By decision of the Court of Justice of the European Union, in Case C-430/19, concerning the dispute between SC C.F. SRL against the County Administration of Public Finances M. and the General Regional Directorate of Public Finances C., at the request of the Cluj Tribunal, the request for annulment of the fiscal administrative acts by which the company in question were imposed additional fiscal obligations regarding VAT and income tax.
This decision comes in support of taxpayers who are denied the right to deduct VAT on purchases of goods and services on tax checks, on the grounds that commercial transactions between the beneficiary and its suppliers are considered fictitious, the liability of the beneficiary for the inadequacy of its suppliers and because no supporting documents other than the tax invoice were presented.
Thus, the Cluj Tribunal asked the Court 4 preliminary questions, which were thus resolved:
- According to the principle of observance of the rights of the defense, as it has been outlined in the case-law of the Court up to that time […], a tax administrative act issued against an individual person may and must be sanctioned with express nullity if the individual person did not have access to the information on the basis of which the fiscal administrative act was issued against him, despite the fact that in its contents reference is made to some components of the administrative file?
The Court has decided that the general principle of Union law of respect for the right to defense must be interpreted as meaning that, in the context of national administrative procedures for the inspection and determination of the basis of value added tax, a taxable person has not been able to have access to the information contained in its administrative file and which was taken into account when adopting an administrative decision imposing additional tax obligations on it, and the court notified found that, in the absence of such an irregularity, the procedure could have had a different result, this principle requires the annulment of this decision.
- Are there opposing the principles of neutrality, proportionality and equivalence of the exercise of the right to deduct in respect of VAT and in respect of corporation tax in the case of a company which behaves in a manner which is immeasurably taxable, the refusal to exercise the right to deduct in respect of corporate tax being generated by the allegedly inappropriate tax behavior of suppliers based on elements such as lack of human resources, lack of means of transport, doubled by the fact that the tax authority does not prove any approach that would result in the commitment of fiscal or criminal liability of those suppliers?
- Is it compatible with the European law a national practice of making the exercise of the right to deduct VAT and income tax from the possession of other supporting documents other than the tax invoice, such as estimates and statements of work, additional supporting documents, which are not clearly and precisely determined by national tax law?
- It can be considered, in accordance to the case of law resulting from the Decision of 17 December 2015, WebMindLicenses (C 419/14, EU: C: 2015: 832), that there exists a tax fraud in the conditions in which a taxable person purchases goods and services from to another taxable person who benefits from a different tax regime than that of the taxpayer in question?”
Regarding the questions 2 and 4, the Court stated that the principles governing the application by Member States of the common system of value added tax (VAT), in particular those of fiscal neutrality and legal security, must be interpreted as opposing that, in the presence of mere unsubstantiated suspicions of evidence of the national tax administration as to the actual carrying out of the economic transactions underlying the issuance of a tax invoice, the taxable person to whom that invoice is to be denied the right to deduct VAT if he is not to provide, in addition to that invoice, other evidence of the reality of the economic operations carried out.
At the same time, according to a constant jurisprudence of the Court, the right of taxable persons to deduct from the VAT they owe, the VAT due or paid on the goods purchased or services received upstream and used for the purposes of their taxable transactions, is a fundamental principle of common system of VAT established by Union Legislation.
The Court underlines that Union VAT legislation also recognizes and encourages the fight against fraud, tax evasion and possible abuse, and that the task of refusing to grant the right to deduct rests with local authorities and courts, if on the basis of objective elements, if this right is invoked fraudulently or abusively. Therefore, this right of deduction can be refused only if it is established that the taxable person to whom the goods were delivered or provided the services knew or should have known that, through those transactions, he was involved in a VAT fraud. But the recipient of the invoice should not be required to verify that it is not his responsibility, however, these matters are the responsibility of the national tax administration.
In accordance with European Union VAT legislation, represented by the Directive 2006/112 / EC of the Council, regarding the common system of value added tax, as amended by Directive 2010/45 / EU, the submission of additional documents is not provided by Article 178 (a):
,,In order to exercise the right of deduction, a taxable person is required to meet the following conditions:
- for deductions according to Article 168, letter (a) regarding the supply of goods or provision of services, it has the obligation to possess an invoice issued in accordance with Title XI, Chapter 3, Sections 3 – 6”.