The European Court of Justice (ECJ) delivered advocate general Kokott’s opinion Case C‑227/21, against a taxpayer who took possession of the borrower’s property ‘HA.EN’.UAB for consideration and requested clarity on the transaction’s VAT taxes.
The tax authorities should be permitted if not obliged to refuse a taxable person the privilege to deduct input tax if they knew or should have known that a transaction before or after them in a chain of supply was involved in VAT fraud. The criminalization of fraud through tax law, outside the scope of the criminal legislation properly intended for that purpose, already raises concerns about taxpayers’ rights. On the other hand, the mere prospect of non-payment of a tax does not constitute tax fraud, making it almost impossible to conduct business with financially troubled enterprises.
Article 168 ( Right to Deduct )
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay;