- On October 4, 2024, the Court of Justice of the European Union issued a ruling on abuse of law when using the VAT exemption for small entrepreneurs.
- The case involved a Croatian court asking whether the exemption can be denied if a new company was created to bypass turnover limits.
- The Court ruled that if creating a company is an abuse aimed at maintaining the VAT exemption, the exemption must be denied, even without specific national regulations.
- The ruling emphasized that abuse of law requires benefiting from provisions contrary to their purpose and showing that the main goal was to obtain this benefit.
- The case revolved around the VAT exemption threshold for Croatia and the Court highlighted that the exemption aims to support small businesses.
- The ruling confirmed that authorities can question the right to exemption in cases of artificial division of activities, even if conditions are formally met.
- Taxpayers planning restructuring should carefully analyze the economic justification, beyond tax benefits, to avoid challenges from tax authorities.
- The ruling is part of a broader trend in the EU to combat tax law abuses, with tax authorities expected to increasingly question artificial business structures created solely for tax purposes.
- Taxpayers should seek individual interpretations or protective opinions when in doubt, ensuring that restructuring actions have genuine business justifications beyond tax aspects.
Source: crido.pl
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
