It is apparent from the wording of Article 17(2)(a) of Sixth Council Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes that, in order to be able to avail of the right to deduct, it is necessary, inter alia, that the goods or services relied on be supplied. In that respect, since the concept of ‘supply of goods’ in Article 5(1) of the Sixth Directive does not refer to the transfer of ownership in accordance with the procedures prescribed by the applicable national law but covers any transfer of tangible property by one party which empowers the other party actually to dispose of it as if he were its owner, the possibility that the supplier lacks the power legally to dispose of the goods cannot mean that a supply of those goods within the meaning of that provision did not take place, if those goods were in fact delivered to the purchaser, which used them for the purposes of its taxed transactions.

The provisions of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 2002/38, must be interpreted as precluding national legislation by which a taxable person is not allowed to deduct the VAT due or paid in respect of goods that were delivered to him on the grounds that the invoice was issued by a trader which is to be regarded, in the light of the criteria provided by that legislation, as a non-existent trader, and that it is impossible to determine the identity of the actual supplier of the goods, except where it is established, on the basis of objective factors and without the taxable person being required to carry out checks which are not his responsibility, that that taxable person knew, or should have known, that that transaction was connected with VAT fraud, this being a matter for the referring court to determine.

The criterion that the supplier of the goods must exist or be entitled to issue invoices does not feature among the conditions giving rise to the right to deduct set out in Article 17(2)(a) and 18(1)(a) of the Sixth Directive.

By contrast, Article 17(2)(a) of the Sixth Directive provides that that supplier must have the status of a taxable person within the meaning of Article 4(1) and (2) of that directive.

According to Article 4(1) and (2) of the Sixth Directive, a taxable person is any person who independently carries out any economic activity of producers and persons supplying services, whatever the purpose or results of that activity. The existence of such economic activity cannot be called into question by the fact that the dilapidated state of the building in which the corporate seat of the company issuing the invoices is located did not allow any economic activity to take place, since such a finding does not mean that that activity could not be conducted in places other than the seat.

Similarly, any impossibility of establishing contact with that company or with the person registered as its director in the commercial register during the administrative proceedings cannot lead automatically to the conclusion that there was no economic activity on the date of the supplies of goods if those attempts at contact were made prior or subsequently to those supplies of goods. In addition, Article 4(1) and (2) of the Sixth Directive does not indicate that the status of taxable person depends on any authorisation or licence granted by the authorities for the exercise of an economic activity. That status also cannot depend on whether the taxable person complies with the obligations, stemming from Article 22(4) and (5), to submit a tax return and pay VAT. A fortiori, the recognition of the status of a taxable person cannot be made subject to the obligation to publish annual accounts or have a concession to sell fuel, since those obligations are not provided for by the Sixth Directive.

In addition, since VAT applies to each transaction by way of production or distribution after deduction of the VAT directly borne by the various cost components, the question whether or not the supplier of the goods has paid the VAT due on those transactions to the public purse has no bearing on the right of the taxable person to deduct input VAT.

As regards the fact that the transactions were not carried out by the company issuing the invoice, but by another trader whom it was impossible to identify, with the result that the tax authorities were unable to recover the tax relating to those transactions, it must be borne in mind that the prevention of tax evasion, avoidance and abuse is an objective recognised and encouraged by the Sixth Directive. It is therefore for the national courts and judicial authorities to refuse the right of deduction if it is shown, in the light of objective factors, that that right is being relied on for fraudulent or abusive ends. Although that is the position where tax fraud is committed by the taxable person himself, it is also the case where a taxable person knew, or should have known, that, by his purchase, he was taking part in a transaction connected with VAT fraud, which it is for the tax authorities to establish.

It is for the tax authorities, having found fraud or irregularities committed by the issuer of the invoice, to establish, on the basis of objective factors and without requiring the recipient of the invoice to carry out checks which are not his responsibility, that that recipient knew, or should have known, that the transaction on which the right to deduct is based was connected with VAT fraud, this being a matter for the referring court to determine. The determination of the measures which may, in a particular case, reasonably be required of a taxable person wishing to exercise the right to deduct VAT in order to satisfy himself that his transactions are not connected with fraud committed by a trader at an earlier stage of a transaction depends essentially on the circumstances of that particular case.

Although such a taxable person could be obliged, when there are indications pointing to an infringement or fraud, to make enquiries about the trader from whom he intends to purchase goods or services in order to ascertain the latter’s trustworthiness, the tax authorities cannot, however, as a general rule, require that taxable person, first, to ensure that the issuer of the invoice relating to the goods and services in respect of which the exercise of that right to deduct is sought was in possession of the goods at issue and was in a position to supply them and that he has complied with his obligations as regards the declaration and payment of VAT, in order to be satisfied that there are no irregularities or fraud at the level of the traders operating at an earlier stage of the transaction or, second, to be in possession of documents in that regard.

(see paras 33-37, 39, 45-48, 50-53, operative part)