Opinion of the Advocate General — ECLI:EU:C:2020:599
Date: 2020-07-16
Language of the case: Hungarian
Subject matter: Taxation;Free movement of goods;Internal market - Principles;Common customs tariff;Value added tax;Customs Union
Procedure: Reference for a preliminary ruling
Origin: Hungary

Summary C-656/19 — 1 
Case C-656/19 
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: 
4 September 2019 
Referring court: 
Szegedi Közigazgatási és Munkaügyi Bíróság (Administrative and 
Social Court, Szeged, Hungary) 
Date of the decision to refer: 
22 August 2019 
Applicant: 
BAKATI PLUS Kereskedelmi és Szolgáltató Kft. 
Defendant: 
Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (Appeals 
Directorate of the National Tax and Customs Administration, 
Hungary) 
  
Subject matter of the main proceedings 
Administrative-law action in tax matters. 
Subject matter and legal basis of the request for a preliminary ruling 
In the first place, this request for a preliminary ruling seeks, on the one hand, to 
determine whether it is compatible with Article 147 of Council Directive 
2006/112/EC of 28 November 2006 on the common system of value added tax 
(‘the VAT Directive’) for a Member State to operate a practice whereby the 
concept of ‘personal luggage’ within the meaning of the VAT Directive is treated 
in the same way as the concept of luggage in other legal provisions. On the other 
hand, in the event that that question is answered in the negative, it asks for a 
clarification of the definition to be given to the concept of ‘personal luggage’ in 
Article 147 of the VAT Directive and, in that regard, whether a practice whereby 
EN 
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the tax authorities of a Member State take into account only the ‘normal meaning 
of terms’ is compatible with EU law. 
In the second place, this request for a preliminary ruling is also concerned, on the 
one hand, with an interpretation of Articles 146 and 147 of the VAT Directive to 
the effect that, where a taxable person does not qualify for exemption under 
Article 147 of that directive, it must be examined whether the exemption for the 
supply of goods for export under Article 146 of that directive is applicable, even if 
the customs procedures provided for by law have not been carried out. On the 
other hand, the request for a preliminary ruling seeks to ascertain whether a legal 
transaction may be classified as a supply of goods for export exempt from VAT 
contrary to the express intention of the customer. 
In the third place, the request for a preliminary ruling seeks to determine whether, 
in the circumstances of the main proceedings, it is compatible with Articles 146 
and 147 of the VAT Directive and the EU law principles of fiscal neutrality and 
proportionality for a Member State to operate a practice whereby the tax authority 
refuses to refund tax incorrectly declared and paid on supplies of goods to foreign 
travellers without classifying such transactions as supplies of goods for export. 
Questions referred 
1. Is it compatible with Article 147 of Council Directive 2006/112/EC of 
28 November 2006 on the common system of value added tax (‘the VAT 
Directive’) for a Member State to operate a practice whereby the concept of 
‘personal luggage’, established as forming part of the concept of the supply 
of goods to foreign travellers, which is exempt from value added tax, is 
treated in the same way as both the concept of personal effects used in the 
Convention concerning Customs Facilities for Touring, done at New York 
on 4 June 1954, and the Additional Protocol thereto, and the concept of 
‘luggage’ defined in Article 1(5) of Commission Delegated Regulation (EU) 
2015/2446 supplementing Regulation (EU) No 952/2013 of the European 
Parliament and of the Council as regards detailed rules concerning certain 
provisions of the Union Customs Code? 
2. In the event of a negative answer to the previous question, how is the 
concept of ‘personal luggage’ in Article 147 of the VAT Directive to be 
defined, given that that directive does not define it? Is the national practice 
whereby the tax authorities of a Member State take into account only the 
‘normal meaning of terms’ compatible with the provisions of Community 
law? 
3. Must Articles 146 and 147 of the VAT Directive be interpreted as meaning 
that, where a taxable person does not qualify for the exemption for the 
supply of goods to foreign travellers under Article 147 of that directive, it 
must be examined, where appropriate, whether the exemption for the supply 
of goods for export under Article 146 of that directive is applicable, even if 
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the customs procedures laid down in the Union Customs Code and in 
delegated legislation have not been carried out? 
4. If the answer given to the previous question is that, where the exemption for 
foreign travellers is not applicable, the transaction qualifies for a VAT 
exemption on the ground that the goods are for export, can the legal 
transaction be classified as a supply of goods for export that is exempt from 
VAT contrary to the intention expressed by the customer at the time of 
placing the order. 
5. In the event of an affirmative answer to the third and fourth questions, in a 
situation such as that in the case at issue, in which the issuer of the invoice 
knew at the time of supplying the goods that they had been purchased for the 
purposes of resale but the foreign buyer nonetheless wished to remove them 
from the territory under the scheme applicable to foreign travellers, with the 
result that the issuer of the invoice acted in bad faith in issuing the tax 
refund application form available for that purpose under that scheme, and in 
refunding the output VAT pursuant to the exemption for foreign travellers, is 
it compatible with Articles 146 and 147 of the VAT Directive and the EU 
law principles of fiscal neutrality and proportionality for a Member State to 
operate a practice whereby the tax authority refuses to refund tax incorrectly 
declared and paid on supplies of goods to foreign travellers without 
classifying such transactions as supplies for goods for export and without 
making a correction to that effect, notwithstanding that it is indisputable that 
the goods left Hungary as traveller’s luggage? 
Provisions of EU law and international law relied on 
– Council Directive 2006/112/EC of 28 November 2006 on the common 
system of value added tax (OJ 200 L 347, p. 1; corrigenda in OJ 2007 L 335, 
p. 60, and OJ 2015 L 323, p. 31): Articles 146, 147 and 273. 
– Commission Delegated Regulation (EU) 2015/2446 of 28 July 2015 
supplementing Regulation (EU) No 952/2013 of the European Parliament and of 
the Council as regards detailed rules concerning certain provisions of the Union 
Customs Code (OJ 2015 L 343, p. 1; corrigenda in OJ 2016 L 87, p. 35, OJ 2016 
L 264, p. 43, and OJ 2017 L 101, p. 164). 
– Case-law of the Court of Justice of the European Union, in particular: 
judgment of 21 February 2008, Netto Supermarkt, C-271/06, EU:C:2008:105, 
paragraph 29; judgment of 17 May 2018, Vámos, C-566/16, EU:C:2018:321; 
judgment of 21 October 2010, Nidera Handelscompagnie, C-385/09, 
EU:C:2010:627. 
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Provisions of national law relied on 
– Az általános forgalmi adóról szóló 2007. évi CXXVII. törvény (Law 
CXXVII of 2007 on Value Added Tax; ‘the VAT Law’): Articles 98, 99, 
153/A(1) and 259, point 10. 
– Az adózás rendjéről szóló 2003. évi XCII. törvény (Law XCII of 2003 on 
General Taxation Procedure): Article 170. 
– A Nemzeti Adó- és Vámhivatalról szóló 2010. évi CXXII. törvény (Law 
CXXII of 2010 on the National Tax and Customs Administration; ‘the Law on the 
National Tax and Customs Administration’): Article 12/A. 
– A turistaforgalom vámkönnyítéseiről szóló, New Yorkban 1954. június 4-én 
kelt Egyezmény, valamint az Egyezmény Kiegészítő Jegyzőkönyvének 
kihirdetéséről szóló 1964. évi 2. törvényerejű rendelet (Decree-law No 2 of 1964 
enacting the Convention concerning Customs Facilities for Touring, done at New 
York on 4 June 1954, and the Additional Protocol to that Convention; ‘the New 
York Convention’): Article 2. 
– Judgment No KfV.1.35 502/2016/6 of the Kúria (Supreme Court, Hungary) 
of 8 December 2016. 
Brief presentation of the facts and the main proceedings 
1 The applicant’s main business, until April 2015, was the wholesale trade in 
ornamental plants and, since then, has been other non-store retailing. Since 2015, 
the applicant’s annual turnover has risen from the previous 50 million Hungarian 
forints (‘HUF’) to HUF one billion. 
2 During 2016, the year to which the main proceedings relate, almost all of the 
applicant’s business (some 95%) consisted in the sale to twenty private 
individuals of various food, cosmetic and cleaning products intended for a non-
Community territory, in this instance Serbia. The applicant was aware that the 
Serbian buyers, who had purchased large quantities of goods from it on hundreds 
of occasions, belonged to three families and that the goods left Hungary for Serbia 
as the buyers’ traveller’s luggage. 
3 The applicant’s representative would issue the supporting documentation for the 
supplies of goods on the basis of the information which the buyers provided by 
telephone when placing their orders. An agent of the applicant would transport the 
goods from the applicant’s warehouse in Szeged (Hungary) to a warehouse which 
the Serbian private buyers rented at a location in the vicinity of the border 
between Hungary and Serbia, on the Hungarian side, namely Tompa. There, the 
driver providing the transportation would hand over to the buyers, along with the 
goods, the invoices issued by the applicant’s representative and the tax refund 
application forms used under the scheme for foreign travellers, in return for the 
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payment in cash of the purchase price. The goods would be transported onwards, 
as traveller’s luggage, by private car from Tompa to Serbia. 
4 There is no question that the applicant knew that its customers were buying the 
goods at issue not for personal or family use but in order to resell them on Serbian 
markets. The applicant was also aware that the family members’ participation 
served to ensure that the value of each supply did not exceed HUF 1 million, thus 
making it easier, under the Hungarian customs authorities’ internal rules on 
customs procedure, for the goods to be taken across the border from Hungary to 
Serbia unhindered.  
5 As regards those goods, the buyers would avail themselves of the exemption from 
value added tax (‘VAT’) for foreign travellers in the following way: the applicant 
would complete the VAT refund application form, which would subsequently be 
endorsed and stamped by the customs office of exit of the goods, in some cases 
with the wording ‘Exit from Community territory: Tompa’, following which a 
second copy of the form would be returned to the applicant and the latter would 
refund the VAT in cash to the buyers. 
6 The buyers requested that a tax refund application form be issued to them on 
every occasion as foreign travellers, without at any point proposing that the goods 
in question should be removed from the territory not as traveller’s luggage but as 
part of a supply of goods for export. 
7 In keeping with the foregoing, the applicant refunded the VAT to the buyers ― 
HUF 339 788 000 in total (some EUR 1 038 000) ― in accordance with 
Article 99(9) of the VAT Law, according to which, if VAT has been charged at 
the time of the supply of goods and the supplier of the goods has refunded the tax 
charged to the foreign traveller, and if, moreover, the supplier has previously 
assessed and declared that VAT to be tax owed, he is to be entitled, at the earliest 
in the VAT assessment period in which the refund to the foreign traveller took 
place, to deduct from his assessment of the tax owed the amount of tax refunded. 
The supporting documentation for the application for a tax refund for foreign 
travellers shows that, in any event, the goods in question left Hungarian territory. 
8 The Nemzeti Adó- és Vámhivatal Csongrád Megyei Adó- és Vámigazgatósága 
(Tax and Customs Directorate for the province of Csongrád (Hungary), which 
forms part of the National Tax and Customs Administration; ‘the first-tier tax 
authority), by decision of 27 June 2018, adopted following an inspection of the tax 
year at issue, required the applicant to pay differences in VAT in the amount of 
HUF 340 598 000 (approximately EUR 1 041 000), a fine of HUF 163 261 000 
(approximately EUR 499 000) and a late-payment surcharge of HUF 7 184 000 
(some EUR 22 000). It found that the purchases exceeded the scope of personal 
needs and family use and had been made for the purposes of resale, which ruled 
out their classification as traveller’s luggage. It stated that the applicant did not 
qualify for the exemption for goods for export either, since nobody had requested 
export customs clearance in connection with those transactions and the applicant 
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did not have the documentation necessary for that purpose. Neither does the 
applicant satisfy the definition of exporter, since it was no longer in possession of 
the goods once it had supplied them to the buyers in the latter’s warehouse, that is 
to say a warehouse situated on the Hungarian side of the border between Serbia 
and Hungary, and was therefore unable to arrange for the goods to be transported 
to a place of destination situated outside the Community customs territory. 
9 By decision of 31 October 2018, the defendant confirmed the first-tier decision, 
which had been challenged before it by the applicant. In the grounds of its 
decision, the defendant stated that, following its inspection, the tax authority had 
found that, since the transactions could not be classified as supplies to foreign 
travellers, it had examined whether the conditions applicable to supplies of goods 
for export were met, and concluded that they were not. It referred to the 
applicant’s statements, according to which the applicant had taken the view, in the 
light of the buyers’ intentions, that these were supplies of goods for foreign 
travellers. 
According to the defendant, the Kúria (Supreme Court) pointed out in its 
judgment KfV.1.35.502/2016/6 of 8 December 2016, in connection with the 
definition of the concept of traveller’s luggage, that both the quantity of the goods 
and the frequency of the purchases are relevant in this regard. Neither the VAT 
Law nor the VAT Directive define the concept of personal luggage, EU customs 
law provides no guidance in this respect either and the New York Convention 
defines the concept of ‘personal effects’. According to national practice, 
traveller’s luggage is to be regarded as the goods which a traveller purchases for 
his own personal needs or as a gift, and must under no circumstances serve 
commercial purposes. Regular supplies and large quantities of goods preclude the 
classification of those goods as traveller’s luggage, and it is for this reason that 
Article 99 of the VAT Law does not allow commercial quantities of goods to be 
removed from the territory as traveller’s luggage. That provision thus states that, if 
the buyer is a foreign traveller and the goods purchased by him form part of his 
personal luggage or his traveller’s luggage, the exemption provided for in 
Article 98(1) of the VAT Law may apply, provided that: 
– the total value of the supply of goods (including VAT) is greater than an 
amount equal to EUR 175; 
– the traveller can prove his legal status by means of a travel document; 
– the customs office of exit of the goods from Community territory certifies the 
departure of the goods from that territory by endorsing and stamping the tax 
refund application form. At the request of the foreign traveller, the supplier of 
the goods must arrange for the tax refund application form to be completed.  
A further condition of the applicability of the exemption, pursuant to Article 99 of 
the VAT Law, is that the supplier must be in possession of the first endorsed and 
stamped copy of the tax refund application form, and that, if tax was charged at 
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the time of supply of the goods, the supplier of those goods must refund the tax 
charged to the foreign traveller. The latter is to be entitled to a tax refund by 
payment in HUF and in cash, although the parties may also agree on another 
currency or method of payment.  
If tax has been charged in accordance with paragraph 4(b) of the VAT Law and 
the supplier has previously assessed and declared that tax as tax owed, the supplier 
is to be entitled, at the earliest in the tax assessment period in which the refund to 
the foreign traveller took place, to deduct from his assessment of the tax owed the 
amount of the tax refunded. 
According to national practice, in so far as it is established that the goods have left 
Community territory, the tax authority must examine whether the conditions for 
exempting a supply of goods on another legal basis are met, in particular whether 
the applicant qualifies for the exemption under Article 98 of the VAT Law, 
whereby supplies of goods dispatched by post or transported from national 
territory to another country situated outside the Community are to be exempt from 
tax.  
The national practice takes into account the case-law of the Court of Justice to the 
effect that, although the VAT Directive allows the Member States to lay down the 
formal requirements relating to the rules on exercising the right of deduction, such 
requirements must not go beyond what is necessary to ensure the proper levying 
and collection of tax and to prevent tax evasion. 
10 The defendant stated that, account being taken of the aforementioned judgment of 
the Kúria, the applicant does not qualify for the exemption for goods for export 
either, since it did not request export customs clearance in connection with the 
transactions in question and, according to the applicant’s statements, no 
consideration was given to processing the transactions as exports because the 
buyers expressly asked for the exemption for foreign travellers to be applied. 
Main arguments of the parties in the main proceedings 
Applicant’s arguments 
11 In its application, the applicant seeks the annulment of the defendant’s decision 
and the first-tier decision. It submits that neither Community law nor the VAT 
Law contain a definition of personal luggage or traveller’s luggage. In the absence 
of a definition in tax law, the tax authority cannot differentiate between goods 
crossing the border and, therefore, cannot refuse to endorse a tax refund 
application form for goods leaving the territory on the ground of an alleged 
intention to resell such goods. Neither is the applicant attempting to avoid tax, 
since the taxable person would also qualify for the exemption for goods for 
export, pursuant to Article 98 of the VAT Law. The applicant also refers to the 
judgment delivered by the Court of Justice in Netto Supermarkt, C-271/06, 
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according to which the case-law laid down by the Court of Justice in the field of 
customs law cannot be relied on in tax disputes, which supports the inference that 
the tax mechanism used by the applicant cannot be assessed on the basis of 
customs legislation either. 
12 In addition, the applicant refutes the tax authority’s legal interpretation to the 
effect that, in accordance with Article 12/A of the Law on the National Tax and 
Customs Administration, the mere fact that the customs authority of exit acts 
within the framework of the tax authority does not mean that it performs all of the 
tax administration tasks laid down by law, with the result that the customs 
authority certifies only that the goods have left the territory of the European 
Union, but not that the goods were removed from the territory as part of personal 
luggage or traveller’s luggage in accordance with Article 99 of the VAT Law, or 
that that provision was complied with. 
Defendant’s arguments 
13 The defendant contends that the action should be dismissed, and reiterates the 
grounds of law set out in its decision. 
Brief statement of the grounds on which the request for a preliminary ruling 
is made 
14 This court relies on a judgment of the Kúria in which the latter held, in a case with 
a similar factual background (departure from the territory of commercial 
quantities of goods under the scheme for foreign travellers), that, first, it must be 
examined whether the conditions laid down in Article 99 of the VAT Law are 
met, and then, in the light of the fact that the goods actually left Community 
territory, it must be analysed whether any other provision of the VAT Law is 
applicable. Although neither the VAT Law nor the VAT Directive define the 
concept of traveller’s luggage and Community customs law and international law 
do not provide an unequivocal definition of that concept either, it is safe to say 
that traveller’s luggage is to be regarded as the goods which a traveller purchases 
for his own personal needs or as a gift and may not under any circumstances have 
commercial purposes. In that judgment, it was held that Article 99 of the VAT 
Law does not allow commercial quantities of goods to be removed from the 
territory as traveller’s luggage, with the result that neither the exemption from, nor 
the deduction of, that tax as provided for under that scheme can be authorised. The 
Kúria went on to say that, since supplies of goods must be taxed in the country in 
which the goods supplied are ultimately used, it is necessary to examine whether 
the exemption provided for in Article 98 of the VAT Law is applicable. The 
conditions governing the application of that article include in particular 
certification by the customs office of exit that, at the time of the supply, or, at the 
latest, within ninety days thereafter, the goods left Community territory. It is for 
the customs authority to determine to what extent the applicant qualifies for 
exemption under Article 98 of the VAT Law. 
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15 This court points out that, since Articles 98 and 99 of the VAT Law are consistent 
with Articles 146 and 147 of the VAT Directive for the purposes of the present 
case, the latter articles of the VAT Directive must be interpreted and applied. 
16 This court is of the view that, in order to define the concept of personal luggage 
and traveller’s luggage, it is important to start from its everyday meaning, with 
reference to the provisions of the Community Customs Code, the Union Customs 
Code and the New York Convention. That approach is also supported by the case-
law of the national courts. Decisive in the assessment of the concept of traveller’s 
luggage, according to this court, is the purpose of removing the goods from the 
territory. The concept of traveller’s luggage does not include goods ― irrespective 
of their quantity or mode of transportation ― that were purchased not in order to 
satisfy personal or family needs or as a gift but with a view to their resale. 
However, in the absence of an authentic interpretation in the legislation, the 
definition of that concept calls for a reference for a preliminary ruling. 
17 In the present administrative-law proceedings, the rules on the exemption for 
foreign travellers being inapplicable, the defendant examined whether the 
conditions for exempting goods for export were met and found that the applicant 
knew that it was selling goods to persons who later resold them on Serbian 
markets. Since the applicant has had to recognise that the legal conditions 
governing the exemption for foreign travellers are not met, it cannot reasonably 
claim in the present dispute to have exercised due commercial care. The defendant 
referred in this regard to paragraph 29 of the judgment delivered by the Court of 
Justice in Netto Supermarkt. The defendant further observed that, contrary to what 
the applicant had submitted, the VAT Law contains no specific provision which, 
in circumstances similar to those of this case, compels the seller, when so 
requested by the buyer, to issue a tax refund application form. 
18 This court also considers, however, that, at the time of supply of the goods, the 
seller could not disregard the stated intention of the buyers to remove the goods 
from the country as foreign travellers, which rules out the possibility of invoicing 
without VAT on the ground that the goods were for export. The rules governing 
the exemption for foreign travellers are different from and stricter than those 
governing the supply of goods for export (the exemption covers a limited selection 
of goods, eligibility for it is subject to a quantitative threshold and the invoice 
cannot be issued ab initio without VAT), the logical consequence of this being 
that the invoice issuer could not unilaterally apply the exemption for supplies of 
goods for export to buyers who defined themselves as foreign travellers and were, 
as such, subject to a stricter VAT exemption scheme, since it was reasonable for it 
to expect those buyers to remove the goods from the country as foreign travellers. 
Consequently, the invoice issuer acted properly in including VAT on its invoices. 
If the foreign buyers had changed their original intention and had ultimately 
removed the goods from the country under the single customs procedure, the 
applicant might have contemplated correcting the invoice. In this instance, 
however, the foreign buyers did not change their original intention, it being 
common ground in the present dispute that they transported the goods to Serbia as 
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foreign travellers. Since the invoices were therefore correct at the time of their 
issue and there was no later change on account of which they should have been 
corrected, the tax authority was not required to reclassify their content afterwards. 
19 In this case, the parties do not question the fact that the invoice issuer’s foreign 
customers removed commercial quantities of goods via the border between 
Hungary and Serbia for the purposes of resale but as foreign travellers. Neither is 
it a matter of any dispute that those customers saw to it that the value of the 
invoiced goods did not exceed a certain amount on each occasion, thus evading 
customs control. The invoice issuer knew of the fraudulent activities of its 
customers and was aware that the conditions for exempting foreign travellers were 
not met, and it should not therefore have issued the tax refund application form 
which triggered that exemption. This court considers it to be irrelevant what 
specific Serbian legislation the foreign buyers sought to circumvent and what 
advantages they secured by bringing the goods into Serbian territory as foreign 
travellers. For the purposes of reviewing the tax authority’s decision, what matters 
is that the invoice issuer knew of its customers’ intention to resell and should not 
therefore have provided them with the exemption for foreign travellers. In 
collaborating with its foreign customers to circumvent the Hungarian tax 
legislation and, even though it knew that it was the intention of those customers to 
resell the goods, and, therefore, that the essential conditions for exempting foreign 
travellers were not met, in refunding the VAT and including it in its returns for the 
financial year at issue as a deductible item of tax owed, the applicant obtained a 
significant competitive advantage over its competitors acting in accordance with 
that legislation. 
20 As a consequence of the conscious actions of the invoice issuer and the buyers, 
indicative of a concurrence of wills, the goods were not exhibited or subjected to 
close scrutiny at the Serbian customs office, their traceability was lost and 
customs duties and other customs clearance costs ‒ not determined in the present 
dispute ‒ could not be paid; in addition, the buyers were given the opportunity, by 
circumventing Serbian tax legislation, to resell the goods brought into that country 
as individuals. From the point of view of the facts of the case at issue, it is 
irrelevant whether or not the Serbian buyers actually went on to take up that 
opportunity, since the fiscal and other consequences in Serbia fall outside the 
framework of analysis in this dispute, in which it is also not appropriate to 
examine which specific costs were not incurred because the customs procedure 
was circumvented. The only relevant point is that, by its actions, the invoice issuer 
knowingly collaborated in the fraudulent activities of the Serbian buyers and 
knowingly infringed the provisions of the VAT Law relating to supplies of goods 
in issuing the invoices and completing forms under the scheme for foreign 
travellers, as well as in improperly reducing its tax base to reflect the tax refund 
made to foreign travellers.  
21 If, in the case where tax cannot be refunded under the exemption for foreign 
travellers, the tax authority were required to grant a tax exemption on another 
legal basis, the fact that the invoice issuer acted in bad faith would effectively 
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have no legal consequences, in particular given that, if there is no improper 
application for a refund, the conditions for imposing a tax fine are not met either. 
Because of the competitive advantage improperly secured by the invoice issuer, 
that situation would not only fail to comply with the principle of fiscal neutrality 
but would also be contrary to the obligation on Member States to take action 
against tax evasion and avoidance.  
22 The Court of Justice has already looked at the principle of fiscal neutrality in the 
context of eligibility for tax exemptions, and has held that that principle is 
intended by the EU legislature to reflect, in matters relating to VAT, the general 
principle of equal treatment. The measures that Member States may adopt in order 
to ensure the correct collection of VAT and prevent evasion may not be used in 
such a way as to undermine the neutrality of VAT. To allow taxable persons to opt 
for an exemption scheme after the time limit set would confer on them an undue 
competitive advantage, to the detriment of operators who duly complied with the 
procedural obligations laid down in the national legislation at issue in the main 
proceedings. Those taxable persons would be in a position to choose after the 
event, and, consequently, on the basis of the actual results of their activity, the tax 
arrangements which seem most advantageous to them (judgment of 17 May 2018, 
Vámos, C-566/16). 
23 In the opinion of this court, the findings in the judgment in Vámos are also 
applicable to this case. After all, the invoice issuer, acting in breach of the VAT 
legislation, applied to its tax base a reduction to which it was not entitled; later, 
when the tax authority detected the error, the invoice issuer sought to benefit after 
the event from another exemption for exports. If the tax authority authorised the 
retrospective application of the tax exemption for exports, the invoice issuer 
would secure an undue competitive advantage over its competitors, in breach of 
the principle of fiscal neutrality.  
24 According to the settled case-law of the Court of Justice, the measures which the 
Member States may adopt under Article 273 of the VAT Directive in order to 
ensure the correct levying and collection of the tax and for the prevention of fraud 
must not go further than is necessary to attain such objectives and must not 
undermine the neutrality of VAT (judgment in Nidera Handelscompagnie, 
C-385/09). 
25 Consequently, a failure to comply with the formal conditions may lead to the loss 
of the right of deduction only where it makes it impossible to verify compliance 
with the material requirements. This court considers that this is precisely the case 
in this instance, where the invoice issuer and the buyers not only failed to comply 
with the formal conditions but also, acting in breach of the rules on the relevant 
formalities, knowingly concealed their true economic activity from the tax and 
customs authorities.  
26 In the opinion of this court, the principle of fiscal neutrality will be observed only 
if, in the face of a reduction of the tax base by the tax refund made to foreign 
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travellers, the tax authority does not reclassify the transactions in question as 
supplies of goods for export, this being the only practice that also satisfies the 
requirement of proportionality. 
27 On the basis of the differences in the concept of exportation under tax law and 
customs law respectively, the applicant criticises the fact that the tax authority 
requires it to bear responsibility for the fact that it could have removed the goods 
from the territory as an exporter. However, there is nothing in the documents 
before this court to show that the applicant or anybody else sought customs 
clearance as an exporter of the goods in question, and, according to the statements 
made by the applicant’s legal representative, the possibility of processing the 
transactions as exports was not even considered.  
28 Contrary to what the applicant has submitted, it is not sufficient, when it comes to 
classifying the facts for tax purposes, to show that the goods have left the territory, 
since, as has been explained previously, the exemption for foreign travellers is 
special vis-à-vis the exemption for supplies of goods for export and applies to a 
defined group of persons, which makes it necessary to specify on what basis the 
buyer qualifies for a refund. Consequently, the applicant is wrong to argue that the 
endorsement affixed by the customs authority to the tax refund application form, 
which shows that the goods have left the territory as part of traveller’s luggage, 
also serves to justify the tax exemption for supplies of goods for export. 
29 Account being taken of the foregoing considerations, this court also has doubts 
about the fact that, where the tax exemption for foreign travellers is found to be 
unlawful, there is a requirement to examine in tandem whether the conditions 
applicable to the supply of goods for export are met, in all cases where the goods 
have left the territory as traveller’s luggage. 
30 At the same time, this court regards as decisive in the case at issue the fact that the 
applicant clearly acted in bad faith in the discharge of its tax obligations, for 
which reason it is appropriate, on the basis of the EU law principles of fiscal 
neutrality and proportionality, not only to refuse the reduction of the tax base but 
also to rule out the possibility of reclassification as a supply of goods for export, 
even if the tax authority were also required to examine whether the conditions 
applicable to the supply of goods for export are met.  
31 This court considers it necessary to refer the foregoing questions for a preliminary 
ruling and is aware that other administrative-law proceedings relating to similar 
matters are currently pending before Hungarian courts.