- There is no right to deduct input tax for incorrectly charged VAT, as established by the European Court of Justice; the right to deduct only applies to tax that is legally due, not merely stated on an invoice.
- Buyers must pursue corrections from sellers for wrongly charged VAT, as they cannot deduct such amounts; this includes situations involving fraudulent invoices or tax evasion, where the formal and substantive conditions for deduction are not met.
- The right to deduct input tax may also be denied in cases of known or suspected VAT fraud, emphasizing that buyers must exercise due diligence to avoid complicity in tax evasion, with the burden of proof resting on tax authorities to demonstrate fraudulent involvement.
Source Skatteverket
ECJ Cases Referred to:
- C-342/87 – Genius Holding: Established that the right to deduct input VAT is contingent upon the tax being lawfully due and not merely based on what is stated on the invoice.
- C-107/13 – Firin OOD: Reaffirmed that a taxpayer may not deduct input tax if the underlying transaction does not meet the requirements set out in the VAT Directive, emphasizing the need for a valid taxable transaction.
- C-454/98 – Schmeink & Cofreth: Clarified that allowing deductions for VAT that is not legally owed would facilitate tax evasion, reinforcing the principle that only VAT related to genuine transactions can be deducted.
- C-712/17 – EN.SA: Addressed situations where VAT was charged despite no actual transaction taking place, affirming that such instances do not grant the right to deduct input tax.
- C-281/20 – Ferimet: Highlighted the necessity for invoices to meet formal requirements; failure to do so can invalidate the right to deduct input tax even if the substantive conditions are met.
- C-610/19 – Vikingo Fővállalkozó: Reinforced the requirement that the seller must be a taxable person for the buyer to claim input tax deduction; if this condition is not met, the right to deduct is lost.
- C-332/15 – Astone: Clarified that the absence of proper invoicing can prevent buyers from proving that the conditions for input tax deduction have been satisfied.
- C-35/05 – Reemtsma Cigarettenfabriken: Established the principle that buyers must seek refunds directly from sellers for VAT incorrectly charged, as they cannot deduct such amounts from their VAT returns.
- C-397/21 – HUMDA: Examined circumstances surrounding the right to deduct input VAT and the implications of incorrectly charged VAT, reinforcing the need for due diligence.
- C-83/23 – H GmbH: Focused on the legal framework surrounding input tax deductions and established guidelines for identifying valid transactions for VAT purposes.
- C-640/23 – Greentech: Recent case reinforcing the lack of right to deduct VAT when the supplier is unable to correct an invoice due to being time-barred from making adjustments.
- C-512/21 – Aquila Part Prod Com: Addressed issues of VAT fraud and the conditions under which a buyer may lose the right to deduct input tax due to knowledge or complicity in fraudulent activities.
- C-439/04 and C-440/04 – Kittel: Clarified that the right to deduct VAT can be denied if a buyer is deemed to be acting in bad faith, particularly in cases involving VAT fraud.
- C-80/11 and C-142/11 – Mahagében and Dávid: Established that a buyer can retain the right to deduct input VAT if they acted in good faith and were unaware of any fraud in the supply chain.
- C-131/13, C-163/13, and C-164/13 – Schoenimport Italmoda Mariano Previt: Explored the implications of fraudulent transactions and clarified that the right to deduct may still apply if the buyer had no knowledge of the fraud.
- C-108/20 – Finanzamt Wilmersdorf: Addressed the requirements for valid input tax deductions and the impact of supplier fraud on the buyer’s right to deduct.
- C-354/03, C-55/03, and C-484/03 – Optigen: Examined the relationship between VAT fraud and the right to deduct input tax, emphasizing the importance of the buyer’s knowledge of the underlying transactions.
- C-596/21 – Finanzamt M: Reinforced the principle that the right to deduct input VAT is lost if the buyer is aware or should have been aware that the transaction involved VAT fraud.
- C-324/11 – Tóth: Explored conditions under which a buyer can be deemed to act in bad faith, particularly regarding knowledge of the seller’s fraudulent actions.
- C-277/14 – PPUH Stehcemp: Addressed the circumstances under which a buyer may retain the right to deduct input VAT despite potential irregularities in the seller’s conduct.
- C-537/22 – Global Ink Trade: Focused on the burden of proof regarding the buyer’s knowledge of fraud and the conditions under which deductions can be denied.
- C-660/16 and C-661/16 – Achim Kollroß and Others: Examined the circumstances under which advance payments can be deducted, emphasizing the buyer’s awareness of potential non-fulfillment of the transaction.
