ECJ: AG Opinion on Case No. C-227/21 (‘HA.EN.’ UAB) – Right to deduct input VAT on intra-community transactions would not be able to pay the VAT incurred to the tax authorities due to the financial situation

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The European Court of Justice (ECJ) delivered advocate general Kokott’s opinion Case C227/21, 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; 


AG Opinion 


  •  The fiscal neutrality forbids national law that denies taxpayers the right to deduct VAT if they knew or should have known when acquiring real estate, the supplier would not pay the VAT owing to insolvency
  • VAT cannot be collected unless the recipient of the supply makes the funds accessible to the tax debtor.  



 Source: eur-lex.europa.eu  

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