Good things to remember … CJEU Joined Cases C‑95/07 and C‑96/07 Ecotrade
reverse charge procedure/ right to deduct/ time-bar/ irregularity in accounts and tax returns affecting transactions subject to the reverse charge procedure/ principle of fiscal neutrality
In the VAT system, the principle of fiscal neutrality requires deduction to be allowed if the substantive requirements are satisfied – even in the case that the taxable person has failed to comply with some of the formal requirements. Additional conditions, which may have the effect of rendering the right to deduct ineffective, cannot be imposed.
The denial of the right to deduct because of non-compliance on the part of the taxable person in relation to accounts and tax returns goes further than necessary, since Member States have the possibility to impose a fine or financial penalty proportionate to the seriousness of the offence in order to sanction a failure to comply with those obligations.
It also goes further than what is necessary for the correct collection of the tax and for the prevention of evasion, since it may even lead to the loss of the right to deduct if the reassessment of the tax return by the tax authorities is made after the expiry of the limitation period available to the taxable person in which to make the deduction.