On December 9, 2021, the ECJ issued its decision in the case C-154/20 (Kemwater ProChemie).
Context: Reference for a preliminary ruling – Taxation – Value added tax (VAT) – Directive 2006/112/EC – Article 168 – Right to deduct input tax – Material conditions governing the right of deduction – Supplier’s status as taxable person – Burden of proof – Refusal of the right of deduction where the true supplier has not been identified – Conditions
Article in the EU VAT Directive
Articles 168(a), 178(a), 226 of the EU VAT Directive 2006/112/EC
Article 168 (Origin and Scope of Right of Deduction)
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries
out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
Article 178 (Rules Governing Exercise of the Right of Deduction)
In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;
Article 226 (Content of invoices)
Without prejudice to the particular provisions laid down in this Directive, only the following details are required for VAT purposes on invoices issued pursuant to Articles 220 and 221:
(1) the date of issue;
(2) a sequential number, based on one or more series, which uniquely identifies the invoice;
(3) the VAT identification number referred to in Article 214 under which the taxable person supplied the goods or services;
(4) the customer’s VAT identification number, as referred to in Article 214, under which the customer received a supply of goods or services in respect of which he is liable for payment of VAT, or received a supply of goods as referred to in Article 138;
(5) the full name and address of the taxable person and of the customer;
(6) the quantity and nature of the goods supplied or the extent and nature of the services rendered;
(7) the date on which the supply of goods or services was made or completed or the date on which the payment on account referred to in points (4) and (5) of Article 220 was made, in so far as that date can be determined and differs from the date of issue of the invoice;
(7a) where the VAT becomes chargeable at the time when the payment is received in accordance with Article 66(b) and the right of deduction arises at the time the deductible tax becomes chargeable, the mention “Cash accounting”;
(8) the taxable amount per rate or exemption, the unit price exclusive of VAT and any discounts or rebates if they are not included in the unit price;
(9) the VAT rate applied;
(10) the VAT amount payable, except where a special arrangement is applied under which, in accordance with this Directive, such a detail is excluded;
(10a) where the customer receiving a supply issues the invoice instead of the supplier, the mention “Self-billing”;
(11) in the case of an exemption, reference to the applicable provision of this Directive, or to the corresponding national provision, or any other reference indicating that the supply of goods or services is exempt;
(11a) where the customer is liable for the payment of the VAT, the mention “Reverse charge”;
(12) in the case of the supply of a new means of transport made in accordance with the conditions specified in Article 138(1) and (2)(a), the characteristics as identified in point (b) of Article 2(2);
(13) where the margin scheme for travel agents is applied, the mention “Margin scheme — Travel agents”;
(14) where one of the special arrangements applicable to second-hand goods, works of art, collectors’ items and antiques is applied, the mention “Margin scheme — Second-hand goods”; “Margin scheme — Works of art” or “Margin scheme — Collector’s items and antiques” respectively”;
(15) where the person liable for payment of VAT is a tax representative for the purposes of Article 204, the VAT identification number, referred to in Article 214, of that tax representative, together with his full name and address.
Facts
The Czech Supreme Administrative Court made a reference for a preliminary ruling to the ECJ related to the right to deduct the VAT on services supplied by an unknown entity.
Czech company Kemwater ProChemie has been supplied advertisement services. Tax administrator did not dispute the actual provision of services, but disputes that the alleged supplier has supplied them. Subsequently the tax administrator refused the company’s input VAT claim.
CSAC reminds basic substantive conditions for the right to deduction, one of them being that the supply is provided by another taxable person. CSAC questions in this relation ECJ rulings Signum Alfa Sped and Maks Pen (which conclude that VAT claim cannot be disputed just based on the fact that the issuer of the invoice is not actual service provider) as contradicting former ECJ rulings e.g. Enkler, Evita-K, Barlis 06. Those rulings concluded that the proof of burden of complying with the substantive conditions lies upon the supply recipient.
CSAC asks the ECJ whether
- VAT claim is conditioned by proving that the supply has been provided by another concrete taxable person
- If so, and a taxable person does not fulfil its above-mentioned obligation, is it possible to refuse the right to deduction unless proven that the supply recipient knew or might have known about their participation in the VAT fraud.
Source: Czech Supreme Administrative Court
Questions
It is in accordance with Directive 2006/112/EC 1 that the exercise of the right to deduct value added tax paid upstream is conditional on the taxable person’s obligation to prove that the benefit received by him in a taxable transaction was carried out by a taxable person. another taxable person, concrete?
If the answer to the first question is in the affirmative, if the taxable person has not fulfilled the burden of proof, he may be denied the right to deduct value added tax paid upstream, even if it has not been established that that taxable person knew or could to know that by acquiring goods or services, she will be involved in a tax fraud?
AG Opinion
None
Decision
Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the right to deduct input value added tax (VAT) must be refused, without the tax authorities having to prove that the taxable person committed VAT fraud or that he or she knew, or ought to have known, that the transaction relied on to establish the right of deduction was connected with such fraud, where, the true supplier of the goods or services concerned not having been identified, that taxable person fails to adduce proof that that supplier had the status of taxable person, provided that, taking into account the factual circumstances and the evidence produced by that taxable person, the information needed to verify that the true supplier had that status is lacking.
Personal comments/VATupdate
After an audit, the Czech tax authorities deny Kemwater ProChemie sro deduction of input VAT paid for advertising services provided by Viasat Service sro during golf tournaments. Viasat, however, denies that it provided the advertising services. The Czech court is asking questions for a preliminary ruling in this case.
The European Court of Justice rules that Kemwater is not entitled to deduct input VAT if Kemwater does not prove that Viasat is a taxable person. The Tax and Customs Administration does not have to prove that fraud has taken place. This applies when it is not clear who the actual supplier of the goods or services concerned is. It is also important that the data required to verify whether the actual supplier is liable for tax is missing.
Source
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