Comments on ECJ Case T-363/25: Hungarian Tax Authorities Cannot Deny VAT Deduction Solely for Unreliable Invoices

VAT Deduction Rights Affirmed: The General Court ruled that the right to deduct VAT cannot be denied solely based on the perception of a ‘non-credible’ invoice chain, provided that the supply of goods is established and the State budget has not been harmed.
Clarification on Fraud Involvement: The court emphasized that to refuse a VAT deduction, tax authorities must prove active involvement in or knowledge of VAT fraud by the taxpayer, rather than relying on assumptions derived from an economically irrational transaction structure.
Importance of Payment Fulfillment: The decision highlighted that since all parties in the supply chain fulfilled their VAT obligations and the goods were supplied and used for taxable transactions, the absence of damage to the State budget is a critical factor in excluding any claims of fraud.

The ECJ issued a preliminary ruling on Hungarian input VAT deduction rules in Case No. T-363/25.
A Hungarian company’s VAT deduction was denied by tax authorities, claiming the invoice was fictitious.
The ECJ ruled that VAT deduction cannot be denied solely due to unreliable invoices or incorrect parties if goods were supplied, used for taxable activities, and VAT obligations were met.
The ruling interprets Directive 2006/112/EC to protect taxpayers when there is no loss to the state budget.