have known that the transaction was connected with fraud by the invoice issuer or an earlier trader in the chain. No strict liability. General verification duties cannot be imposed where the trader holds no material giving grounds to suspect irregularities. Where there are such indications, enquiries may reasonably be required. The authority, not the taxpayer, bears the burden of proving knowledge or means of knowledge, and cannot shift its investigative function onto customers.

C-414/10 Véleclair

Judgment · 29 March 2012 · France

Deduction of import VAT without prior payment

A Member State may not make the deduction conditional on prior payment. The wording covers VAT "due or paid", so the right to deduct extends to import VAT still owed, and Article 18(1)(b) requires only an import document identifying the importer and showing or permitting calculation of the tax due. Conditioning deduction on payment would impose an economic burden contrary to neutrality. Evasion concerns are met by the burden of proof on the claimant, retroactive recovery and refusal of the right where fraud is objectively established. Relevant to importers and their advisers in any Member State whose domestic law ties recovery of import VAT to proof of payment, particularly where duty and import VAT are assessed retrospectively after an origin or classification challenge.

C-153/11 Klub

Judgment · 22 March 2012 · Bulgaria

Deduction on capital goods not yet brought into use

A taxable person who acquires capital goods acting as such and allocates them to the assets of the business may deduct the VAT in the tax period in which the tax became chargeable, even if the goods are not immediately used for business purposes. Whether the person acquired the goods for the purposes of his economic activity is a question of fact for the national court, assessed on all circumstances including the nature of the asset, the interval before business use and steps taken to obtain the necessary authorisations, as is any fraud or abuse. Confirms that absence of immediate use, and even absence of a permit allowing use, does not of itself defeat deduction on capital goods.

C-280/10 Polski Trawertyn

Judgment · 1 March 2012 · Poland

Deduction of pre-incorporation investment costs and invoices in the partners' names

Both national rules are precluded. Preparatory investment by future partners is economic activity, so where national law prevents the partners themselves from recovering the tax (here because the contribution in kind is exempt), the partnership must be able to deduct it. The invoice being in the partners' names is a purely formal defect that cannot defeat deduction where the substantive conditions are met, the payers and the partnership are in substance the same legal entity, and the authorities have the data needed for reliable collection. Fraud or abuse remains recoverable retrospectively. Confirms that start-up and pre-incorporation expenditure is not stranded VAT. Relevant to Polish practice and to any similar exemption of contributions in kind.

C-594/10 van Laarhoven

Judgment · 16 February 2012 · Netherlands

Flat-rate taxation of private use of business cars

Article 6(2)(a) read with Article 11A(1)(c) of the Sixth Directive precludes legislation which allows immediate full deduction on mixed use cars but then taxes private use annually on a flat-rate basis that does not reflect, proportionally, the actual extent of private use. Flat-rate methods remain permissible because Member States retain a margin of discretion, provided the outcome is proportionate to actual private use and gives the taxable person no advantage over a final consumer. The national court must test the Dutch method against that standard. Relevant to any business allocating mixed use cars wholly to business assets and to advisers dealing with private use charges.

C-25/11 Varzim Sol

Judgment · 16 February 2012 · Portugal

Untaxed subsidies cannot be forced into the pro rata for a wholly taxable sector

The Court holds that those provisions preclude it. Where a Member State allows deduction based on use, the sector in which only taxable transactions are carried out gives a full right of deduction, and untaxed subsidies cannot be brought into the denominator of a fraction for that sector. Doing so would restrict a right of deduction that the directive intends to be complete. The judgment protects the integrity of the use based method in Article 173(2).

C-118/11 Eon Aset Menidjmunt

Judgment · 16 February 2012 · Bulgaria

Deduction on leased and finance-leased cars used for home to work travel

For an ordinary lease (a supply of services), deduction requires a direct and immediate link with the economic activity, assessed at the expiry of the period to which each payment relates. Where a finance lease transfers substantially all risks and rewards, or ownership at the end, it is the acquisition of capital goods. If allocated wholly to business assets, input VAT is fully and immediately deductible, with private or staff use taxed under Article 26(1). Such national exclusions are permissible, but not where capital goods are allocated to the business. Relevant to fleet operators, leasing companies and advisers handling company car deductions.

C-504/10 Tanoarch

Judgment · 27 October 2011 · Slovakia

Deduction on assignment of a co-ownership share in an unpatented invention

A taxable person may in principle deduct input VAT on such an assignment, provided national law permits a co-inventor to assign his share. That question of national law is for the referring court. Lack of patent registration does not prevent the transaction being an economic activity, and the parties' intention to obtain a tax advantage is irrelevant to that classification. Whether the arrangement amounts to abuse of rights is a factual assessment for the national court on all the circumstances. Confirms that intangible rights transactions are judged objectively. Relevant to IP holding structures, research consortia and advisers handling deals in patent rights before grant.

C-277/09 RBS Deutschland Holdings

Judgment · 22 December 2010 · United Kingdom

Input tax deduction where a classification mismatch leaves output rentals untaxed

Deduction cannot be refused on that ground. Under Article 17(3)(a) the test is whether the right would exist had all transactions taken place in the same Member State, and it would have. Non-collection of output tax caused by divergent national categorisation does not defeat deduction, the leasing being taxable in principle and not exempt or outside scope. Nor is there abuse. The parties were legally unconnected, the transactions genuine and commercial, and taxable persons may structure activities to limit tax. Confirms that cross-border classification mismatches, particularly the goods versus services treatment of finance leases with residual value or put option arrangements, do not of themselves justify denying input tax recovery to the lessor. Relevant to leasing and asset finance groups with subsidiaries in more than one Member State, and to advisers defending Halifax challenges.

C-392/09 Uszodaépítő

Judgment · 30 September 2010 · Hungary

Retroactive invoicing formalities and the right to deduct under reverse charge

They do preclude it, where the tax authority already holds all the information needed to establish that the taxable person is liable to the VAT as recipient and to verify the deductible amount. Under a reverse charge only the formalities permitted by Article 178(f) apply, so no invoice meeting the Directive's formal invoicing conditions is required, and national formalities must not go beyond what is strictly necessary to check the reverse charge. Electing into the new law does not itself affect the right to deduct. Confirms, for construction and other reverse charge sectors, that under Article 178(f) the recipient's deduction does not depend on a formally compliant invoice, and that where substantive conditions are met and the authority has the information it needs, refusal for missing formalities is unlawful.

C-188/09 Profaktor Kulesza, Frankowski, Jóźwiak, Orłowski

Judgment · 29 July 2010 · Poland

Reduction of input tax deduction as a penalty for not using a cash register

The Court held that the common VAT system does not preclude a temporary restriction on the amount of deductible input tax where sales record keeping obligations are breached, provided the sanction respects proportionality, which the national court must verify. The right to deduct itself must not be rendered meaningless. A 30% withholding, preserving most of the input tax, appeared neither excessive nor inadequate. Such a measure falls under Article 22(8), not Article 27(1), and is not a turnover tax caught by Article 33. Member States may enforce cash register and accounting obligations by penalties calculated as a percentage of deductible input tax, without seeking a derogation. Relevant to retail and cash businesses across Member States operating till based reporting regimes.

C-311/09 Commission v Poland

Judgment · 6 May 2010 · Poland

Flat-rate VAT on foreign coach operators without deduction

The Court upheld the action. By applying that flat-rate charge Poland failed to fulfil its obligations under Articles 73, 168 and 273 of the VAT Directive. The taxable amount must be the consideration actually received, and the right to deduct input tax incurred for the purposes of taxed transactions cannot be denied. The additional obligations a Member State may impose under Article 273 do not extend to displacing those two rules. A straightforward but firm statement that simplification cannot be bought at the price of the two structural elements of the system. Relevant to any national scheme that substitutes a lump sum or notional base for the real consideration, particularly where it applies only to non-established operators.

C-536/08 X and fiscale eenheid Facet-Facet Trading

Judgment · 22 April 2010 · Netherlands

No deduction of VAT on a fallback intra-Community acquisition

No immediate right of deduction. Where the goods were not actually brought into the Member State of identification, the deemed acquisition cannot be regarded as giving rise to a right of deduction under Article 17, because the goods are not used for the taxable person's taxed transactions there. The remedy is the specific corrective mechanism in the second subparagraph of Article 28b(A)(2), reducing the taxable amount once the acquisition is shown to have been taxed in the Member State of arrival, not the general deduction regime. Confirms that the fallback taxation in the identification State is a sanction-like charge with no input credit.

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