On January 31, 2013, the ECJ issued its decision in the case C-642/11 (Stroy trans).
Context: Taxation – VAT – Directive 2006/112/EC – Principle of fiscal neutrality – Right of deduction – Refusal – Article 203 – Entry of the VAT on the invoice – Chargeability – Existence of a taxable transaction – Identical determination in respect of the issuer of the invoice and its recipient – Necessity
Article in the EU VAT Directive
Article 203 of Council Directive 2006/112/EC
Article 203 (Liability to pay VAT)
VAT shall be payable by any person who enters the VAT on an invoice.
- Stroy trans was registered under the ZDDS and its main activities were road freight transport and the provision of mechanised services with special equipment. In 2009 it deducted the input VAT resulting from a number of invoices concerning the supply of diesel fuel, which were issued by Hadzhi 98 EOOD and Dieseltrans‑73 EOOD (‘Dieseltrans‑73’) respectively.
- The tax authorities carried out audits of those two companies and of their upstream suppliers. In the course of those audits a number of the documents requested were produced.
- Following the audits, the tax authorities took the view that the documents produced did not enable the route of the fuel to be retraced and that there was no actual supply of goods in the case of the invoices at issue, so that the conditions necessary for the right to deduct input VAT to arise were not fulfilled. The tax authorities therefore sent Story trans a tax adjustment notice refusing the deduction of VAT in respect of a total amount of BGN 42 759.22 and imposing interest for late payment (‘the disputed tax adjustment notice’).
- After the disputed tax adjustment notice was confirmed by the Direktor na Direktsia ‘Obzhalvane i upravlenie na izpalnenieto’ – Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite by decision of 28 February 2011, Stroy trans brought an action before the Administrativen sad Varna (Administrative Court, Varna), submitting that the invoices at issue corresponded to actual supplies of goods and that there was thus no basis for refusing the right of deduction.
- In the course of the main proceedings, the conclusions of an expert report on accounting that had been requested were accepted, according to which, in the light of the accounting data of Dieseltrans‑73, the quantities of fuel sold were available at the time of each sale.
- Also, Stroy trans adduced a tax audit report concerning its supplier Dieseltrans‑73 and a tax adjustment notice addressed to the latter, which were drawn up before the disputed tax adjustment notice. According to the documents adduced, Dieseltrans‑73 was refused the right to deduct input VAT for the acquisition of fuel, in part on the ground that the respective vendors had not submitted any evidence, so that it had to be concluded that there had been no supply to Dieseltrans‑73, and in part on the ground that the original invoices for the purchases had not been submitted. As regards, on the other hand, the output VAT declared by Dieseltrans‑73 concerning the sale of fuel, the view was taken that, ‘in the course of the tax audit, no grounds have been established for an adjustment of the taxable amount for the transactions effected and the VAT entered on the invoices’.
- Stroy trans contends that the tax adjustment notice addressed to its supplier Dieseltrans‑73 proves that the supplies relied upon to establish its right of deduction took place inasmuch as in that notice the tax authorities did not adjust the output tax declared by that supplier.
- According to the referring court, the case-law of the Varhoven administrativen sad (Supreme Administrative Court) is not homogenous on the question of proving by means of a tax adjustment notice addressed to the supplier of the taxable person wishing to exercise the right of deduction that a supply has actually taken place. Some of that court’s chambers take the view that such a notice is just one of the pieces of evidence and cannot alone prove that there was actually a supply of goods. According to other chambers, the fact that such a notice does not contain any adjustment of the VAT invoiced by the supplier means that the tax authorities themselves have issued an official document testifying that the transaction actually took place and that the corresponding VAT was invoiced correctly.
- The referring court states that it interprets Article 85 of the ZDDS, which transposed Article 203 of Directive 2006/112, as imposing a special requirement that VAT entered on an invoice is chargeable, whether or not there is a justification for the invoice and the entry of the VAT on it. It also considers that, since the national provisions lay down that correction and cancellation of invoices are to be carried out by the issuer of the invoices and provide for no possibility of correction by the tax authorities, the VAT entered on an invoice is payable in itself and the assessment office is not entitled to correct this tax.
1. Article 203 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that:
– the value added tax entered by a person on an invoice is payable by him regardless of whether a taxable transaction actually exists;
– it cannot be inferred from the mere fact that the tax authorities did not correct, in a tax adjustment notice addressed to the issuer of that invoice, the value added tax declared by the latter that those authorities have acknowledged that the invoice corresponded to an actual taxable transaction.
2. The principles of fiscal neutrality, proportionality and the protection of legitimate expectations must be interpreted as not precluding the recipient of an invoice from being refused the right to deduct input value added tax because there is no actual taxable transaction even though, in the tax adjustment notice addressed to the issuer of that invoice, the value added tax declared by the latter was not adjusted. However, if, in the light of fraud or irregularities, committed by the issuer of the invoice or upstream of the transaction relied upon as the basis for the right of deduction, that transaction is considered not to have been actually carried out, it must be established, on the basis of objective factors and without requiring of the recipient of the invoice checks which are not his responsibility, that he knew or should have known that that transaction was connected with value added tax fraud, a matter which it is for the referring court to determine.