- A Polish company issued an invoice for the sale of trademarks to another Polish company, but the tax authority denied the buyer’s right to deduct input VAT based on a provision in the Polish VAT Law that refused deduction for activities to which Article 83 of the Polish Civil Code applies.
- Article 83 states that a transaction concluded with another party seemingly (illusory, in appearance) is invalid.
- The right to deduct VAT cannot be restricted, but it depends on whether the transaction actually took place and whether the trademarks were used for taxable activities.
- The burden of proof lies with the taxpayer, and if it is established that the trademarks were acquired and subsequently used for taxable activities, the taxpayer cannot be denied the right to deduct VAT.
- However, if there has been fraud or abuse, the right to deduct may be denied. The prohibition of abuse bars wholly artificial arrangements that do not reflect economic reality and are set up with the sole aim of obtaining a tax advantage contrary to the purposes of Directive 2006/112.
- The appearance/illusiveness of an act under civil law may be an indication of fraud or abuse, but it is not a sufficient indication.
Source Pawel Mikula
See also
- Summary of ECJ C-114/22: VAT deduction even if a taxable economic transaction is regarded as fictitious
- C-114/22 (Dyrektor Izby Adminitracji Skarbowej w Warszawie) – Judgment – VAT deduction even if sale of the brands was a sham transaction
