ECJ C-281/20 analyzed – Part 4: Neutrality principle, Substance over Form and 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.


  • Neutrality principle: VAT ensures neutrality of taxation of all economic activities, whatever the purpose or results of those activities, provided that they are themselves subject in principle to VAT (Vikingo FővállalkozóC‑610/19, paragraph 41 and the case-law cited).
  • The right to deduct VAT may not be limited if the material and formal requirements or conditions are respected by taxable persons wishing to exercise it (Vikingo FővállalkozóC‑610/19, paragraph 40 and the case-law cited).
  • Article 273, 1st. par.  of Directive 2006/112: Member States may impose obligations, other than those provided for by that directive, if they consider such obligations necessary to ensure the correct collection of VAT and to prevent evasion, the measures adopted by the Member States must not go beyond what is necessary to achieve the objectives pursued. Therefore, they cannot be used in such a way that they would have the effect of systematically undermining the right to deduct VAT and, consequently, the neutrality of VAT (Vikingo FővállalkozóC‑610/19, paragraph 44 and the case-law cited).
  • The fundamental principle of VAT neutrality requires deduction of input VAT to be allowed if the material conditions are satisfied, even if the taxable person has failed to comply with some of the formal conditions (Senatex, C‑518/14, paragraph 38, and Paper Consult, C‑101/16, paragraph 41).
  • Consequently, where the tax authorities have the information necessary to establish that the substantive requirements have been satisfied, they cannot, in relation to the right of the taxable person to deduct that tax, impose additional conditions which may have the effect of rendering that right ineffective for practical purposes (Barlis 06 – Investimentos Imobiliários e Turísticos, C‑516/14, paragraph 42).
  • Those considerations apply, in particular, in the context of the application of the reverse charge procedure (see Bockemühl, C‑90/02, paragraphs 50 and 51; Ecotrade, C‑95/07 and C‑96/07, paragraphs 62 to 64; Fatorie, C‑424/12, paragraphs 34 and 35).


  • The position may be different if non-compliance with formal requirements effectively prevents the production of conclusive evidence that the substantive requirements have been satisfied (Paper Consult, C‑101/16, paragraph 42 and the case-law cited).
  • That may be the case where the identity of the true supplier is not mentioned on the invoice relating to the goods or services on the basis of which the right to deduct is exercised, if that prevents the supplier from being identified and, therefore, the supplier’s status as a taxable person from being established, since, as has been noted in paragraph 27 of the present judgment, that status is one of the material conditions of the right to deduct VAT.



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