Judgment of the European Court of Justice of 22 October, PPUH. Supplier regarded as non-existent, right to deduction of VAT


The dispute refers to the right to deduction of VAT borne by a taxable person in the purchase of goods intended for their economic activity when the local Tax Administration has not been able to verify the existence of the actual supplier of goods, despite being the taxable person in possession of the goods as well as the justifying invoices of the purchases made.

In 2004 the entity PPUH made several purchases of diesel fuel which affected to their activity, proceeding to the deduction of the VAT borne in such purchases. However, the local Tax Administration denied this deduction on the basis that it was not possible to identify the supplier of the goods stated in the invoices, so it was a non-existent one. The reasons that led him to this conclusion are:

-The provider was not registered for VAT purposes.

-Not had filed tax returns and failed to pay VAT.

-Not submitted their annual accounts nor had an administrative concession for the sale of fuel.

-The registered office was in ruins, for which was not able to carry out supplies of goods, as well as that could not contact with any representative of the entity.

However, PPUH alleges that it is contrary to the VAT Directive to deny to a taxable person the possibility of deducting the VAT, even more when it has acted in good faith having received from the supplier a certificate of inscription in the trade register and a tax identification number, as well as that invoices comply with the formal requirements for the deduction about the content of those.

In summary, the National Court asks if the VAT directive is contrary to a national regulation which denies a taxable person the right to deduct the VAT due or paid by goods that have been delivered since the invoices have been issued by an operator who, in accordance with the criteria laid down in said legislation, must be considered non-existent, and that it is impossible to identify the actual supplier of the goods.

In this regard, the European Court of Justice recalls that the material requirements for the deduction of the tax are the status of VAT taxable person and that the goods and/or services purchased are used in operations that generate the right to deduction, while the formal requirements laid down refer that the invoice or supporting document to comply with the requirements established for that purpose by the Community Legislation with regard to the contents of those. Therefore, the arguments put forward by the local Tax Authorities in terms that it cannot be corroborated the existence of the supplier of the goods are not reasons that exclude these conditions for the deduction since it does not affect PPUH’s taxable status or disposal and effective use of the goods in its activity. In addition failure to meet requirements such as registration for VAT purposes or the non-declaration by the supplier may not limit the deduction of the tax as it has already stated on other occasions by this Court.

Accordingly, the requirements listed by the Tax Administration are not established as such in the VAT Directive (to have license for the sale of fuel, to submit annual accounts, to have a legal domicile for delivery of goods, etc.).

As the Court stated:

“In the present case, it is apparent from the documents submitted to the Court that the invoices relating to the transactions at issue in the main proceedings mentioned, in accordance with that provision, inter alia, the nature of the goods supplied and the amount of VAT due, and also Finnet’s name, tax identification number and the address of its corporate seat. Accordingly, the circumstances noted by the referring court and summarised in paragraph 31 above do not support the conclusion that Finnet does not have the status of a taxable person and, consequently, do not allow PPUH Stehcemp to be refused the right of deduction”

Finally, in relation to the possibility of considering PPUH as knowledgeable of the possible fraud related to the supplier, the ECJ leaves open the possibility of excluding the right to deduct if according to the evidence in possession of the national body it considers PPUH linking to the fiscal fraud, in which case should be determined by the national body.

Attached is a copy of the Judgment with case C-277/14.

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ECJ Right to deduct VAT

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