# C_2023164EN.01002301.xml

| 8.5.2023 | EN | Official Journal of the European Union | C 164/23 |
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8.5.2023

EN

Official Journal of the European Union

C 164/23

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Order of the Court (Fifth Chamber) of 9 January 2023 (request for a preliminary ruling from the Fővárosi Törvényszék — Hungary) — A.T.S. 2003 Vagyonvédelmi és Szolgáltató Zrt., in liquidation v Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága

(Case C-289/22, (1) A.T.S. 2003)

(Reference for a preliminary ruling - Article 99 of the Rules of Procedure - Taxation - Value added tax (VAT) - Directive 2006/112/EC - Articles 167, 168 and 178 - Right to deduct input VAT - Fraud - Proof - Duty of care of the taxable person - Consideration of an infringement of the national provisions governing the supply of services at issue)

(2023/C 164/29)

Language of the case: Hungarian

Referring court

Fővárosi Törvényszék

Parties to the main proceedings

Applicant: A.T.S. 2003 Vagyonvédelmi és Szolgáltató Zrt., in liquidation

Defendant: Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága

Operative part of the order

| 1. | Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
  must be interpreted as precluding a national practice whereby the choice of a taxable person to carry on an economic activity in a way that enables that taxable person to reduce his or her costs is classified as ‘an unlawful exercise of the right’ and, on that ground, that taxable person is refused the right to deduct input value added tax, where it has not been established that there is a wholly artificial arrangement which does not reflect economic reality and is set up with the sole aim or, at the very least, with the essential aim, of obtaining a tax advantage the grant of which would be contrary to the purposes of that directive. |
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1.

Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

must be interpreted as precluding a national practice whereby the choice of a taxable person to carry on an economic activity in a way that enables that taxable person to reduce his or her costs is classified as ‘an unlawful exercise of the right’ and, on that ground, that taxable person is refused the right to deduct input value added tax, where it has not been established that there is a wholly artificial arrangement which does not reflect economic reality and is set up with the sole aim or, at the very least, with the essential aim, of obtaining a tax advantage the grant of which would be contrary to the purposes of that directive.

| 2. | Directive 2006/112
  must be interpreted as not precluding the tax authority from refusing a taxable person the right to deduct value added tax (VAT) in respect of a supply of services, on the basis of findings resulting from witness statements in the light of which that tax authority called into question the existence of that supply of services or considered that it was connected with VAT fraud, if, in the first case, it is not established by the taxable person that that supply of services has actually been made or if, in the second case, it is established by that tax authority, in accordance with the rules of evidence under national law, that that taxable person committed VAT fraud or knew or ought to have known that the transaction relied on as a basis for the right of deduction was connected with such a fraud. |
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2.

Directive 2006/112

must be interpreted as not precluding the tax authority from refusing a taxable person the right to deduct value added tax (VAT) in respect of a supply of services, on the basis of findings resulting from witness statements in the light of which that tax authority called into question the existence of that supply of services or considered that it was connected with VAT fraud, if, in the first case, it is not established by the taxable person that that supply of services has actually been made or if, in the second case, it is established by that tax authority, in accordance with the rules of evidence under national law, that that taxable person committed VAT fraud or knew or ought to have known that the transaction relied on as a basis for the right of deduction was connected with such a fraud.

| 3. | Directive 2006/112
  must be interpreted as meaning that






  — | it precludes the tax authority from refusing a taxable person the right of deduction by considering as sufficient evidence of value added tax (VAT) fraud the fact that the taxable person, or other traders acting upstream in the supply chain, have breached the national rules on the supply of services at issue, without an actual link between that breach and the right to deduct VAT being established; |
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3.

Directive 2006/112

must be interpreted as meaning that

—

it precludes the tax authority from refusing a taxable person the right of deduction by considering as sufficient evidence of value added tax (VAT) fraud the fact that the taxable person, or other traders acting upstream in the supply chain, have breached the national rules on the supply of services at issue, without an actual link between that breach and the right to deduct VAT being established;

| — | such a breach may, however, depending on the factual circumstances of the case, constitute one of a number of indications of such a fraud and evidence which may be taken into account, in an overall assessment of the circumstances, to establish that the taxable person is the perpetrator of or actively participated in that fraud, or to establish that that taxable person knew or ought to have known that the transaction relied on as a basis for the right of deduction was connected with that fraud; |
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—

such a breach may, however, depending on the factual circumstances of the case, constitute one of a number of indications of such a fraud and evidence which may be taken into account, in an overall assessment of the circumstances, to establish that the taxable person is the perpetrator of or actively participated in that fraud, or to establish that that taxable person knew or ought to have known that the transaction relied on as a basis for the right of deduction was connected with that fraud;

| — | it is for the tax authority to characterise the elements constituting VAT fraud, to adduce evidence of fraudulent activity and to establish that the taxable person is the perpetrator of or actively participated in that fraud, or knew or ought to have known that the transaction relied on as a basis for the right of deduction was connected with that fraud; |
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it is for the tax authority to characterise the elements constituting VAT fraud, to adduce evidence of fraudulent activity and to establish that the taxable person is the perpetrator of or actively participated in that fraud, or knew or ought to have known that the transaction relied on as a basis for the right of deduction was connected with that fraud;

| — | that requirement does not necessarily involve identifying all the perpetrators of the fraud and their respective actions. |
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—

that requirement does not necessarily involve identifying all the perpetrators of the fraud and their respective actions.

| 4. | Directive 2006/112, read in conjunction with the principle of proportionality,
  must be interpreted as meaning that it is not, in principle, for the taxable person wishing to exercise the right to deduct value added tax (VAT) to verify that the supplier or other traders acting upstream in the supply chain have complied with the national rules on the supply of services at issue as well as the other national rules applicable to their activity. However, where there are indications, resulting from the breach of those rules and which are such as to give rise to suspicions on the part of the taxable person, at the time the acquisition is made, of irregularities or of fraud, that taxable person may be required to exercise greater care and to take measures that could reasonably be expected of him or her to ensure that, through that acquisition, he or she is not participating in a transaction connected with VAT fraud. |
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4.

Directive 2006/112, read in conjunction with the principle of proportionality,

must be interpreted as meaning that it is not, in principle, for the taxable person wishing to exercise the right to deduct value added tax (VAT) to verify that the supplier or other traders acting upstream in the supply chain have complied with the national rules on the supply of services at issue as well as the other national rules applicable to their activity. However, where there are indications, resulting from the breach of those rules and which are such as to give rise to suspicions on the part of the taxable person, at the time the acquisition is made, of irregularities or of fraud, that taxable person may be required to exercise greater care and to take measures that could reasonably be expected of him or her to ensure that, through that acquisition, he or she is not participating in a transaction connected with VAT fraud.

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(1)  OJ C 266, 11.7.2022.

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