Comments on ECJ C-537/22: Irregularities insufficient for passive VAT fraud or refusal of the right to deduct

The Court of Justice ruled on the case of Global Ink Trade Kft, addressing the issue of whether Hungarian tax authorities can deny the right to deduct VAT due to lack of due diligence in verifying the identity and tax compliance of a supplier.
Global Ink Trade, a Hungarian wholesaler, received invoices from Office Builder Kft, but the tax authorities found that Office Builder was not engaged in real economic activity and had not met its tax obligations.
Despite evidence that goods were delivered to Global Ink Trade, the tax authorities believed that the company had not exercised due diligence and was passively involved in VAT fraud.
However, the Court stated that the right to deduct VAT is subject to substantive conditions, and a taxable person may only be refused the right to deduct if they were actively involved in VAT fraud or should have known about it.
The Court also emphasized that a taxpayer is only required to exercise extra care if there are indications of fraud, and the payment of VAT in previous or subsequent transactions does not affect the right to deduct input VAT.