ECJ’s judgment, of February 12th, 2015. Surgicare. Previous and mandatory administrative proceeding in order to declare the abusive practice for deducting the VAT


It is questioned to the EU Court about the compatibility of the European VAT Directive as regard an administrative procedure set out in the Portuguese national legislation, which is mandatory and previous to the declaration of abusive practice of a taxpayer concerning the right to deduct VAT.

The taxpayer is a Portuguese company dedicated to the construction, operation and management of health centres and the provision of general medical services. The company built a clinic and transferred the exploitation to another company in the same group. However, the tax authorities understood that the assignment was made only for the purpose of being able to deduct the VAT borne on the construction, which otherwise, if the company itself exploded the clinic, could not deduct.

Therefore, it is rejected to the taxpayer the refund of VAT by considering the national tax authorities that the activity was part of an abusive practice of the right to be VAT refunded, as far as it is a business simulation for the sole purpose of deducting the VAT.

However, the company appeal against the VAT settlement on the basis of not using the tax authorities the special and mandatory procedure laid down in its rules of General Tax Law. Therefore, it is asked to the Court whether that legislation is compatible with the VAT system that has its origin in the EU law.

Reminds the Court that, first, the implementation of measures to combat fraud are part of the domestic legal system, and also in this case, the method seeks to ensure respect of certain fundamental rights and especially the one of being heard. These principles are in line with EU Directive, which literally states in article 273:

“Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion (…)”

Therefore, the Court concludes that the VAT Directive does not preclude the prior application of a national administrative procedure as the one described in this case.

A copy of the judgment C-662/13 is attached.

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ECJ VAT deduction with abusive practice

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