Information;Order — ECLI:EU:C:2020:674
Date: 2020-09-03
Language of the case: Hungarian
Court formation: Tenth Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Hungary

Summary C-611/19 — 1 
Case C-611/19 
Summary of the request for a preliminary ruling under Article 98(1) of the 
Rules of Procedure of the Court of Justice 
Date lodged:  
13 August 2019  
Referring court:  
Fővárosi Közigazgatási és Munkaügyi Bíróság (Budapest 
Administrative and Labour Court, Hungary) 
Date of the decision to refer:  
19 May 2019 
Applicant:  
Crewprint Kft. 
Defendant:  
Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (Appeals 
Directorate of the National Tax and Customs Administration, 
Hungary) 
  
Subject matter of the main proceedings 
Judicial proceedings brought against a decision of the national tax authority 
denying the right to deduct VAT on the grounds that the tax authority reclassified 
the taxable person’s activity and found the invoicing chain to be a fraudulent 
abusive practice on the basis of multiple recurrences of circumstances not found to 
be objective according to the case-law of the Court of Justice. 
Subject matter and legal basis of the request for a preliminary ruling 
The Fővárosi Közigazgatási és Munkaügyi Bíróság (Budapest Administrative and 
Labour Court, Hungary) asks the Court of Justice to interpret Article 167, 
Articles 168(a) and 178(a) and Articles 220 and 226 of Directive 2006/112 in the 
light of the principles of tax neutrality and effectiveness. 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-611/19  
 
2  
Questions referred for a preliminary ruling 
1. Is it compatible with the relevant provisions [on the deduction of VAT] of 
Directive 2006/112 and with the principle of tax neutrality for national 
interpretation and practice to operate with the effect that the tax authority 
denies the right [to deduct VAT] on an economic transaction between the 
parties, on the basis that it finds the form of the legal relationship between 
them (a works contract) to be fraudulent because it gives rise to a right to 
deduct tax and, therefore, classifies it, under Article 1(7) [of the General 
Law on Tax Procedure] as an activity (agency) that does not give rise to a 
right to deduct, taking the view that the parties’ conduct was intended to 
evade tax since the activity carried on by the addressee of the invoice did not 
necessarily have to take [that form of business activity], and since it could 
also have performed that activity as an agent? In that context, are taxable 
persons obliged, as a requirement for [deducting VAT], to choose the form 
of economic activity that places the greater tax burden on them, or is there 
an abusive practice where, in exercise of their freedom to contract and for 
purposes unrelated to tax law, they choose a contractual form for the 
economic activity carried on between them that also has the unintended 
consequence of entitling them to deduct the tax? 
2. Is it compatible with the relevant provisions [on the deduction of VAT] of 
Directive 2006/112 and with the principle of tax neutrality for national 
interpretation and practice to operate with the effect that, where a taxable 
person wishing to exercise the right [to deduct VAT] fulfils the substantive 
and formal requirements [for that deduction] and has taken the measures it 
can be expected to take before concluding the contract, the tax authority 
denies the right to deduct VAT on the basis that it finds that it was 
unnecessary from an economic perspective to set up a chain and that doing 
so is therefore an abusive practice because the subcontractor, 
notwithstanding that it is in a position to supply the services, engages other 
subcontractors to perform them for reasons unconnected with the taxable 
event, and because the taxable person wishing to exercise the right [to 
deduct VAT] knew that its subcontractor, at the time it accepted the 
commission, owing to a lack of  personnel and material resources, would 
perform the services using subcontractors of its own? Is the answer affected 
by the fact that the taxable person or its subcontractor included in the chain a 
subcontractor with which it has a direct relationship or to which it has a 
personal or organisational link (personal acquaintance, family relationship or 
even ownership)? 
3. If the preceding question is answered in the affirmative, is the requirement 
that the facts must be determined on the basis of objective facts satisfied 
where, in proceedings in which the tax authority considers the economic 
relationship between the taxable person wishing to exercise the right to 
[deduct VAT] and its subcontractor is irrational and unjustified, it bases that 
finding solely on the evidence of some of the subcontractor’s employees, 
CREWPRINT 
 
3 
without ascertaining on the basis of objective facts the characteristics of the 
economic activity under the contract, the specific circumstances of that 
activity or the relevant economic context, and without hearing the directors 
with decision-making powers of the taxable person or of the subcontractors 
forming part of the chain and, if that requirement is satisfied, is it relevant 
whether the taxable person or members of the chain are capable of 
performing the services and is it necessary to involve an expert in that 
respect? 
4. Is it compatible with Directive 2006/112 and with the principle of 
effectiveness for national interpretation and practice to operate with the 
effect that, where the substantive and formal requirements [to deduct VAT] 
are satisfied and the measures that can [reasonably] be expected have been 
taken, the tax authority, acting on the basis of circumstances that, according 
to judgments of the Court of Justice do not justify [the refusal to allow the 
deduction of VAT] and are not objective, finds tax evasion to have been 
proven and denies the right [to deduct VAT] solely because those 
circumstances occur in the chain detected as a whole, in a sufficient number 
of its members who were investigated? 
Provisions of EU law relied upon 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax, Article 9(1), Article 167, Articles 168(a) and 178(a) and 
Articles 220 and 226. 
Provisions of national law relied upon 
Az adózás rendjéről szóló 2003. évi XCII. törvény (Law XCII of 2003 on General 
Taxation Procedure, ‘General Taxation Procedure Law’), Articles 1(7), 2(1) and 
97(4). 
Az általános forgalmi adóról szóló 2007. évi CXXVII. törvény (Law CXXVII of 
2007 on Value Added Tax, ‘the Law on VAT’), Article 26, Articles 27(1), 119(1) 
and 120(a) and Article 127(1)(a). 
A számvitelről szóló 2000. évi C. törvény (Law C of 2000 on Accounting), 
Article 166(1) and (2). 
Brief description of the facts and the main proceedings 
1 The applicant, whose corporate purposes are printing and the provision of 
typographical services, received orders for the manufacture of typographical 
products, which were executed, in accordance with two framework works 
contracts and with individual orders placed under those contracts, by its main 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-611/19  
 
4  
printing subcontractor, Crew Kft, partly with the involvement of other 
subcontractors. 
2 From 10 July 2012, the applicant’s director, who at the time of its incorporation 
was an employee of that company, became also one of the directors of Crew Kft. 
The business premises of Crew Kft. and of the applicant’s two branches have the 
same address. The applicant does not have any printing resources. 
3 Crew Kft.’s main activity is printing, although in reality it provides global 
typographical services. The undertaking has various printing machines and other 
typographical machines, but does not have a binder or any digital or rotary 
equipment, and a subcontractor therefore has to do that work. 
4 The invoices received from Crew Kft., the VAT on which was deducted by the 
applicant, showed ‘provision of typographical services … — Subcontracting of 
typographical and binding services on the basis of a certificate of work’. The 
certificates of work were also enclosed with the invoices and contained a detailed 
description of the product that the subcontractor had produced for the applicant, 
and the delivery notes were also included. 
5 The first-tier tax authority inspected the applicant to carry out an ex post 
examination of its Value Added Tax (VAT) declarations, and adopted four 
decisions as a result. In those decisions, the competent tax authority declared there 
to be a tax difference owed by the applicant in respect of VAT of 56 415 000 
Hungarian forints (HUF) in relation to the second to fourth quarters of 2012, of 
HUF 17 882 000 in relation to the first quarter of 2013, of HUF 19 409 000 in 
relation to the second quarter of 2013 and of HUF 18 999 000 in respect of the 
third quarter of 2013, constituting a tax debt, and, accordingly, imposed a fine and 
a late payment surcharge on account of that difference. 
6 In the course of the inspection, the first-tier tax authority heard the director of the 
applicant company and carried out related investigations into the undertakings 
participating in the chain. In the context of those investigations, it obtained the 
available subcontracts and files of the undertakings, and heard the subcontractors’ 
directors and their employees who were available. It was also given access to the 
tax declarations and data managed by the tax authority and data recorded in other 
public registers. 
7 In its decisions the tax authority stated that SZET Hungary Kft. and Mikron-96 Bt. 
were subcontractors of the applicant’s subcontractor, Crew Kft., and that they in 
turn used other subcontractors.  
8 In the connected investigation into Crew Kft., the tax authority found that, at its 
place of business, the undertaking manufactured the products ordered from it by 
the applicant and that it subsequently delivered them using its own vehicle to the 
applicant’s principals. Crew Kft. subcontracted a minority of the applicant’s 
orders. The parties rendered accounts each month, enabling the applicant to add a 
minimum commercial margin to the price set by Crew Kft.  
CREWPRINT 
 
5 
9 The director of SZET Hungary Kft. had in the past been the wife of the applicant’s 
director and those two people also had a commercial company in common. 
Through a subcontractor, SZET Hungary Kft. performed, first, binding tasks and, 
secondly, all the manufacturing tasks, for Crew Kft. 
10 The former director of Ride-Ex Hungary Kft., which was one of the 
subcontractors designated by the director of SZET Hungary Kft., stated that he 
executed orders obtained by the owner, and that he knew SZET Hungary Kft and 
its director, although not the applicant company, its director or Crew Kft. 
11 There were no longer any banking transactions between Vikobit Kft. and SZET 
Hungary Kft in the periods investigated, and, in addition, the tax authority found 
that Vikobit Kft. did not carry on any activity related to typography. 
12 The director of Micron-96 Bt., Crew Kft.’s other subcontractor, fully confirmed 
the statements of the applicant’s director and indicated that they knew each other 
although, when the printing work was carried out, Micron-96 Bt.’s subcontractor 
was R-M Trade Hungary Kft. 
13 The activities of R-M Trade Hungary Kft did not include activities related to 
typography and, since it lacked personal and physical resources, the undertaking 
could not perform those activities. 
14 The first-tier tax authority did not question that the printing work had been carried 
out in accordance with the stated facts, although, notwithstanding the invoices for 
subcontracted work received by Crew Kft., it found that Crew Kft. and the 
applicant had performed the majority of the printing tasks between them, using 
their own resources, their own personnel and equipment and at their own 
premises, given that Crew Kft.’s subcontractors could not perform those tasks. 
Accordingly, Crew Kft. received and wrongly deducted invoices for the 
typographical services, and subsequently reduced the tax owed by means of the 
false invoices for subcontracted work, with the effect that the taxable persons in 
the last link of the specially created invoicing chain failed to comply with their 
obligations to pay VAT. According to the tax authority, the applicant necessarily 
and objectively must have been aware of those facts and of the tax evasion by 
Crew Kft., since both companies have the same director, the same registered 
office, the same place of business and the same accountant. 
15 The tax authority considers that the applicant abused its rights as a taxable person 
when, on the basis of the invoices received, it deducted tax that the issuer of the 
invoice had not paid to the public exchequer, even though the applicant must have 
known that the VAT deducted had not been paid to the exchequer. That conduct 
constitutes a serious breach of the principle that rights must be exercised in 
accordance with their purpose established in Article 2(1) of the General Taxation 
Procedure Law, the infringement of which, in itself, precludes the taxable person 
from exercising the right to deduct VAT.  
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-611/19  
 
6  
16 The tax authority found furthermore that the contents of the invoices that the 
applicant received from Crew Kft. were also incorrect, since there was no 
subcontracting relationship between the parties, and the applicant was acting 
instead as an intermediary. According to the tax authority, the applicant acted as 
an agent in the transactions, since the applicant’s director obtained the customers 
as an employee of Crew Kft., and Crew Kft. itself executed the orders. In the 
framework contract the applicant and Crew Kft. agreed the applicant’s 
commission as 0.2%. However, apart from obtaining the orders, the applicant did 
not add any material value to the work. In the light of the foregoing, in accordance 
with its power under Article 1(7) of the General Taxation Procedure Law, the tax 
authority reclassified the contracts on the basis of their contents and, as a result, 
denied the applicant the right to deduct the tax on the invoices it had received. 
17 On 28 March 2017, the defendant confirmed the first-tier decisions. 
Fundamental arguments of the parties in the main proceedings 
18 In its action, the applicant claims that the defendant infringed its obligation to 
clarify the facts and its obligation to provide evidence, and that it also 
misinterpreted the substantive legal provisions in so far as, given that the legal 
requirements were satisfied, the applicant was entitled to deduct the tax. It 
emphasises that the defendant also acknowledged that, in accordance with the 
invoices, ‘an economic transaction had taken place between the parties shown in 
the invoice’, but nevertheless found that the issuer of the invoice had acted 
fraudulently. The applicant argues that, on the contrary, neither the issuer of the 
invoices nor the issuer of the invoices received by that person acted fraudulently, 
and states that it acted with due diligence in relation to those undertakings before 
entering into the economic relationship. The relationship structure set up by the 
applicant’s director was confined purely to the companies mentioned. The 
applicant played no part in the formation of the other part of the invoicing chain 
identified by the defendant. 
19 The applicant also criticises the defendant for exceeding its power under the 
General Taxation Procedure Law and infringing Article 1(7) of that law by 
reclassifying the applicant’s activity and finding that the applicant acted as an 
agent, since it accepted the orders from its own customers as a trader in its own 
right and made a profit on the commercial margin between the prices of the orders 
accepted and placed by it, meaning that the reference to subcontracting in the 
invoices received does not make them less credible. The applicant also notes that 
supply chains are a common phenomenon. For VAT purposes, supplies of goods 
do not require physical possession of the goods. The fact that the applicant was 
not directly linked to the products ordered therefore does not justify the finding 
that it acted only as an agent. 
20 The applicant disputes the defendant’s assertion that the activities shown on the 
invoice were performed by Crew Kft. without the involvement of subcontractors, 
CREWPRINT 
 
7 
since the defendant bases that assessment on particular information taken from the 
statements of a number of Crew Kft.’s workers who carry out only parts of the 
manufacturing process, whilst no expert has examined whether Crew Kft. could 
have carried out all the parts of the services, and in the applicant’s view the 
defendant therefore failed to justify its finding that there had been tax evasion on 
the basis of any objective facts. 
21 As regards whether it knew that it was evading tax, the applicant noted, on the 
basis of rulings of the Court of Justice, that not even a single item of objective 
evidence had been submitted in the course of the tax proceedings proving that the 
applicant’s director had even known the identity and activity of the operators 
downstream of the subcontractor’s subcontractors. The defendant knew that its 
subcontractor was not going to perform the whole of the service indicated in the 
invoice. Conversely, it acted with due diligence in relation to the subcontracting of 
which it was aware, and that diligence, according to the order of the Court of 
Justice in Signum Alfa Sped (C-446/15, EU:C:2016:869), is not unlimited, that is 
to say, the addressee of the invoice is not required to carry out tax checks, let 
alone investigate the participants constituting each of the links in the order chain. 
Proof that the taxable person was aware cannot be based on the fact that it did not 
carry out checks that it was not required to perform. 
Brief description of the grounds for the request for a preliminary ruling 
22 Since the matters of fact relevant to the exercise of the right to deduct, which are 
set out in paragraphs 43 and 44 of the judgment of 21 June 2012, Mahagében and 
Dávid (C-80/11 and C-142/11, EU:C:2012:373), are present in this case, all the 
material and formal conditions for the creation and exercise of the right to deduct 
are fulfilled. What is more, there was nothing in the decision to indicate that the 
applicant filed false returns or issued improper invoices. 
23 The referring court must decide whether, merely because the tax authority found, 
in relation to the members of the chain upstream of the applicant and its 
subcontractors, a large number of certain factors that the Court of Justice has in 
various judgments already held cannot be regarded as objective circumstances and 
therefore do not in themselves justify denying the right to deduct VAT, it is 
justified for the applicant to be denied the right to deduct VAT on grounds that the 
contents of the invoices appear implausible and, consequently, on grounds of tax 
evasion. 
24 Although the facts of the present case are the same as regards the relevant factual 
considerations as those set out in and that constitute the basis of the questions 
referred for a preliminary ruling in Mahagében and Dávid (C-80/11 and C-142/11, 
EU:C:2012:373), Hardimpex (C-444/12, not published, EU:C:2013:318) and 
Signum Alfa Sped (C-446/15, EU:C:2016:869), as regards the exercise of the right 
to deduct VAT, there remain, even after those judgments, significant 
contradictions in legal interpretation which appear to confirm that the national 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-611/19  
 
8  
practice, which continues unchanged as regards the way in which the national tax 
authority and courts apply those articles of the Directive, is still inconsistent with 
the acte clair doctrine established in the judgment of 6 October 1982, CILFIT and 
Others (283/81, EU:C:1982:335). 
25 Given that the practice followed by the defendant in this case has led to the right 
to deduct being denied even where the substantive and formal legal requirements 
of the right to deduct VAT are satisfied and even where the measures that could 
reasonably be expected were taken, the referring court finds that the issue of legal 
interpretation to which the proceedings relate quite clearly influences the decision 
to be made on the substance of the case, and it is therefore relevant and cannot be 
resolved without a referral for a preliminary ruling. 
26 According to the order in Signum Alfa Sped (C-446/15, EU:C:2016:869), the 
provisions of Directive 2006/112 preclude a national practice under which the tax 
authorities deny a taxable person the right to deduct Value Added Tax which is 
payable or paid in respect of services supplied to it on the ground that the invoices 
relating to those services lack verisimilitude since the issuer of those invoices 
could not be the real supplier of those services, unless it is established, in the light 
of objective factors and without the taxable person being required to carry out 
checks not required of it, that that taxable person knew or should have known that 
those services were involved in Value Added Tax fraud. 
27 According to the decisions of the tax authority, it can be found that it has 
continued to deny the applicant’s right to deduct VAT relying on the 
implausibility of the contents of the invoices precisely on the basis of factors that, 
according to the judgments of the Court of Justice do not adversely affect the 
taxable person’s right to deduct input VAT because they cannot be regarded as 
objective factors. Nevertheless, according to the tax authority, a sufficiently large 
number of those inappropriate factors justifies denying the right to deduct VAT. 
Furthermore, the tax authority has demonstrated that those factors exist by means 
of a check which the taxable person is neither required nor, due to objective 
circumstances, able, to carry out.  
28 In the light of the case-law of the Court of Justice on the VAT legislation, the 
referring court entertains doubts as to whether the aim, breadth and depth of that 
investigation are in conformity with the principles of tax neutrality, effectiveness 
and proportionality. 
29 The referring court is of the view that the tax authority’s right to reclassify 
contracts is not unlimited, in particular in relation to the deduction of VAT, and 
cannot be exercised by imposing requirements additional to those laid down in 
Directive 2006/112, going beyond the purpose of the system for deducting the tax. 
It therefore entertains doubts as to whether the tax authority complied with the 
fundamental principles governing the VAT regime when it reclassified the activity 
carried on by the applicant as a brokering activity. 
CREWPRINT 
 
9 
30 The referring court therefore wishes to know whether, where the taxable person 
fulfils the substantive and formal requirements to deduct VAT, it is necessary, in 
order to justify refusing that deduction, to specify how tax evasion has been 
committed, or whether it is sufficient to cite irregularities committed by the 
participants in the chain, deficiencies or gaps in the recollections of participants in 
the chain and a sufficient number of circumstances which, as the Court of Justice 
has found, cannot be grounds for refusing the VAT deduction. 
31 In the light of the foregoing, it is not clear whether, in the circumstances described 
above, the fact that the service is supplied by setting up a chain in which there is 
or has been a personal or organisational link between the taxable person and the 
issuer of the invoice or between any of the members of the chain may be relevant 
and, therefore, may in itself amount to tax evasion. Furthermore, it is also unclear 
whether the initiative of setting up a chain for purposes unrelated to the taxable 
event constitutes tax evasion because the creation of that chain actually affects the 
amount of VAT payable, since the amount of VAT payable will be higher as a 
result of characteristics inherent to the setting up of the chain. It is also necessary 
to elucidate whether the tax authority is acting lawfully where, in carrying out its 
assessment, it does not take into account either the purpose of the VAT system or 
the fact that the amount of VAT payable also increases at the same time as the 
amounts covered by the right to deduction increase. 
32 The issue also arises of whether the tax authority’s practice satisfies the 
requirement for proof in the manner required by law, when it requires the taxable 
person to carry out a fact check of a depth incompatible with the time limit in 
which to carry out the transactions agreed in the commercial sphere and which is 
objectively impossible for other reasons, whilst that authority does not 
exhaustively investigate the circumstances giving rise to the setting up of the 
chain.  
33 In all the questions it raises, the referring court asks whether the breadth, depth 
and scope of the proof which the tax authority requires as a condition of 
exercising the right to deduct VAT and which the Kúria (Supreme Court, 
Hungary) considers lawful ― account also being taken of the principle of fiscal 
neutrality ― encompass the relevant facts and are necessary and proportionate, 
that is to say, they do not exceed the framework laid down in the judgments of the 
Court of Justice, in particular given that the tax authority criticises the applicant 
for furnishing insufficient proof in the tax proceedings and, in addition to refusing 
it the right to deduct VAT, imposes a tax penalty on it. 
34 Accordingly, since it continues to justify denial of the right to deduct VAT 
without relying on objective facts reasonably and directly related to the economic 
transaction, the tax authority is automatically denying exercise of that right, 
relying on an abusive practice, an organisational or personal relationship and a 
reclassification of the contract. Accordingly, the referring court considers that the 
tax authority not only transfers its own duty of verification to taxable persons, 
contrary to the aforementioned provisions of Directive 2006/112 and the case-law 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-611/19  
 
10  
of the Court of Justice, but also, by that practice, infringes the principles of fiscal 
neutrality, proportionality and effectiveness. 
35 A legal practice based on considerations that run counter to the findings in Signum 
Alfa Sped (C-446/15, EU:C:2016:869), with no examination of the individual 
criteria mentioned in the Law on VAT and in the judgments of the Court of 
Justice (whether the taxable person knew or could reasonably be expected to have 
known), renders nugatory the right to deduct VAT provided for in Article 168 and 
Article 178(a) of Directive 2006/112 and in the judgments of the Court of Justice, 
in particular in Hungarian cases.