Flashback on ECJ/CJEU cases: C-332/15 Astone – No right to deduct VAT in case of failure to submit returns

The right to deduct input tax may be refused due to failure to meet formal obligations, if the taxpayer presents purchase invoices in the procedure, but has not submitted VAT returns at all, has not kept a VAT register, accounting books and has not paid VAT.


1.      Articles 167, 168, 178, the first paragraph of Article 179, and Articles 180 and 182 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that they do not preclude national legislation which provides for a limitation period for exercising the right to deduct, such as the limitation period at issue in the main proceedings, provided that the principles of equivalence and effectiveness are observed, which it is for the referring court to ascertain.

2.      Articles 168, 178, 179, 193, 206, 242, 244, 250, 252 and 273 of Directive 2006/112 must be interpreted as meaning that they do not preclude national legislation, such as that at issue in the main proceedings, which allows the tax authorities to refuse a taxable person the right to deduct value added tax when it is established that that person has fraudulently failed to fulfil most of the formal obligations incumbent upon him in order to be able to benefit from that right, which it is for the referring court to ascertain.

Link to (unofficial translation)

The circumstances of the case

The Italian company was not able to present the VAT register and the accounting records for 2010-2013. At the same time, it was established that in 2010 it issued VAT invoices for the amount of EUR 320,000, but did not pay the VAT resulting from these invoices.

Accordingly, criminal proceedings were pending against Mr. Astone (a representative of that company).

During the proceedings, Mr. Astone submitted purchase invoices which were issued to the company and which were paid. If these purchase invoices were taken into account, the amount of unpaid VAT would be less than the amount that gives rise to criminal liability.

Under Italian law, the deduction depends on the formal inclusion of invoices in the register.

The essence of the dispute

Is it possible to refuse – also for the purposes of findings in criminal proceedings – the right to deduct input tax on the grounds that invoices were not entered in the register and were presented only during the proceedings before the authority?


The right to deduct input tax may be refused if the taxpayer has not submitted a VAT declaration at all and has not kept a VAT register.


With regard to the time when the taxpayer exercises the right to deduct

  • The accused invoked the right to deduction only during the criminal proceedings before the referring court. Under Italian law, however, the right to deduct must be exercised no later than in the annual declaration for the year following that in which the right arose (28).
  • The VAT system is designed to relieve the entrepreneur of the burden of VAT and is to ensure complete neutrality (29-30).
  • The right to deduct is generally exercised in the same period as it arises. A later deduction is possible, subject to the procedural conditions established by the MS (31-32).
  • The possibility of deducting without limitation in time would run counter to the principle of legal certainty as the taxpayer should not be exposed indefinitely to challenge his legal position.
  • The deadline for deducting the tax is not incompatible with the VAT system if the taxable person has been sufficiently diligent and the deduction is not impossible or practically difficult (34).
  • The national court must assess whether the limitation period is sufficient (36).
  • However, it seems that the 2-year period is not in itself capable of preventing or excessively hindering the exercise of the right to deduct (38).

Regarding the performance of formal obligations

  • It should be noted that the accused did not fulfill any of the formal obligations and was unable to present either the accounting books or the VAT register for the period under examination. He also did not submit a VAT return for the analyzed period and did not pay VAT (40-41).
  • The principle of neutrality requires that a deduction of VAT is granted if the substantive requirements are met, where certain formal requirements have been omitted (45).
  • However, it may be otherwise when breach of such formal requirements would prevent the provision of evidence that the material requirements have been met (46).
  • The VATD lists a number of formal obligations that taxpayers are required to fulfill. Moreover, Art. 273 VATD entitles MS to impose additional obligations. However, they may not go beyond what is necessary to achieve the objectives of proper tax collection (48-49).
  • Nevertheless, the fight against tax fraud, tax avoidance and abuse is an objective recognized by the VATD. The right to deduct should therefore be refused where taxpayers invoke the right to deduct in a ‘fraudulent or abusive’ manner (50).
  • Tax authorities are required to demonstrate that the objective conditions for fraud or abuse are met (52).
  • It is for the referring court to assess those circumstances.
  • In the present case, the accused intentionally failed to comply with his formal obligations in order to avoid paying the tax. This may prevent the correct collection of the tax and, as a consequence, jeopardize the proper functioning of the VAT system. Such shortcomings therefore constitute tax evasion and may constitute a denial of the right to deduct tax (56).
  • It should also be borne in mind that these shortcomings were repeated for many years, which may also be a relevant circumstance in this case (57).
  • There is no contradiction here with the principle of fiscal neutrality, as this principle cannot be effectively invoked by a taxpayer who has deliberately participated in tax fraud (58).


Source: Curia


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