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ECJ C-281/20 analyzed – Part 1: Formal vs. material requirements of the Right to deduct VAT

On November 11, 2021, the ECJ issued its decision in the case C-281/20 (Ferimet, S. L.) – Decision – No Input VAT deduction for self-invoice with reverse charge VAT with fictitious supplier.

The court case develops an interesting argumentation on the Right to Deduct VAT, and more specifically when there is a suspicion that fraud is involved.

In a series of newsitems, we will highlight some interesting obeservations from the decision of the Court.

Part 1 deals with regard to the Formal vs. Material requirements of the Right to deduct VAT.

The right to deduct VAT is subject to compliance with material as well as formal conditions.

  • Material conditions (Art. 168(a) of the EU VAT Directive 2006/112/EC)
    • the person concerned must be a ‘taxable person’
    • the goods or services must be supplied by another taxable person as inputs and those goods or services must be used by the taxable person for the purposes of his or her own taxed output transactions
    • Art. 168(a):
      In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
      (a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;

 

  • Formal conditions (Art. 178(a) of the EU VAT Directive 2006/112/EC)
    • the taxable person must hold an invoice drawn up in accordance with Articles 220 to 236 and Articles 238 to 240 of that directive
    • Art. 178(a):
      In order to exercise the right of deduction, a taxable person must meet the following conditions:
      (a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;

 

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