C-430/19. Exercise of the right to deduct in the case of value added tax (VAT)

On 4th June, the Court of Justice of the European Union issued decision C-430/19, having an impact on the area of practice of tax inspections.
Basically, in this way it was established that it is excessive on the part of the Tax Office to request other supporting documents besides the invoice, in order to benefit from the deduction. The decision adopted is binding for all courts in the EU that face similar situations, so including Romania, especially given that the case concerns a dispute between the Tax Office and a company under Romanian law.
The two conclusions are:

  1. The general principle of European Union law of observance of the rights of the defense must be interpreted as meaning that, in the context of national administrative procedures for inspection and determination of the basis of value added tax, a taxable person has not had access to to the information contained in his administrative file and which were taken into account when adopting an administrative decision which imposed additional tax obligations on him, and the notified court finds that, in the absence of this irregularity, the procedure could have had a different result, this principle requires that this decision be annulled.
  2. The principles governing the application by the Member States of the common system of value added tax (VAT), in particular those of fiscal neutrality and legal certainty, must be interpreted as precluding that in the presence of mere unsubstantiated suspicions of evidence of to the national tax administration regarding the effective realization of the economic operations that were the basis for issuing a fiscal invoice, to the taxable person receiving this invoice to be denied the right to deduct VAT if he is not able to provide, apart from the mentioned invoice , other elements to prove the reality of the economic operations performed.

Therefore, the first conclusion evokes the fact that the taxpayer’s access to his fiscal file, before a decision is made imposing additional amounts of payment, is essential for the legality of the decision itself. If the access to the information based on which the decision is adopted is denied, it can be annulled in court. But only if access to that information would have led to a different result of the tax inspection.
It is explained that, although the Tax Office is not obliged to automatically provide access to the information it holds, this is still the responsibility of the taxpayer, who can submit an express request in this regard. Methodologically speaking, the taxpayer must receive upon request “the information and documents contained in the administrative file and which were taken into account by the public authority when adopting its decision, unless objectives of general interest justify restricting access to such information and documents ”, as explained in the decision
If, following such a request, the Tax Office refuses to provide the requested information, not having a real motivational basis, the court must annul the decision imposing additional payment amounts.
“It is for the referring court to assess the extent to which the tax inspection procedure could have had a different outcome if [the inspected taxpayer] could have had access to the file during that administrative procedure,” as set out in the judgment.
The second conclusion refers to the VAT deduction based on a simple tax invoice, given that there are suspicions that the operations for which it was issued are fictitious. Therefore, in the absence of concrete evidence regarding the fictitious quality of the operations, the VAT deduction must be allowed only on the basis of the invoice, without the need to present supporting documents.

Contact an Advisor

If you have any questions regarding this topic and how it might have an impact on your business, please contact the Mirus Consultant with whom you regularly work, or:

Raluca Tutu

  • Tax
  • Bucharest
  • +40 (31) 228 20 75