ECJ: Preliminary Ruling on Case C-582/20 (SC Cridar Cons SRL) – Tax authorities may suspend tax assessment for the input VAT deduction in order to obtain evidence of a taxpayer’s involvement in VAT
The Preliminary Ruling for Case No. C-582/20, issued by the European Court of Justice (ECJ), was published in the Official Gazette of the European Union on April 19, clarifying the VAT deduction regulations in Romania.
Background
Cridar Cons SRL, which works primarily in road and highway construction, was the subject of a tax inspection by the Public Prosecution Service regarding its VAT obligations for the period 1 January 2011 to 30 April 2014.
The Romanian Tax Authorities issued a tax assessment that rejected the right to deduct VAT for all Cridar purchases made from five companies recognized by the Public Prosecution Service. Cridar appealed that it has not been proven that it engaged in VAT fraud.
Decision
The EU Court of Justice has ruled that the Romanian tax authorities are not in violation of EU law when they postpone the processing of an objection to a tax assessment in order to obtain information on a taxpayer’s participation in tax evasion, provided that:
- The suspension does not cause an unreasonably long delay in the administrative objection process;
- The ruling allowing such suspension is supported by facts and law and is open to judicial review; and
- If it is established that the taxpayer’s right to deduct was wrongly rejected, the reimbursement must be given within a reasonable time frame.
If these requirements are satisfied, it is not necessary to suspend the application of the tax assessment.
Source: curia.europa.eu
