Judgment;Summary — ECLI:EU:C:2020:345
Date: 2020-04-30
Language of the case: Hungarian
Court formation: Tenth Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling - inadmissible
Origin: Hungary

Translation C-258/19 - 1 
Case C-258/19 
Request for a preliminary ruling 
Date lodged: 
27 March 2019 
Referring court: 
Kúria (Supreme Court, Hungary) 
Date of the decision to refer: 
7 March 2019 
Applicant: 
EUROVIA Ipari, Kereskedelmi, Szállítmányozási és 
Idegenforgalmi Kft. 
Defendant: 
Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (Appeals 
Directorate of the National Tax and Customs Administration, 
Hungary) 
 
Order of the 
Kúria (Supreme Court, Hungary) 
as court of cassation 
... 
Applicant: EUROVIA Ipari, Kereskedelmi Szállítmányozási és Idegenforgalmi 
Kft. (... Budapest ...) 
... 
Defendant: Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (Appeals 
Directorate of the National Tax and Customs Administration, Hungary) (... 
Budapest ...) 
... 
EN 
REQUEST FOR A PRELIMINARY RULING OF 7.3.2019 — CASE C-258/19 
 
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Subject matter of the dispute: tax-related administrative appeal 
... [procedural matters of domestic law] 
Operative part 
The Kúria (Supreme Court, Hungary) ... has referred the following questions for a 
preliminary ruling: 
1. Does the practice of a Member State infringe the principle of fiscal 
neutrality and the formal requirements of the right to deduct VAT where, for 
the purposes of exercising the right to deduct the tax, it has regard solely to 
the time the chargeable event occurred, and does not take into account the 
fact that there was a civil dispute between the parties concerning 
performance of the contract, which was determined in judicial proceedings, 
and that the invoice was only issued once a final judgment was delivered? 
2. If the answer to that question is in the affirmative, is it possible to exceed the 
limitation period for exercising the right to deduct VAT, set by the 
legislation of the Member State has at five years from the time when the 
services were supplied? 
3. If the answer to that question is in the affirmative, is the exercise of the right 
to deduct VAT affected by the conduct of the recipient of the invoice in the 
present case, which did not pay the contractor’s remuneration determined by 
a final judgment until the contractor had brought enforcement proceedings, 
for which reason the invoice was not issued until after the limitation period 
had expired? 
Relevant [legislation] 
EU provisions in force when the services were supplied: 
Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the 
laws of the Member States relating to turnover taxes - Common system of value 
added tax: uniform basis of assessment (‘the Sixth Directive’) 
‘Article 10 
1.  
(a)  “Chargeable event” shall mean the occurrence by virtue of which the legal 
conditions necessary for tax to become chargeable are fulfilled. 
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(b)  The tax becomes “chargeable” when the tax authority becomes entitled 
under the law at a given moment to claim the tax from the person liable to pay, 
notwithstanding that the time of payment may be deferred. 
2.  The chargeable event shall occur and the tax shall become chargeable when 
the goods are delivered or the services are performed. ... 
... 
By way of derogation from the above provisions, Member States may provide that 
the tax shall become chargeable, for certain transactions or for certain categories 
of taxable person, either:  
-  no later than the issue of the invoice or of the document serving as invoice, 
or 
-  no later than receipt of the price, or 
-  where an invoice or document serving as invoice is not issued, or is issued 
late, within a specified period from the date of the chargeable event. 
...’. 
‘Article 17 
Origin and scope of right to deduct 
1.  The right to deduct shall arise at the time when the deductible tax becomes 
chargeable. 
2.  In so far as the goods and services are used for the purposes of his taxable 
transactions, the taxable person shall be entitled to deduct from the tax which he is 
liable to pay:  
(a)  value added tax due or paid in respect of goods or services supplied or to be 
supplied to him by another taxable person; 
...’. 
‘Article 18 
Rules governing the exercise of the right to deduct 
1.  To exercise his right to deduct, the taxable person must: 
(a)  in respect of deductions under Article 17(2)(a), hold an invoice, drawn up in 
accordance with Article 22(3); 
...’. 
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EU provisions in force when the invoice was issued: 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax (‘the VAT Directive’) 
‘Article 62 
For the purposes of this Directive: 
(1)  “chargeable event” shall mean the occurrence by virtue of which the legal 
conditions necessary for VAT to become chargeable are fulfilled; 
(2)  VAT shall become “chargeable” when the tax authority becomes entitled 
under the law, at a given moment, to claim the tax from the person liable to pay, 
even though the time of payment may be deferred.’ 
‘Article 63 
The chargeable event shall occur and VAT shall become chargeable when the 
goods or the services are supplied.’ 
‘Origin and scope of right of deduction 
Article 167 
A right of deduction shall arise at the time the deductible tax becomes 
chargeable.’ 
‘Article 168 
In so far as the goods and services are used for the purposes of the taxed 
transactions of a taxable person, the taxable person shall be entitled, in the 
Member State in which he carries out these transactions, to deduct the following 
from the VAT which he is liable to pay: 
(a)  the VAT due or paid in that Member State in respect of supplies to him of 
goods or services, carried out or to be carried out by another taxable person; 
...’. 
‘Rules governing exercise of the right of deduction 
Article 178 
In order to exercise the right of deduction, a taxable person must meet the 
following conditions: 
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(a) for the purposes of deductions pursuant to Article 168(a), in respect of the 
supply of goods or services, he must hold an invoice drawn up in accordance with 
Sections 3 to 6 of Chapter 3 of Title XI; 
...’. 
Hungarian provisions relevant at the time the services were supplied: 
The általános forgalmi adóról szóló 1992. évi LXXIV. törvény (Law LXXIV of 
1992 on value added tax, ‘the previous VAT Law’) 
‘Paragraph 16 
1) The tax becomes chargeable, on supplies of goods and of services – without 
prejudice to Paragraphs 17 and 18 – at the time of performance or, if applicable, 
partial performance (collectively, “performance”). 
2) Unless otherwise provided, the time of performance will be determined in 
accordance with the Polgári Törvénykönyv (Civil Code) ....’ 
‘Paragraph 32 
1. A taxable person under Paragraph 34 shall have the right to deduct from the 
tax which he is required to pay: 
a) the amount of tax which another taxable person has passed on to him in 
connection with the supply of goods or the performance of services – including, in 
the case of a corporate restructuring, the legal predecessor of that taxable person – 
or a taxable person by virtue of the Simplified Corporation Tax Law; ...’ 
‘Paragraph 35 
1.  – Unless otherwise prescribed by the General Taxation Procedure Law , the 
right of deduction may only be exercised by persons who hold documentation 
reliably attesting to the amount of the input tax. The following documents issued 
on behalf of the taxable person shall be considered to be such documentation: 
a) invoices and simplified invoices [in the case of Paragraph 32(1)(a) and (g)]; 
...’. 
Hungarian provisions relevant at the time the invoice was issued: 
The általános forgalmi adóról szóló 2007. évi CXXVII. törvény (Law CXXVII of 
2007 on value added tax, ‘the Law on VAT’) 
‘Paragraph 55 
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1. The tax shall become chargeable on the occurrence of the event by which 
the taxable transaction is actually effected (“performance”).’ 
‘Paragraph 119 
1. Unless otherwise provided in this Law, a right of deduction shall arise at the 
time the amount due in respect of input VAT is determined (Paragraph 120).’ 
‘Paragraph 120 
In so far as the taxable person, acting as such, uses or otherwise exploits goods or 
services in order to carry out a taxable supply of goods or services, he shall be 
entitled to deduct from the tax that he is liable to pay: 
(a) the amount of tax passed on to him, in connection with the purchase of 
goods or services, by another taxable person — including any person or entity 
subject to simplified corporation tax. ...’ 
‘Paragraph 127 
1. Exercise of the right of deduction shall be subject to the substantive 
condition that the taxable person is himself in possession: 
(a) in the situation referred to in Paragraph 120(a), of an invoice issued in his 
name which attests to the performance of the transaction; ...’ 
Hungarian procedural provisions on the exercise of the right of deduction: 
The adózás rendjéről szóló 2003. évi XCII. törvény (Law XCII of 2003 on 
General Taxation Procedure, ‘the Taxation Procedure Law’) 
‘Paragraph 164 
1. The right to charge the tax will become time-barred on expiry of five years 
from the last day of the calendar year in which the declaration or notification of 
the tax should have been submitted or, where there is no declaration or 
notification, in which the tax should have been paid. The right to apply for public 
grants and the right to apply to be refunded amounts paid in excess will become 
time-barred – unless otherwise provided by statute – on expiry of five years from 
the last day of the calendar year in which those rights arose. 
Factual background 
1 On 12 November 1996 and 17 September 1997, the applicant concluded a number 
of works contracts with a commercial company for work relating to an overhead 
telecommunications network. Under the contracts, the contractor could not request 
consideration in respect of items which the developer had not authorised. The 
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applicant only paid the contractor part of the remuneration, a dispute having arisen 
between the parties as to the amount of that remuneration. The contractor claimed 
payment of the remuneration to which it was entitled and brought proceedings to 
that end, as a result of which the Fővárosi Ítélőtábla (Budapest Regional Court of 
Appeal, Hungary), in its judgment No 3.Pf.20.756/2004/5 of 17 September 2004, 
ordered the applicant to pay HUF 19 703 394 plus interest. The applicant lodged 
an application for revision against that decision, but the Legfelsőbb Bíróság 
(Supreme Court, Hungary [name by which the Kúria was known until 2012]), by 
judgment No Pfv.VII.21.212/2010/6 of 5 October 2010, confirmed the judgment 
made against the applicant by the Fővárosi Ítélőtábla (Budapest Regional Court of 
Appeal). The applicant paid the contractor’s remuneration following enforcement 
proceedings and, at the applicant’s request, the contractor issued an invoice on 
15 June 2011, indicating the date of performance as 6 June 2011. 
2 The applicant deducted the value added tax (‘VAT’) shown on the invoice, 
HUF 3 940 679, in its VAT declaration for the second quarter of 2011. The tax 
authorities carried out a pre-payment check, as a result of which they found that 
the applicant had submitted an application for an undue refund and issued it with a 
tax penalty of HUF 394 000. According to those authorities, under 
Paragraph 36(1)(a) and Paragraph 16(15) of the previous VAT Law, the limitation 
period began to run on 31 December 2004, and the right to claim a refund of the 
VAT had therefore become time-barred on 31 December 2009. The applicant 
contested the position adopted by the tax authorities and accordingly brought an 
administrative appeal, which was dismissed by the first instance court. 
Subsequently, by judgment No Kfv.V.35.490/2014/5, the Kúria (Supreme Court) 
set aside both the defendant’s decision and the decision made by the first tier tax 
authority, and ordered that tax authority to commence a new procedure. The Kúria 
(Supreme Court) held, contrary to the tax authorities’ view, that Paragraph 16(15) 
of the previous VAT Law did not apply, and the time of performance should 
instead be determined in accordance with the general provisions of the law. 
3 Rehearing the administrative procedure, the tax authority, relying on the judgment 
of the Fővárosi Ítélőtábla (Budapest Regional Court of Appeal), set the date of 
performance as 16 November 1998 and, accordingly, denied the right to deduct 
VAT on the grounds that it was time-barred. According to the grounds in the 
administrative decision, under the previous VAT Law the right of deduction 
clearly arose at the time the tax due was charged. The right to deduct the input tax 
on an acquisition therefore arose at the time the tax, on that same transaction, 
became payable by the supplier. According to the tax authorities, the invoice 
issued by the contractor gave an incorrect date of performance because, in actual 
fact, performance had already occurred on 16 November 1998, and the applicant’s 
right to deduct VAT had therefore likewise arisen on that date. They emphasised 
that the time of performance in relation to an invoice relates not to its payment but 
to performance of the economic transaction between the parties. 
4 In its administrative appeal, the applicant argued that the provisions relating to the 
right to charge the tax and to the limitation period for that right do not apply to the 
REQUEST FOR A PRELIMINARY RULING OF 7.3.2019 — CASE C-258/19 
 
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limitation period relating to the applicant’s claim. Referring to Paragraph 326(1) 
and (2) of the Polgári törvénykönyvről szóló 1959. évi IV. törvény ( Law IV of 
1959 establishing the Civil Code), it claimed that the limitation period had not 
even begun, but was instead latent. The right to deduct VAT did not arise until the 
applicant was in possession of the correctly issued invoice. According to 
Paragraph 35 of the previous VAT Law, exercising the right to deduct VAT 
presupposes that the taxable person is in possession of an invoice for the 
transaction issued in the taxable person’s name. Thus, until 2011 the applicant did 
not have in its possession any such invoice. According to the applicant, for the 
purpose of exercising the right to deduct VAT, the crucial element was the 
payment which it had made. It had paid the contractor’s invoice in the second 
quarter of 2011, and therefore until that time the requirement that the other taxable 
person must have passed on the VAT payable to the applicant had not been 
satisfied. The position taken in the administrative decision meant that the 
contractor had paid to the Treasury the VAT due and passed on to the applicant, 
but the applicant could neither deduct nor offset that VAT. 
5 The first instance court dismissed the applicant’s administrative appeal. 
6 It is common ground that in 1998 the contractor performed its obligations under 
the works contracts entered into with the applicant. It is apparent from the civil 
judgment issued in the proceedings between the parties that the applicant’s 
conduct prevented the contractor from issuing the invoice for its remuneration, 
given that the applicant did not pay the contractor the sum to which it was entitled 
until the enforcement proceedings and that the contractor issued the invoice once 
it received payment. The date of performance according to the invoice was 6 June 
2011 but, according to the first instance court, the defendant had correctly 
observed that performance by the contractor could not have taken place in 2011 
because it had, in actual fact, already occurred in 1998. That court also concurred 
with the defendant that the time of performance should not relate to payment in 
respect of the economic transaction shown in the invoice, in the same way that the 
applicant’s right to deduct VAT does not arise on the basis of payment, but relates 
to effective performance of the economic transaction. 
7 It is apparent from the limitation rule established in Paragraph 164 of the General 
Taxation Procedure Law that the right to apply for a tax refund becomes time-
barred on expiry of five years from the last day of the calendar year in which that 
right arose. The first instance court stated, as the Fővárosi Ítélőtábla (Budapest 
Regional Court of Appeal) had likewise found in its decision, that the fact that the 
contractor was unable to issue the invoice within the time limit had to be 
attributed to the applicant’s conduct. According to the first instance court, the 
defendant had legitimately determined the time of compliance, which was 
different from what was indicated in the invoice, and that the defendant was 
therefore correct to object to the applicant claiming a refund of the tax, since the 
right to deduct VAT had become time-barred on expiry of five years from the time 
at which it arose. 
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8 The applicant brought an appeal on a point of law against the final judgment, 
seeking that it be set aside and a new decision be made in accordance with the 
law. According to the applicant, both the first instance court and the defendant 
have incorrectly interpreted the limitation of the right to charge the tax, since the 
limitation in question does not relate to the applicant but to the taxable person 
which issues the invoice and collects the tax. The applicant also asserts that the 
right of deduction did not arise until the correctly issued invoice was made 
available to it. In the absence of an invoice, therefore, the applicant was not in a 
position to exercise its right to deduct VAT. It argues that the limitation period 
cannot run during the period when the requirements for the right to deduct are not 
satisfied. The applicant denies that the fact that the invoice was not issued can be 
attributed to its behaviour, stating that the issuer of the invoice could have issued 
it at any time, but that the uncertainty as to the amount of the sum owed prevented 
it from complying with its invoicing obligation. It emerges from a grammatical 
interpretation of Paragraph 32 of the previous VAT Law that, until the tax was 
passed on, the applicant had no right of deduction, nor could the limitation period 
begin to run. The applicant also asserts that performance of the contract means 
that both parties must perform, not just one of them. 
9 In its defence to the appeal on a point of law, the defendant requests that the final 
judgment be confirmed, stating that the time of performance in respect of an 
invoice does not relate to payment, but to the date on which the economic 
transaction between the parties takes place. Accordingly, it argues that the final 
judgment correctly determines the time of performance and, therefore, the time at 
which the right became time-barred. 
The position of the Kúria (Supreme Court) 
10 In the circumstances of the proceedings described above, in which a dispute arises 
between the parties as to the amount of the remuneration for a service, and that 
amount is determined by a court decision, but the invoice is not issued until 
payment is actually made, the Kúria (Supreme Court) wonders whether it is 
appropriate to ignore the provisions of the Sixth Directive and of the VAT 
Directive as regards compliance and, therefore, as regards the passing on of the 
tax and whether, if there is no invoice, which is a formal requirement of the right 
to deduct VAT, it is possible to act outside the parameters of the Member State’s 
legislation on limitation periods. The Kúria (Supreme Court) also wonders 
whether the exercise of the right of deduction is affected by the fact that the 
applicant did not voluntarily comply with its obligation to pay following the final 
judgment, but did so in enforcement proceedings brought by the contractor, , 
which then resulted in a situation in which the invoice, which is a formal 
requirement of the right of deduction, was only issued once the applicant had 
complied with its obligation and requested the invoice from the contractor, 
making it necessary to determine the time at which the time limit for exercising 
that right begins to run. 
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11 The Court of Justice of the European Union (‘the Court of Justice’) has ruled 
many times on the substantive and formal requirements for deducting VAT. As 
regards substantive requirements, it has held that a right of deduction arises at the 
time the tax becomes chargeable, that is to say, when the services are provided. In 
paragraph 43 of its judgment of 21 March 2018 (Volkswagen, C-533/16, 
EU:C:2018:204), examining the time limit for compliance, the Court of Justice, 
referring to the Opinion of the Advocate General, held that, although under 
Article 167 of the VAT Directive the right to deduct VAT arises on the date on 
which the tax becomes chargeable, Article 178 of that directive provides that, in 
principle, it can be exercised only at the point when the taxable person holds an 
invoice. 
12 Given that, because of the dispute between the parties as to the amount of the 
remuneration, the invoice was not issued until payment was made in 2011, the 
applicant’s right to deduct VAT could only have arisen at that time. It is necessary 
to bear in mind the important fact that until that time the contractor which issued 
the invoice had not received the tax due, and that this was when it paid the tax to 
the Treasury. The Kúria (Supreme Court) believes that the time limit for 
exercising the right to deduct VAT should run from the time at which, once the 
service has been provided, the VAT due has been passed on and paid to the 
Treasury and the invoice has been issued in accordance with the Directive. 
13 The defendant tax authorities backdate the exercise of the right to deduct VAT to 
the moment of initial performance and, given the five-year limitation period, 
argue that the claim for a tax refund is time-barred. However, in the view of the 
Kúria (Supreme Court), that approach contravenes the principle of fiscal 
neutrality. The purpose of the provisions on deduction and – therefore – on the 
refunding of the tax is to relieve business owners entirely of any burden relating to 
the VAT due or paid in the course of their economic activities. The common 
system of VAT therefore ensures neutrality in relation to any tax burden on 
economic activities, whatever their purpose or results, provided that those 
activities are in turn, as a general rule, subject to VAT. That principle would be 
infringed if the exercise of the right to deduct the VAT shown in an invoice issued 
in the circumstances described were to be denied as a result of a restrictive 
interpretation of the time of performance, without taking into account the specific 
features of the particular case. 
14 The Court of Justice has also made revealing decisions on the Member States’ 
legislation on limitation periods (for example, judgments of 12 April 2018, Case 
C-8/17, Biosafe — Indústria de Reciclagens, EU:C:2018:249, and of 21 March 
2018, Volkswagen, C-533/16, EU:C:2018:204). Accordingly, in Volkswagen,  
cited above, it held that EU law must be interpreted as meaning that it precludes 
legislation of a Member State under which, in circumstances such as those at issue 
in the main proceedings in which the VAT was charged to the taxable person and 
paid by it several years after delivery of the goods in question, the benefit of the 
right to claim a refund of VAT is denied on the grounds that the limitation period 
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provided for by that legislation for the exercise of that right began to run from the 
date of supply and expired before the application for a refund was submitted. 
15 The Court of Justice has stated in various rulings that the tax authorities can refuse 
a taxable person the right to deduct VAT when it is established that that person 
has fraudulently failed to fulfil most of the formal obligations incumbent upon 
him in order to be able to benefit from that right (judgment of 28 July 2016, 
Astone, C-332/15, EU:C:2016:614, paragraph 59), and in Volkswagen it also 
referred to the need for the taxable person to act diligently. That reasoning was 
confirmed in the judgment in Biosafe — Indústria de Reciclagens (paragraph 44), 
which allowed a claim outside an identical limitation period. 
16 Given the circumstances of the case, it is quite clear that the parties did not act 
with abusive or fraudulent intent in relation to VAT, but nevertheless, there was a 
form of conduct ‘in bad faith’ on the part of the applicant when, notwithstanding 
the final judgment, it did not voluntarily comply with its payment obligation. The 
Kúria (Supreme Court) therefore also asks whether bad faith of that nature on the 
part of the taxable person as regards actual payment, which caused the other 
contracting party to delay issuing the invoice, affects the exercise of the right of 
deduction. 
Budapest, 7 March 2019 
... [signatures]