ECJ ruling raises threshold for denying EU companies VAT deductions
12 July 2012
The ECJ has issued a judgment that shifts the burden of proof onto tax authorities in instances where taxpayers are denied VAT credit.
The ruling concerned two cases involving Hungarian taxpayers and advisers say it will benefit companies in Hungary, Bulgaria and any other EU state where the practice of the tax authorities is to deny VAT deductions based on suspicion of tax avoidance by the supplier.
In both cases, Hungary’s tax authorities attempted to limit VAT refunds accessible to the purchasers based on their inability to prove the supplier was able to provide the relevant service, and a lack of documentation – other than an invoice – as evidence of the supply.
The ECJ said the tax authorities cannot deny the purchaser’s right to deduct input VAT unless they can prove the purchaser knew the supplier was avoiding tax or acting in a fraudulent manner.
The court also said the VAT deduction...
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