Judgment of the Court (Tenth Chamber) of 1 December 2022 (request for a preliminary ruling from the Fővárosi Törvényszék — Hungary) — Aquila Part Prod Com S.A v Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága

(Case C-512/21) (1)

(Reference for a preliminary ruling - Taxation - Common system of value added tax (VAT) - Directive 2006/112/EC - Article 168 - Right to deduct VAT - Principles of fiscal neutrality, effectiveness and proportionality - Fraud - Proof - Obligation of care of the taxable person - Taking into consideration of an infringement of the obligations arising from national provisions and EU law relating to the safety of the food chain - Authority given by the taxable person to a third party to enter into the taxed transactions - Charter of Fundamental Rights of the European Union - Article 47 - Right to a fair trial)

(2023/C 35/14)

Language of the case: Hungarian

Referring court

Fővárosi Törvényszék

Parties to the main proceedings

Applicant: Aquila Part Prod Com S.A

Defendant: Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága

Operative part of the judgment

1. Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, must be interpreted as meaning that: — where the tax authority seeks to deny a taxable person the right to deduct input value added tax (VAT) on the ground that that taxable person was involved in carousel VAT fraud, it precludes that tax authority from merely establishing that that transaction forms part of a circular invoicing chain; — it is for that tax authority, first, to describe precisely the constituent elements of the fraud and to prove the fraudulent conduct and, second, to establish that the taxable person was actively involved in that fraud or that he knew or ought to have known that the transaction relied on as the basis for that right was involved in that fraud, which does not necessarily mean that all the actors involved in the fraud and the respective actions of those parties must be identified.

2. Directive 2006/112 must be interpreted as meaning that: — it does not preclude a tax authority, where that tax authority states that the taxable person has been actively involved in a fraudulent evasion of value added tax in order to refuse the right to deduct, from basing that refusal, in addition or in the alternative, on evidence establishing not the involvement therein, but the fact that that taxable person could have known, by exercising all due diligence, that the transaction concerned was involved in such fraud; — the mere fact that the members of the supply chain, of which that transaction forms part, knew each other is not sufficient to establish that the taxable person was involved in the fraud.

3. Directive 2006/112, read in conjunction with the principle of proportionality, must be interpreted as meaning that: — where there are indications giving rise to a suspicion of irregularities or fraud, it does not preclude the taxable person from being required to exercise greater diligence in order to ensure that the transaction which he enters into does not lead to his involvement in fraud; — that person cannot, however, be required to carry out complex and thorough checks such as those which may be carried out by the tax authorities; — it is for the national court to determine whether, in the light of all the circumstances of the case, the taxable person has shown sufficient diligence and has taken the measures which may reasonably be required of him in those circumstances.

4. Directive 2006/112 must be interpreted as meaning that: — it precludes the tax authority from refusing to allow a taxable person to exercise the right to deduct value added tax (VAT) solely on the ground that he has failed to comply with the obligations arising from national provisions or EU law relating to the safety of the food chain; — failure to comply with those obligations may, however, constitute one factor among others which may be taken into account by the tax authority in order to establish both the existence of VAT fraud and the involvement of that taxable person in that fraud, even in the absence of a prior decision of the administrative body competent to find such an infringement.

5. The right to a fair trial, enshrined in Article 47 of the Charter of Fundamental Rights of the European Union, must be interpreted as meaning that: it does not preclude the court hearing the appeal against the decision of the tax authority from taking into consideration, as evidence of the existence of value added tax fraud or the involvement of the taxable person in that fraud, a breach of those obligations, if that evidence may be challenged and subject to debate before it.

6. Directive 2006/112 and the principle of fiscal neutrality must be interpreted as meaning that: they do not preclude a tax practice whereby, in order to deny a taxable person the right to deduct on the ground that he was involved in value added tax fraud, account was taken of the fact that the legal representative of the taxable person’s agent had been aware of the facts constituting that fraud, irrespective of the applicable national rules governing the authority and the terms of the agency agreement entered into in that case.

(1) OJ C 471, 22.11.2021.