ECJ Cases: A preliminary ruling regarding the Hungarian VAT deduction rules
The European Court of Justice (ECJ) released a preliminary ruling in Case No. C-289/22, addressing the Hungarian value-added tax (VAT) deduction rules. The case in question concerned a company that utilized temporary employment agencies to hire subcontractors and workers, resulting in a chain of services. The tax authority found that these agencies were involved in a string of fraudulent activities, which raised concerns about the company’s compliance as well as its liability for any indirect involvement in fraudulent activities committed by the agencies.
The ECJ ruled that according to EU Directive 2006/112/EC on the common VAT system:
- The tax authority reserves the right to refuse a taxpayer’s claim for VAT deductions if the taxpayer is found to have participated in or had awareness of any fraudulent tax activities.
- The tax authority bears the responsibility of presenting compelling evidence of VAT fraud and establishing all the elements of the fraudulent activity beyond a reasonable doubt.
- Taxpayers who are seeking to claim VAT deductions must practice due diligence in order to eliminate the risk of indirect involvement in VAT fraud and protect themselves from any potential legal or financial repercussions.
Source: europa.eu
