Case C-324/11

Gábor Tóth

v

Nemzeti Adó- és Vámhivatal Észak-magyarországi Regionális Adó Főigazgatósága

(Reference for a preliminary ruling from the Legfelsőbb Bíróság)

‛Taxation — VAT — Directive 2006/112/EC — Article 9 — Meaning of taxable person — Right to deduct — Refusal — Principle of tax neutrality — Issuer of the invoice removed from the business register — Issuer of the invoice having failed to declare his employees to the tax authority — Obligation of the taxable person to satisfy himself as to the propriety of the conduct of the issuer of that invoice vis-à-vis the tax authority’

Summary — Judgment of the Court (Third Chamber), 6 September 2012

1. Harmonisation of fiscal legislation — Common system of value added tax — Principle of fiscal neutrality — Deduction of input tax — Denial of the right to deduct tax paid by a taxable person to a trader, on the ground of the withdrawal of the business operator’s licence of the latter and despite the issuing by him of an invoice containing all the required information — Not permissible

   (Council Directives 2006/112, Arts 9(1), 213(1), first para., and 226)

2. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Denial of the right to deduct tax paid by a taxable person to a trader, on the ground of his employment of undeclared workers — Not permissible — Exception — Fraud known to the taxable person — Extent of the burden of proof

   (Council Directive 2006/112)

1.  Directive 2006/112 on the common system of value added tax and the principle of tax neutrality must be interpreted as precluding the tax authority from refusing a taxable person the right to deduct value added tax due or paid for services provided to him solely on the ground that the business operator’s licence of the issuer of the invoice had been withdrawn before he provided the services in question or issued the invoice for them, where that invoice contains all the information required by Article 226 of that directive, in particular the information necessary to identify the person who drew up the invoice and the nature of the services supplied.

   Although the concept of ‘taxable person’ in Article 9(1) of the directive is defined widely, on the basis of the factual circumstances, it is not apparent from that article that the status of taxable person depends on any authorisation or licence granted by the authorities for the exercise of an economic activity. It is true that the first subparagraph of Article 213(1) of the directive provides that every taxable person is to state when his activity as a taxable person commences, changes or ceases. However, despite the importance of that declaration for the smooth functioning of VAT, it cannot constitute an additional condition to be met in order to have the status of a taxable person within the meaning of Article 9(1) of that directive, given that Article 213 appears in Chapter 2, entitled ‘Identification’, of Title XI of the directive.

   (see paras 30, 31, 34, operative part 1)

2.  Directive 2006/112 on the common system of value added tax must be interpreted as precluding the tax authority from refusing a taxable person the right to deduct value added tax due or paid for services provided to him on the ground that the issuer of the invoice relating to those services did not declare the workers he employed, without that authority establishing, on the basis of objective evidence, that the taxable person concerned knew, or ought to have known, that the transaction relied on as a basis for the right to deduct was connected with fraud committed by the issuer of the invoice or by another trader acting earlier in the chain of supply.

   In that regard, the fact that a taxable person did not verify either whether a legal relationship existed between the workers employed on a work site and the issuer of the invoice or whether the latter had declared those workers does not constitute an objective factor which demonstrates that the addressee of the invoice knew or ought to have known that he was participating in a transaction involving fraudulent evasion of value added tax, where the addressee was not in possession of any material justifying the suspicion that irregularities or fraud had been committed within that invoice issuer’s sphere of activity. Accordingly, the right to deduct may not be refused on that ground where the material and formal conditions laid down by that directive for the exercise of that right are met.

   In addition, where the tax authority provides specific evidence of the existence of fraud, Directive 2006/112 and the principle of tax neutrality do not preclude the national court from verifying, on the basis of an overall examination of the circumstances of the case, whether the issuer of the invoice carried out the transaction in question himself. However, the right to deduct may be refused only where it is established by the tax authority, on the basis of objective evidence, that the addressee of the invoice knew or should have known that the transaction relied on as a basis for the right to deduct was connected with a fraud committed by the issuer or another operator supplying inputs in the chain of supply.

   (see paras 39, 45, 53, operative part 2-4)

Case C-324/11

Gábor Tóth

v

Nemzeti Adó- és Vámhivatal Észak-magyarországi Regionális Adó Főigazgatósága

(Reference for a preliminary ruling from the Legfelsőbb Bíróság)

‛Taxation — VAT — Directive 2006/112/EC — Article 9 — Meaning of taxable person — Right to deduct — Refusal — Principle of tax neutrality — Issuer of the invoice removed from the business register — Issuer of the invoice having failed to declare his employees to the tax authority — Obligation of the taxable person to satisfy himself as to the propriety of the conduct of the issuer of that invoice vis-à-vis the tax authority’

Summary — Judgment of the Court (Third Chamber), 6 September 2012

1. Harmonisation of fiscal legislation — Common system of value added tax — Principle of fiscal neutrality — Deduction of input tax — Denial of the right to deduct tax paid by a taxable person to a trader, on the ground of the withdrawal of the business operator’s licence of the latter and despite the issuing by him of an invoice containing all the required information — Not permissible

   (Council Directives 2006/112, Arts 9(1), 213(1), first para., and 226)

2. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Denial of the right to deduct tax paid by a taxable person to a trader, on the ground of his employment of undeclared workers — Not permissible — Exception — Fraud known to the taxable person — Extent of the burden of proof

   (Council Directive 2006/112)

1.  Directive 2006/112 on the common system of value added tax and the principle of tax neutrality must be interpreted as precluding the tax authority from refusing a taxable person the right to deduct value added tax due or paid for services provided to him solely on the ground that the business operator’s licence of the issuer of the invoice had been withdrawn before he provided the services in question or issued the invoice for them, where that invoice contains all the information required by Article 226 of that directive, in particular the information necessary to identify the person who drew up the invoice and the nature of the services supplied.

   Although the concept of ‘taxable person’ in Article 9(1) of the directive is defined widely, on the basis of the factual circumstances, it is not apparent from that article that the status of taxable person depends on any authorisation or licence granted by the authorities for the exercise of an economic activity. It is true that the first subparagraph of Article 213(1) of the directive provides that every taxable person is to state when his activity as a taxable person commences, changes or ceases. However, despite the importance of that declaration for the smooth functioning of VAT, it cannot constitute an additional condition to be met in order to have the status of a taxable person within the meaning of Article 9(1) of that directive, given that Article 213 appears in Chapter 2, entitled ‘Identification’, of Title XI of the directive.

   (see paras 30, 31, 34, operative part 1)

2.  Directive 2006/112 on the common system of value added tax must be interpreted as precluding the tax authority from refusing a taxable person the right to deduct value added tax due or paid for services provided to him on the ground that the issuer of the invoice relating to those services did not declare the workers he employed, without that authority establishing, on the basis of objective evidence, that the taxable person concerned knew, or ought to have known, that the transaction relied on as a basis for the right to deduct was connected with fraud committed by the issuer of the invoice or by another trader acting earlier in the chain of supply.

   In that regard, the fact that a taxable person did not verify either whether a legal relationship existed between the workers employed on a work site and the issuer of the invoice or whether the latter had declared those workers does not constitute an objective factor which demonstrates that the addressee of the invoice knew or ought to have known that he was participating in a transaction involving fraudulent evasion of value added tax, where the addressee was not in possession of any material justifying the suspicion that irregularities or fraud had been committed within that invoice issuer’s sphere of activity. Accordingly, the right to deduct may not be refused on that ground where the material and formal conditions laid down by that directive for the exercise of that right are met.

   In addition, where the tax authority provides specific evidence of the existence of fraud, Directive 2006/112 and the principle of tax neutrality do not preclude the national court from verifying, on the basis of an overall examination of the circumstances of the case, whether the issuer of the invoice carried out the transaction in question himself. However, the right to deduct may be refused only where it is established by the tax authority, on the basis of objective evidence, that the addressee of the invoice knew or should have known that the transaction relied on as a basis for the right to deduct was connected with a fraud committed by the issuer or another operator supplying inputs in the chain of supply.

   (see paras 39, 45, 53, operative part 2-4)