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Comments on ECJ C-696/20: Looming VAT liabilities for chain transactions?

The recent decision of the Court of Justice of the EU (CJEU) in case C-696/20 (B. v Dyrektor Izby Skarbowej w W.) offers a cautionary tale of what could happen when tax authorities challenge parties’ characterization of a chain transaction. Although the CJEU did not accept a double levy of non-deductible VAT, the CJEU confirmed that a misclassification of a supply as a domestic supply could result in a single levy of non-deductible VAT.

Now more than ever, attention must be paid to the VAT consequences of intra-EU chain transactions.

  • The CJEU supports — at least partially — a rigid approach such as the one demonstrated by the Polish tax authorities.
  • Looking for additional VAT revenue, more member states may scrutinize chain transactions.
  • Charging (and accepting) local VAT as a fallback position is not a sensible approach, as from 2020, VAT mistakenly charged on an intra-community supply cannot be corrected.

Source Baker & McKenzie

See also ECJ C-696/20 (Dyrektor Izby Skarbowej w W.) – Judgment – A “double tax” can not be levied in the event of erroneous taxation of intra-Community acquisition of goods

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