ECJ case: Preliminary ruling on German VAT deduction rules
German VAT deduction rules in a supply of products that were connected to tax fraud were clarified by the European Court of Justice in a preliminary judgement for Case No. C-596/21 on November 24.
Background
The taxpayer bought an automobile from a person who was involved in VAT evasion through a series of transactions. The taxpayer, who was the second buyer and was not aware of the earlier transactions, requested input tax deduction. The tax authority rejected the request, so the taxpayer filed a claim.
Resolution
After review, the ECJ determined that the benefit of the deduction may be denied to the taxpayer. The reason for this is that the taxpayer should have known about the initial seller’s VAT fraud at the time of the first sale. Moreover if the taxpayer knew that the purchase was connected to fraud, the deduction could be completely rejected.
Source: Europa.eu
