Judgment;Summary — ECLI:EU:C:2022:950
Date: 2022-12-01
Language of the case: Hungarian
Court formation: Tenth Chamber
Subject matter: Taxation;Value added tax;Fundamental rights;Charter of Fundamental Rights
Procedure: Reference for a preliminary ruling;Reference for a preliminary ruling - inadmissible
Origin: Hungary

Summary C-512/21 – 1 
Case C-512/21 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
17 August 2021 
Referring court: 
Fővárosi Törvényszék (Hungary) 
Date of the decision to refer: 
31 May 2021 
Applicant: 
Aquila Part Prod Com S.A. 
Defendant: 
Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága  
  
Subject matter of the main proceedings 
Administrative action brought by Aquila Part Prod Com S.A. (Romania) against 
four rulings of the Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága 
(Appeals Directorate of the National Tax and Customs Authority, Hungary), in 
which the tax authority found that there was a discrepancy in the value added tax 
payable by the applicant, categorised, for the most part, as an improper refund 
and, as regards a lesser part, as unpaid tax, and as a result of which the tax 
authority imposed a fine and issued a demand for a late-payment penalty. 
Subject matter and legal basis of the request for a preliminary ruling 
The request for a preliminary ruling has been made under Article 267 TFEU. 
The request for a preliminary ruling concerns the interpretation of Articles 9(1), 
10, 167, 168(a), 178(a), 220 and 226 of Council Directive 2006/112/EC of 
28 November 2006 on the common system of value added tax, in the light of the 
principles of fiscal neutrality and reasonableness and the right to a fair trial 
enshrined in Article 47 of the Charter of Fundamental Rights of the European 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-512/21 
 
2  
Union. According to the case-law of the Court of Justice, the national court must 
decide, based on that interpretation, whether the circumstances on which the 
defendant relies in relation to the applicant can be regarded as objective 
circumstances such that they justify the defendant’s refusal of the right to deduct 
VAT, and whether, as a consequence, the applicant was lawfully denied the right 
to deduct VAT on the grounds that it had participated in a tax fraud and had not 
displayed due diligence. 
Questions referred for a preliminary ruling 
1) Is a practice of a tax authority pursuant to which that authority, 
automatically and without carrying out any checks, concludes from the fact that a 
natural person has acted knowingly, where that natural person has a legal 
relationship with a legal person which acts as a broker, is independent of the 
taxable person, which is the principal, and has its own legal personality, but that 
natural person does not have a relationship with the taxable person, that the 
taxable person has also acted knowingly, thereby ignoring the provisions of the 
contract concluded between the principal and the broker and also the provisions of 
foreign law governing the brokerage relationship, compatible with EU law, in 
particular Articles 9(1) and 10 of the VAT Directive, and with the principle of 
fiscal neutrality? 
2) Are Articles 167, 168(a) and 178(a) of the VAT Directive to be interpreted 
as meaning that, where a tax authority identifies the existence of a circular 
invoicing chain, that fact alone suffices as objective evidence of tax fraud or in 
such a case is the tax authority also required to indicate which member(s) of the 
chain committed the tax fraud and what their modus operandi was? 
3) Are Articles 167, 168(a) and 178(a) of the VAT Directive, in the light of the 
principles of proportionality and reasonableness, to be interpreted as meaning that 
even if the tax authority considers, based on the specific circumstances of the 
case, that the taxable person should have been more diligent, that person cannot be 
required to verify facts which the tax authority was only able to discover after an 
inspection lasting approximately five years which necessitated numerous 
additional checks using instruments of public law, such that the protection of 
taxable persons’ trade secrets was not an impediment to the checks? In the event 
that greater diligence is required, is it sufficient proof of due diligence that the 
taxable person’s scrutiny extends to matters beyond those indicated in the 
Mahagében judgment in relation to possible trading partners, such that the taxable 
person has internal supply rules for the purpose of conducting checks on those 
trading partners, does not accept cash payments, includes clauses concerning the 
possible risks in the contracts it concludes, and also examines other matters during 
the transaction? 
4) Are Articles 167, 168(a) and 178(a) of the VAT Directive to be interpreted 
as meaning that, if the tax authority finds that the taxable person actively 
AQUILA PART PROD COM 
 
3 
participated in the tax fraud, is it sufficient in that regard that the evidence 
discovered by the tax authority shows that, using due diligence, the taxable person 
could have become aware of the fact that it was participating in a tax fraud, 
without that evidence showing that the taxable person knew that it was 
participating in a tax fraud because of its active conduct in that fraud? If active 
participation in a tax fraud, in other words, awareness of that participation, is 
proven, is the tax authority required to establish the fraudulent actions of the 
taxable person materialising in its concerted conduct with the members preceding 
it in the chain or is it sufficient for the tax authority to rely on objective evidence 
that the members of the chain knew one another? 
5) Is a practice of a tax authority pursuant to which that authority bases its 
ruling on an alleged infringement of provisions governing the safety of the food 
supply chain which have no bearing on compliance by the taxable person with his 
tax obligations or on the circulation of his invoices, which the tax legislation does 
not provide for in any way in relation to the taxable person and which have no 
effect on the actual facts of the transactions inspected by the tax authority and on 
the taxable person’s awareness examined in the tax proceedings, compatible with 
Articles 167, 168(a) and 178(a) of the VAT Directive, with the right to a fair trial 
recognised as a general principle in Article 47 of the Charter of Fundamental 
Rights of the European Union, and with the principle of legal certainty? 
In the event the previous question is answered in the affirmative: 
6) Is a practice of a tax authority whereby that authority, without the 
involvement of the official body responsible for the safety of the food supply 
chain, which has material and territorial competence, sets out in its ruling findings 
concerning the taxable person which come within that official body’s sphere of 
competence, such that, based on infringements identified in relation to the safety 
of the food supply chain – a matter outside its sphere of competence – it draws tax 
consequences for the taxable person, without that person being able to dispute the 
finding that he infringed the provisions on food supply chain safety in proceedings 
which are separate from the tax proceedings and which respect the fundamental 
guarantees and the parties’ rights, compatible with Articles 167, 168(a) and 178(a) 
of the VAT Directive, with the right to a fair trial recognised as a general principle 
in Article 47 of the Charter, and with the principle of legal certainty? 
Provisions of European Union law and case-law of the Court of Justice relied 
on 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax (OJ 2006 L 347, p. 1): Articles 9(1), 10, 167 and 168(a) 
Article 47 of the Charter of Fundamental Rights of the European Union 
Judgment of 21 June 2012, Mahagében (C-80/11, EU:C:2012:373) 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-512/21 
 
4  
Judgment of 3 October 2019, Altic (C-329/18, EU:C:2019:831) 
Order of 3 September 2020, Vikingo (C-610/19, EU:C:2020:673) 
Provisions of national law relied on 
Az adózás rendjéről szóló 2003. évi XCII. törvény (Law No XCII of 2003 on 
General Taxation Procedure; ‘Law on General Taxation Procedure’) 
Article 1(7): 
‘Contracts, transactions and other similar acts must be classified by reference to 
their true content. Contracts or any other transactions which are invalid shall be 
relevant for tax purposes in so far as it is possible to show their financial 
consequences.’ 
Article 2(1): 
‘All rights in legal relationships for tax purposes shall be exercised in accordance 
with their purpose. Under the tax laws, the conclusion of contracts or the carrying 
out of other transactions whose purpose is to circumvent the provisions of tax 
laws may not be classified as exercise of rights in accordance with their purpose.’ 
Article 97(4): 
‘In the course of the inspection, it shall be the duty of the tax authority to establish 
and prove the facts unless, by virtue of legislation, the burden of proof lies with 
the taxpayer.’ 
Article 97(6): 
‘When establishing the facts, the tax authority shall have a duty also to seek facts 
favourable to the taxpayer. Except where estimates are made, an unproven fact or 
circumstance shall not be assessed to the taxpayer’s disadvantage.’ 
Az általános forgalmi adóról szóló 2007. Évi CXXVII. törvény (Law No CXXVII 
of 2007 on value added tax; ‘Law on VAT’). 
Article 27(1): 
‘Where goods are sold successively in such a way that they are dispatched or 
transported directly from the original supplier to the final customer mentioned as 
recipient, Article 26 shall apply exclusively to a single supply of goods.’ 
Article 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 (Article 120).’ 
AQUILA PART PROD COM 
 
5 
Article 120(a): 
‘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 or she shall 
be entitled to deduct from the tax that he or she is liable to pay: 
a) the amount of tax he or she was charged, in connection with the purchase of the 
goods or the use of the services, by another taxable person – including any person 
or entity subject to simplified corporation tax.’ 
Article 127(1)(a) 
‘Exercise of the right of deduction shall be subject to the substantive condition 
that the taxable person is himself or herself in possession: 
a) in the situation referred to in Article 120(a), of an invoice issued in his or her 
name which attests to the performance of the transaction.’ 
Succinct presentation of the facts and procedure in the main proceedings 
1 The applicant’s predecessor in law, Agrirom Srl, is a company incorporated under 
Romanian law which, since 2 June 2010, has been registered in Hungary for VAT 
purposes. The main business declared by the applicant is wholesale intermediation 
services for food, beverages and tobacco, in the course of which it carries out 
intra-Community supplies of goods and internal purchases, while, in Hungary, it is 
involved in the wholesale of food. 
2 With a view to conducting its trading activity in Hungary, on 1 April 2011, the 
applicant concluded a brokerage contract with Corpinvest Srl, whose 
representative is KG. 
3 In the course of its wholesale business, the applicant would purchase from Rilax 
Kft cooking oil which it would resell to Strongfood Sro. 
4 The first-tier tax authority made the applicant subject to inspection in order to 
conduct retrospective checks on its tax returns for the period from August to 
November 2012. On 16 June 2017, at the end of the inspections, the first-tier tax 
authority adopted four decisions in which it declared that there was a tax 
difference of nearly HUF 300 000 000, for the most part in respect of an improper 
refund and, as regards a lesser part, in respect of unpaid tax. The tax authority 
imposed a fine and issued a demand for a late-payment penalty in relation to that 
tax difference. During the almost five years that the inspection lasted (2012-2017), 
the tax authority conducted extensive checks. It found that the applicant had 
participated in a classic ‘carousel’ type fraud and that each month it would 
purchase cooking oil from Rilax Kft and then resell that oil to Strongfood Sro. 
The chain included a ‘missing trader’ and ‘buffer or front companies’, while the 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-512/21 
 
6  
applicant was the ‘broker company’ and Strongrood Sro. was the ‘conduit 
company’ which would resell the product back to missing traders in Hungary. 
5 The tax authority also examined the origin of the products sold. KG did not 
provide any certificates of quality until the adoption of the first-tier decision and 
therefore the tax authority stated that, in accordance with the requirements laid 
down in the food safety legislation, each participant in the supply chain should 
have known the place of origin of the food product purchased by it and 
subsequently resold, and also whether that product was quality compliant. The tax 
authority found that the cooking oil was re-invoiced for through a number of 
Hungarian companies, which showed that the aim was to ‘have the product travel’ 
between Hungary and Slovakia. The tiny margin applied by the companies in the 
invoicing chain indicates that they were not taking market conditions into 
consideration and that the traders in the chain were acting in concert. 
6 According to the tax authority, the companies participating in the chain committed 
a deliberate and intentional tax fraud and therefore those companies, including the 
applicant, have incurred strict liability. 
7 As evidence of the fact that applicant knew that it was actively participating in a 
tax fraud, the tax authority referred to the following: 
– the applicant itself entered into the contracts; 
– the applicant’s Slovak customer would resell the goods back to 
Hungary on the same day as it purchased those goods from Hungary; 
– a person with the same surname featured in the company information 
of the supplier and of the applicant’s customer; 
– personal relationships can be observed in the financial transactions; 
– the invoices which the ‘missing traders’ at the bottom of the supply 
chain issued as suppliers do not constitute credible documentary 
evidence because those companies did not carry on an independent 
business. 
8 According to the tax authority, a number of facts show the applicant’s lack of due 
diligence; inter alia, the fact that KG and the applicant had previously been 
involved in fraudulent VAT transactions; that verification of the sources of supply 
would have made it possible to establish that the cooking oil sold to Slovakia had 
ultimately come from Slovakia, which KG would have realised if KG had used 
due diligence; that KG would have been able to observe that KG’s supplier was 
unable to attach certificates of origin to the invoices; and that the applicant did not 
even need to ask for a Hungarian tax identification number. 
AQUILA PART PROD COM 
 
7 
9 In the light of the foregoing, the tax authority found that the applicant’s conduct 
breached certain provisions of the Law on General Taxation Procedure and the 
Law on VAT. 
10 By its rulings of 8 December 2017, the defendant confirmed the first-tier decisions 
in all respects. The documents showing that checks were carried out on suppliers, 
together with the label for the cooking oil and its certificate of conformity, which 
were annexed to the administrative appeal, were ruled inadmissible on the ground 
that they did not contain any new information and because the cooking oil label 
provided had no probative value as regards the origin of the product. 
11 The applicant appealed against those rulings by an application lodged with the 
referring court. 
The essential arguments of the parties in the main proceedings 
12 In its application, the applicant complained that the defendant conducted the 
procedure on the basis of a preconceived idea, that the defendant committed 
substantive errors when it found that the applicant had acted knowingly, and that, 
due to those contradictions and in the absence of facts and of evidence, the rulings 
are unlawful. As regards due diligence, the applicant principally criticised the fact 
that it is not clear from the ruling whether the role it played was active or passive, 
which presupposes different conduct and requires a determination of the facts that 
were relevant for the inspection. 
13 As regards the due diligence displayed by the applicant, the latter claimed that its 
company has supply standards which require pre-contract checks on suppliers, 
which the tax authority did not even mention in its ruling. In accordance with 
those standards, the validity of the extract of the companies register and of the tax 
identification number, the areas of business and the persons empowered to act as 
representatives were always verified. The goods purchased had certificates of 
quality. KG would personally inspect a supplier’s premises, warehouse and the 
like, and also whether there were sufficient machinery and staff for loading and 
labelling the goods, as shown by the witness statements. The tax authority 
deliberately ignored those statements. 
14 The applicant criticised the scope and the depth of the checks required of it in 
relation to its method of selecting trading partners, pointing out that it is 
unreasonable, impracticable and contrary to the case-law of the Court of Justice 
for the defendant to require the applicant, prior to taking a commercial decision, to 
uncover an arrangement that it took the tax authority over five years to get to the 
bottom of. 
15 The applicant disputed the defendant’s findings concerning the deliberate nature 
of its actions and criticised the lack of evidence in that regard, since the tax 
authority concluded directly from the deliberate nature of KG’s actions that the 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-512/21 
 
8  
applicant’s actions were deliberate, while, in the ruling, the deliberateness of KG’s 
actions was only examined in relation to due diligence. 
16 The applicant also pointed out that, pursuant to the brokerage contract, the 
relationship between it and the broker company was one of horizontal cooperation 
and that the parties’ autonomy was the principal characteristic of the contract, 
which was not considered by the tax authority. Therefore, the applicant argued 
that, in that context, it displayed due diligence, which was ignored by the 
defendant. 
17 As regards the origin of the goods, the applicant claimed that that is covered by 
trade secrecy which is of no relevance for tax purposes, but that in the course of 
trade it constitutes information the protection of which is vitally important for any 
economic operator. The applicant added that it is not subject to the Hungarian 
provisions on food safety and that the tax authority did not indicate the provision 
under which the applicant should have obtained and kept the certificates of quality 
which it was alleged not to have. 
18 In the light of the foregoing considerations, the applicant requested that 
preliminary-ruling proceedings be commenced before the Court of Justice. 
19 Without altering its position, the defendant pointed out that the inspection report 
relating to the period February to July 2012 describes in detail the invoicing chain 
discovered in relation to the period in question and the role that the applicant 
played in that chain. 
20 In relation to the defendant’s finding of an infringement of the provisions 
governing food safety, the defendant refers to paragraph 41 of the judgment in 
Altic (C-329/18), in which, it claims, the Court previously addressed that issue. 
21 In order to show that the findings contained in its rulings are well-founded, the 
defendant annexed a judgment given by the Kúria (Supreme Court, Hungary) in a 
case in which the facts were identical to those of the present case and in which the 
Kúria confirmed the objective circumstances discovered by the defendant and, on 
the basis of these, the refusal of the right of deduction. 
Succinct presentation of the reasoning in the request for a preliminary ruling 
22 According to the referring court, an interpretation of EU law in the light of the 
acte clair doctrine is necessary for the resolution of the dispute. 
23 Citing paragraph 57 of the order in Vikingo (C-610/19) and paragraph 27 of the 
judgment in Hardimpex (C-444/12), the referring court argues that the 
contradiction concerning the essence of the interpretation and application of EU 
law with regard to the allocation of the burden of proof between a taxable person 
and the tax authority has also remained after those judgments. Therefore, in the 
interests of the correct performance of the judicial scrutiny that falls to it, the 
AQUILA PART PROD COM 
 
9 
referring court considers that it is necessary for the Court of Justice to provide 
guidance on whether the circumstances relied on by the defendant can be regarded 
as objective factors to which the judgment in Mahagében (C-80/11) is applicable, 
since the referring court is not aware that the Court of Justice has ruled on those 
objective conditions to date, while, for the purpose of resolving the dispute, it is 
also necessary to determine whether, in the light of the nature of the supply chain 
identified in the present case, the extent of the checks that the tax authority 
requires a taxable person to carry out in connection with his obligation to act with 
due diligence is compatible with the evidentiary framework established by the 
Court of Justice in its interpretation of the relevant articles of the VAT Directive, 
and with the fundamental principles applicable to the exercise of the right to 
deduction of VAT.