On November 10, 20216, the ECJ issued its decision in the case C-446/15 (Signum Alfa Sped).
Context: Reference for a preliminary ruling — Article 99 of the Rules of Procedure of the Court of Justice — Taxation — Value added tax — Directive 2006/112/EC — Right of deduction — Refusal — Issuer of the invoice considered not to have been the real supplier of the invoiced services — Obligation on the taxable person to carry out checks
Article in the EU VAT Directive
Articles 167, 168, 178, 220, 226 of the EU VAT Directive 2006/112/EC
Article 167 (Origin and Scope of Right of Deduction)
A right of deduction shall arise at the time the deductible tax becomes chargeable.
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;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18 (a)and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.
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;
(b) for the purposes of deductions pursuant to Article 168(b), in respect of transactions treated as the supply of goods or services, he must comply with the formalities as laid down by each Member State;
(c) for the purposes of deductions pursuant to Article 168(c), in respect of the intra-Community acquisition of goods, he must set out in the VAT return provided for in Article 250 all the information needed for the amount of VAT due on his intra-Community acquisitions of goods to be calculated and he must hold an invoice drawn up in accordance with Sections 3 to 5 of Chapter 3 of Title XI;
(d) for the purposes of deductions pursuant to Article 168(d), in respect of transactions treated as intra-Community acquisitions of goods, he must complete the formalities as laid down by each Member State;
(e) for the purposes of deductions pursuant to Article 168(e), in respect of the importation of goods, he must hold an import document specifying him as consignee or importer, and stating the amount of VAT due or enabling that amount to be calculated;
(f) when required to pay VAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down by each Member State.
Article 220 (Issue of invoices)
1. Every taxable person shall ensure that, in respect of the following, an invoice is issued, either by himself or by his customer or, in his name and on his behalf, by a third party:
(1) supplies of goods or services which he has made to another taxable person or to a non-taxable legal person;
(2) supplies of goods as referred to in Article 33;
(3) supplies of goods carried out in accordance with the conditions specified in Article 138;
(4) any payment on account made to him before one of the supplies of goods referred to in points (1) and (2) was carried out;
(5) any payment on account made to him by another taxable person or non-taxable legal person before the provision of services was completed.
2. By way of derogation from paragraph 1, and without prejudice to Article 221(2), the issue of an invoice shall not be required in respect of supplies of services exempted under points
(a) to (g) of Article 135(1).
Article 226 (Content of an invoice)
Without prejudice to the particular provisions laid down in this Directive, only the following details are required for VAT purposes on invoices issued pursuant to Articles 220 and 221:
(1) the date of issue;
(2) a sequential number, based on one or more series, which uniquely identifies the invoice;
(3) the VAT identification number referred to in Article 214 under which the taxable person supplied the goods or services;
(4) the customer’s VAT identification number, as referred to in Article 214, under which the customer received a supply of goods or services in respect of which he is liable for payment of VAT, or received a supply of goods as referred to in Article 138;
(5) the full name and address of the taxable person and of the customer;
(6) the quantity and nature of the goods supplied or the extent and nature of the services rendered;
(7) the date on which the supply of goods or services was made or completed or the date on which the payment on account referred to in points (4) and (5) of Article 220 was made, in so far as that date can be determined and differs from the date of issue of the invoice;
(7a) where the VAT becomes chargeable at the time when the payment is received in accordance with Article 66(b) and the right of deduction arises at the time the deductible tax becomes chargeable, the mention “Cash accounting”;
(8) the taxable amount per rate or exemption, the unit price exclusive of VAT and any discounts or rebates if they are not included in the unit price;
(9) the VAT rate applied;
(10) the VAT amount payable, except where a special arrangement is applied under which, in accordance with this Directive, such a detail is excluded;
(10a) where the customer receiving a supply issues the invoice instead of the supplier, the mention “Self-billing”;
(11) in the case of an exemption, reference to the applicable provision of this Directive, or to the corresponding national provision, or any other reference indicating that the supply of goods or services is exempt;
(11a) where the customer is liable for the payment of the VAT, the mention “Reverse charge”;
(12) in the case of the supply of a new means of transport made in accordance with the conditions specified in Article 138(1) and (2)(a), the characteristics as identified in point (b) of Article 2(2);
(13) where the margin scheme for travel agents is applied, the mention “Margin scheme — Travel agents”;
(14) where one of the special arrangements applicable to second-hand goods, works of art, collectors’ items and antiques is applied, the mention “Margin scheme — Second-hand goods”; “Margin scheme — Works of art” or “Margin scheme — Collector’s items and antiques” respectively”;
(15) where the person liable for payment of VAT is a tax representative for the purposes of Article 204, the VAT identification number, referred to in Article 214, of that tax representative, together with his full name and address.
- In its tax declaration, Signum Alfa Sped, whose main activity consists of transport services, deducted the amounts of VAT appearing on 19 invoices issued, between February 28 and December 31, 2007, by Solidity Trade Kft. in the context of the execution of a transport contract concluded with the latter as well as the amount of VAT appearing on an invoice issued on August 31, 2007 by Wimpex-hu Kft., also in execution of a contract of transport concluded with it (hereinafter, together, the “invoices in question”).
- In support of its right to deduct, Signum Alfa Sped provided the invoices in question, the transport contracts and the performance certificates corresponding to those invoices.
- Entering an appeal against the decision of the first-level tax administration to refuse the deduction of the said amounts and to proceed with a VAT adjustment, together with a fine and default interest, the tax administration confirmed this decision.
- In support of its decision, the tax authorities found that a check by Solidity Trade had revealed a series of irregularities. In particular, at the time of this check, her legal representative was said to have been a Cameroonian national who was prohibited from entering and staying on Hungarian territory. The address of the headquarters of this company would have been that of a private house. The said company had never applied for an operating and establishment authorization or appeared in the registers. No operating costs or any indication as to possible subcontractors would appear on Solidity Trade’s bank account statements. According to the declaration of the legal representative of this company at the time of the execution of the contracts for Signum Alfa Sped, the material transport services were not carried out physically by Solidity Trade, which did not have the necessary human and material resources, but by means of hired trucks. The tax authorities also noted that the invoices issued had been corrected and that the performance certificates did not bear the Solidity Trade stamp or the name of the person acting for it. The consignment notes would not show this company as the consignor either. The tax authorities also noted that the invoices issued had been corrected and that the performance certificates did not bear the Solidity Trade stamp or the name of the person acting for it. The consignment notes would not show this company as the consignor either. The tax administration also noted that the invoices issued had been corrected and that the performance certificates did not bear the Solidity Trade stamp or the name of the person acting for it. The consignment notes would not show this company as the consignor either.
- Likewise, as regards Wimpex-hu, it turned out that the latter was a ‘phantom’ company, with no real head office in Hungary or its own premises. She was not registered for local business tax purposes and, although she filed VAT returns, she never paid that tax. At the time of the execution of the contract for Signum Alfa Sped, Wimpex-hu would have had as its only employee the manager of this one and would have had only a truck not adapted to the invoiced transport services.
- While admitting that the transactions mentioned on the invoices in question had gone well and that those invoices met the formal requirements, the tax administration concluded that these transactions had not been carried out by the issuers of those invoices and that ‘they were therefore to be considered fictitious transactions. This administration also concluded that Signum Alfa Sped had not “taken the necessary precautions”, within the meaning of the national legislation, since, in view of the irregularities observed, it should have known that the transactions had not taken place. between it, on the one hand, and Solidity Trading or Wimpex-hu, on the other.
- Signum Alfa Sped appealed against the decision of the tax administration to the referring court, the Fővárosi közigazgatási és munkaügyi bíróság (Administrative and Labor Court, Budapest, Hungary), arguing that it had taken the necessary precautions necessary when it has concluded the contracts with those companies, since it has verified the elements to which it could have access, namely that the latter had an active VAT number and tax registration. She is also said to have entered into a contract with the managing director of these same companies.
- The referring court annulled the decision of the tax administration. It pointed out that, in accordance with Article 32 (1) (a), Article 35 (1) (a) and Article 44 (5) of the Law on VAT, the exercise of the right to deduct VAT presupposed compliance with the formal and substantive conditions provided for by these provisions. In application, more particularly, of article 44, paragraph 5, of that law, the rights related to the taxation of the taxable person who appears as the purchaser on the invoice cannot be called into question since that – here, with regard to the operative event for VAT, has taken “all the necessary precautions”, taking into account the circumstances of the provision of the services in question, even when the invoice is not reliable as regards its content. Having regard to the case-law of the Court, it would be for the tax administration to demonstrate that the invoice is not authentic or that it is fictitious and, when this proof has been provided, it should be examined whether the taxable person who appears therein as purchaser has taken all the necessary precautions within the meaning of Article 44, paragraph 5, of the Law on VAT.
- The referring court also ruled that the information relied on by the tax administration was not sufficient to reverse the probative nature of the documents made available to that administration, namely the transport contracts, the invoices in question and the certificates. execution, and intended to establish the exact course of operations between the parties. The reality of these transactions cannot be called into question by invoking irregularities, committed by the issuers of invoices, which are not directly linked to the performance of said transactions.
- The Kúria (Supreme Court, Hungary) quashed the judgment of the referring court and referred the case back to that court. She recalled that the invoice which notes an operation which actually took place but which mentions as a supplier a person other than the one who provided the service can be considered as not being authentic from the point of view of its content. It considered that the referring court was wrong to rely on the premiss that even an invoice which could not be credited with regard to its content gave rise to the right of deduction if its addressee ‘ took the necessary precautions ”.
- Consequently, the Kúria (Supreme Court) ordered the referring court to rule on the question whether it can be concluded, in fact, that the invoices in question are authentic from the point of view of their content. It considered that, if it turns out that the operations were not carried out between the parties mentioned therein, it is not relevant to verify whether Signum Alfa Sped has taken “all the necessary precautions with regard to the chargeable event ”, within the meaning of national legislation. It would only be if the transactions which are the very subject of some of the invoices in question were carried out between the parties mentioned therein and if only other irregularities, in particular formal ones, are noted that the question whether this company well taken such precautions could be considered.
- Reconsidering the main proceedings, the referring court is of the opinion that the practice of the tax administration, in accordance with this case-law of the Kúria (Supreme Court), voids the right to deduct VAT of its content, as it follows from Articles 168 and 178 of Directive 2006/112 as well as from the case-law of the Court, in particular from the judgment of 21 June 2012, Mahagében and Dávid (C ‑ 80/11 and C ‑ 142 / 11, EU: C: 2012: 373).
- In that regard, the referring court observes that, in the context of that practice, the tax administration intends to be able to reject, in certain cases, the right to deduct on the ground that the invoice concerned is not reliable, in view of basing, for that purpose, on elements which the Court does not accept as objective elements capable of demonstrating to the requisite legal standard that the taxable person had or should have known of the irregularities. In doing so, that administration would require the taxable person to verify elements the examination of which cannot be required, according to paragraphs 61 to 66 of the judgment of 21 June 2012, Mahagében and Dávid (C ‑ 80/11 and C ‑142/11, EU: C: 2012: 373), generally of the taxable person so that he can benefit from the right to deduct VAT. Besides,
1. Are the provisions of Directive 2006/112 concerning the deduction of VAT to be interpreted as meaning that the tax authorities may in general require a taxable person, who wishes to exercise his right to deduct VAT to check, in order that the tax authorities should not treat the financial transaction as a sham, whether the issuer of the invoice for the services in respect of which he wishes to exercise the right to deduct has the necessary personal and material resources for providing the service in question, both when the service is provided and when the check is made, and whether he has satisfied his obligations as regards declaration and payment of VAT, or to be in possession of documents relating to the financial transaction, other than the invoice, that do not contain formal defects? May the issuer of the invoice be required to carry on its economic activity without any irregularity, not only at the time of the legal transaction forming the basis of the right to deduct VAT, but also at the time of the tax inspection?
2. If the tax authorities, having regard to the circumstances described in the first question, should declare that, although the financial transaction has taken place, the content of the invoice lacks verisimilitude, because that transaction was not performed between the parties mentioned in the invoice, are the tax authorities required, in view of the fact that, as a general rule, the burden of proof lies with them, also to ascertain who the persons are that performed the legal transaction in such a case and who it was that issued the invoice, or may the tax authorities refuse the right to deduct claimed by the taxable person, without conclusive proof of the abovementioned elements of fact, without information or circumstances indicating the name or role of the third person, but merely on the basis of what has been declared in that respect by the tax authorities themselves?
3. Are the provisions of Directive 2006/112 concerning the deduction of VAT to be interpreted as meaning that the tax authorities, even if they do not deny that the financial transaction recorded in the invoice has taken place or that the invoice formally satisfies the legal requirements, may refuse the right to deduct VAT without examining due diligence — virtually basing their decision on strict liability — on the grounds that, because the financial transaction was not performed between the parties mentioned in the invoice, the fact that the content of the invoice lacks verisimilitude precludes, ex hypothesi, examination of due diligence, or rather, in such circumstances, the tax authorities refusing the right to deduct are required also to show that the taxable person wishing to exercise the right to deduct knew of the irregular conduct — designed, as the case may be, to evade tax — of the undertaking with which he maintained contractual relations, or even participated in that irregular conduct?
4. If the answer to the previous question is in the affirmative, is it compatible with the provisions of Directive 2006/112 and with the principles of fiscal neutrality, legal certainty and proportionality, affirmed by the Court of Justice of the European Union in its case-law, for that legislation to be interpreted as meaning that the due diligence of the addressee of the invoice may be examined only if it can be shown that there was a transaction between the parties, that is to say, if the financial transaction took place between the parties in the manner specified in the invoice, and that there are only other kinds of irregularities, for example formal defects, particularly bearing in mind that the national tax legislation contains provisions relating to invoices with formal defects or invoices issued without any financial transaction?
The provisions of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax must be interpreted in the sense that they run counter to a national practice according to which the administration tax refuses a taxable person the right to deduct the value added tax due or paid for the services provided to him on the grounds that no credence can be given to the invoices relating to these services when the issuer of these invoices could not be the true supplier of those services, unless it is established, in the light of objective factors and without requiring the taxable person to carry out checks which are not incumbent on him, which this taxable person knew or should have know that the said services were involved in value added tax fraud,which is for the referring court to verify.
Refusal of the right to deduct – Issuer of invoice not actual supplier – Taxpayer’s audit obligations
The tax authorities may not refuse a taxable person the right to deduct VAT on the ground that the invoices for these services are not credible because the issuer of those invoices could not have been the actual supplier of those services, unless on the basis of objective data and without the taxable person is required to carry out checks which he is not obliged to carry out, it is proved that that taxable person knew or should have known that those services were involved in VAT fraud, which is for the referring court to determine.
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