Case C-642/11

Stroy trans EOOD

v

Direktor na Direktsia ‘Obzhalvane i upravlenie na izpalnenieto’ — Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite

(Request for a preliminary ruling from the Administrativen sad Varna)

‛Taxation — VAT — Directive 2006/112/EC — Principle of fiscal neutrality — Right of deduction — Refusal — Article 203 — Entry of the VAT on the invoice — Chargeability — Existence of a taxable transaction — Identical determination in respect of the issuer of the invoice and its recipient — Necessity’

Summary — Judgment of the Court (Third Chamber), 31 January 2013

1. Harmonisation of fiscal legislation — Common system of value added tax — Tax payable solely because it is entered on the invoice — Scope — No actual taxable transaction — Included — Tax adjustment notice — Implications

   (Council Directive 2006/112, Arts 167 and 203)

2. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Observance of the principles of fiscal neutrality, proportionality and the protection of legitimate expectations — Refusal on the ground that the transaction has not actually been carried out — Lawfulness — Conditions

   (Council Directive 2006/112, Arts 63, 167 and 203)

1.  Article 203 of Directive 2006/112 on the common system of value added tax (VAT) must be interpreted as meaning that the value added tax (VAT) entered by a person on an invoice is payable by him regardless of whether a taxable transaction actually exists.

   However, the obligation under Article 203 of Directive 2006/112, which is intended to eliminate the risk of loss of tax revenue which the right of deduction provided for in Article 167 et seq. of the directive might entail, is limited by the possibility, to be provided for by the Member States in their national legal systems, of correcting any tax improperly invoiced where the issuer of the invoice shows that he acted in good faith or where he has, in sufficient time, wholly eliminated the risk of any loss of tax revenue.

   Moreover, to the extent that the issuer of an invoice does not rely on one of the cases in which improperly invoiced value added tax (VAT) can be corrected, the tax authorities are not obliged, in the context of a tax audit of that person, to determine whether the value added tax (VAT) invoiced and declared corresponds to taxable transactions which were actually carried out by him.

   Article 203 of Directive 2006/112 must be interpreted as meaning that it cannot be inferred from the mere fact that the tax authorities did not correct, in a tax adjustment notice addressed to the issuer of the invoice, the value added tax (VAT) declared by the latter that those authorities have acknowledged that the invoice corresponded to an actual taxable transaction.

   However, EU law does not preclude the competent authority from checking the existence of the transactions invoiced by a taxable person and rectifying, where necessary, the tax debt resulting from the declarations made by the taxable person. The outcome of such a check is, like the declaration and the payment, by the issuer of the invoice, of invoiced value added tax (VAT), one factor to be taken into account by the national court when assessing whether a taxable transaction conferring the right of deduction on the recipient of an invoice in a specific case exists.

   (see paras 32, 33, 35, 37, 38, operative part 1)

2.  The principles of fiscal neutrality, proportionality and the protection of legitimate expectations must be interpreted as not precluding the recipient of an invoice from being refused the right to deduct input value added tax (VAT) because there is no actual taxable transaction even though, in the tax adjustment notice addressed to the issuer of that invoice, the value added tax (VAT) declared by the latter was not adjusted. However, if, in the light of fraud or irregularities, committed by the issuer of the invoice or upstream of the transaction relied upon as the basis for the right of deduction, that transaction is considered not to have been actually carried out, it must be established, on the basis of objective factors and without requiring of the recipient of the invoice checks which are not his responsibility, that he knew or should have known that that transaction was connected with value added tax (VAT) fraud.

   (see para. 52, operative part 2)

Case C-642/11

Stroy trans EOOD

v

Direktor na Direktsia ‘Obzhalvane i upravlenie na izpalnenieto’ — Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite

(Request for a preliminary ruling from the Administrativen sad Varna)

‛Taxation — VAT — Directive 2006/112/EC — Principle of fiscal neutrality — Right of deduction — Refusal — Article 203 — Entry of the VAT on the invoice — Chargeability — Existence of a taxable transaction — Identical determination in respect of the issuer of the invoice and its recipient — Necessity’

Summary — Judgment of the Court (Third Chamber), 31 January 2013

1. Harmonisation of fiscal legislation — Common system of value added tax — Tax payable solely because it is entered on the invoice — Scope — No actual taxable transaction — Included — Tax adjustment notice — Implications

   (Council Directive 2006/112, Arts 167 and 203)

2. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Observance of the principles of fiscal neutrality, proportionality and the protection of legitimate expectations — Refusal on the ground that the transaction has not actually been carried out — Lawfulness — Conditions

   (Council Directive 2006/112, Arts 63, 167 and 203)

1.  Article 203 of Directive 2006/112 on the common system of value added tax (VAT) must be interpreted as meaning that the value added tax (VAT) entered by a person on an invoice is payable by him regardless of whether a taxable transaction actually exists.

   However, the obligation under Article 203 of Directive 2006/112, which is intended to eliminate the risk of loss of tax revenue which the right of deduction provided for in Article 167 et seq. of the directive might entail, is limited by the possibility, to be provided for by the Member States in their national legal systems, of correcting any tax improperly invoiced where the issuer of the invoice shows that he acted in good faith or where he has, in sufficient time, wholly eliminated the risk of any loss of tax revenue.

   Moreover, to the extent that the issuer of an invoice does not rely on one of the cases in which improperly invoiced value added tax (VAT) can be corrected, the tax authorities are not obliged, in the context of a tax audit of that person, to determine whether the value added tax (VAT) invoiced and declared corresponds to taxable transactions which were actually carried out by him.

   Article 203 of Directive 2006/112 must be interpreted as meaning that it cannot be inferred from the mere fact that the tax authorities did not correct, in a tax adjustment notice addressed to the issuer of the invoice, the value added tax (VAT) declared by the latter that those authorities have acknowledged that the invoice corresponded to an actual taxable transaction.

   However, EU law does not preclude the competent authority from checking the existence of the transactions invoiced by a taxable person and rectifying, where necessary, the tax debt resulting from the declarations made by the taxable person. The outcome of such a check is, like the declaration and the payment, by the issuer of the invoice, of invoiced value added tax (VAT), one factor to be taken into account by the national court when assessing whether a taxable transaction conferring the right of deduction on the recipient of an invoice in a specific case exists.

   (see paras 32, 33, 35, 37, 38, operative part 1)

2.  The principles of fiscal neutrality, proportionality and the protection of legitimate expectations must be interpreted as not precluding the recipient of an invoice from being refused the right to deduct input value added tax (VAT) because there is no actual taxable transaction even though, in the tax adjustment notice addressed to the issuer of that invoice, the value added tax (VAT) declared by the latter was not adjusted. However, if, in the light of fraud or irregularities, committed by the issuer of the invoice or upstream of the transaction relied upon as the basis for the right of deduction, that transaction is considered not to have been actually carried out, it must be established, on the basis of objective factors and without requiring of the recipient of the invoice checks which are not his responsibility, that he knew or should have known that that transaction was connected with value added tax (VAT) fraud.

   (see para. 52, operative part 2)