Comments on ECJ C-171/23: Can transferring business to a new company for VAT exemption be an abuse of law?

• The case dealt with by the Court of Justice of the European Union (CJEU) on October 4, 2024, involved a Croatian company, UP Caffe, which had transferred its business activity to another company, SS-UGO, in order to benefit from a VAT exemption.
• The tax authorities found that the transfer of business to the new company was artificial and constituted an abuse of law, as it was done solely to take advantage of the VAT exemption.
• UP Caffe disagreed with the decision and questioned whether the national authorities could invoke the general principle of EU law regarding the prohibition of abusive practices in the absence of national regulations.
• The CJEU focused on interpreting the principle of prohibition of abusive practices and the possibility of applying this principle in the absence of national regulations.
• The CJEU stated that the existence of an abusive practice in VAT law implies that a transaction, despite meeting formal conditions, results in a tax benefit that goes against the intended purpose of the law.

Source: mddp.pl

See also

• C-171/23 (UP CAFFE d.o.o) – Judgment – Formation of a company to exploit VAT exemptions constitutes an abusive practice

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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.