European Court upholds right to VAT deduction, despite “Null and Void” agreement

The Court of Justice of the European Union recently ruled in a case (C-114/22), affirming that the rejection of VAT deduction solely on the basis of a transaction’s invalidity under national civil law, is in violation of the VAT Directive. The Court thereby emphasizes that the right to VAT deduction must be safeguarded, even when an agreement is considered null and void under national civil law.While the tax authorities have the right to deny VAT deduction in the case of objective evidence of fraudulent behavior, a violation of civil law regulations does not automatically constitute VAT fraud. The ruling demonstrates that a VAT assessment in cases not related to VAT fraud is excessive and in violation of EU law.

Source: vat-consult.be

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