Case C-285/11

Bonik EOOD

v

Direktor na Direktsia ‘Obzhalvane i upravlenie na izpalnenieto’ — Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite

(Reference for a preliminary ruling from the Administrativen sad — Varna)

‛VAT — Directive 2006/112/EC — Right of deduction — Refusal’

Summary — Judgment of the Court (Third Chamber), 6 December 2012

Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Refusal on the ground that the supplies of goods had not actually been carried out, as a result of fraud and irregularities — Not permissible — Limits — Verification a matter for the national court

(Council Directive 2006/112, Arts 2, 9, 14, 62, 63, 167, 168 and 178)

Articles 2, 9, 14, 62, 63, 167, 168 and 178 of Directive 2006/112 on the common system of value added tax must be interpreted as meaning that a taxable person may not be refused the right to deduct VAT in relation to a supply of goods on the ground that, in view of fraud or irregularities committed upstream or downstream of that supply, the supply is considered not to have actually taken place, where it has not been established on the basis of objective evidence that the taxable person knew, or should have known, that the transaction relied on as a basis for the right of deduction was connected with VAT fraud committed upstream or downstream in the chain of supply — a matter which it is for the referring court to determine.

Since the refusal of the right of deduction is an exception to the application of the fundamental principle constituted by that right, it is incompatible with the rules governing the right of deduction under Directive 2006/112 to impose a penalty, in the form of refusal of that right, on a taxable person who did not know, and could not have known, that the transaction concerned was connected with fraud committed by the supplier or that another transaction forming part of the chain of supply, downstream or upstream of the transaction carried out by the taxable person, was vitiated by VAT fraud. The establishment of a system of strict liability would go beyond what is necessary to preserve the public exchequer’s rights.

(see paras 41-43, 45, operative part)

Case C-285/11

Bonik EOOD

v

Direktor na Direktsia ‘Obzhalvane i upravlenie na izpalnenieto’ — Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite

(Reference for a preliminary ruling from the Administrativen sad — Varna)

‛VAT — Directive 2006/112/EC — Right of deduction — Refusal’

Summary — Judgment of the Court (Third Chamber), 6 December 2012

Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Refusal on the ground that the supplies of goods had not actually been carried out, as a result of fraud and irregularities — Not permissible — Limits — Verification a matter for the national court

(Council Directive 2006/112, Arts 2, 9, 14, 62, 63, 167, 168 and 178)

Articles 2, 9, 14, 62, 63, 167, 168 and 178 of Directive 2006/112 on the common system of value added tax must be interpreted as meaning that a taxable person may not be refused the right to deduct VAT in relation to a supply of goods on the ground that, in view of fraud or irregularities committed upstream or downstream of that supply, the supply is considered not to have actually taken place, where it has not been established on the basis of objective evidence that the taxable person knew, or should have known, that the transaction relied on as a basis for the right of deduction was connected with VAT fraud committed upstream or downstream in the chain of supply — a matter which it is for the referring court to determine.

Since the refusal of the right of deduction is an exception to the application of the fundamental principle constituted by that right, it is incompatible with the rules governing the right of deduction under Directive 2006/112 to impose a penalty, in the form of refusal of that right, on a taxable person who did not know, and could not have known, that the transaction concerned was connected with fraud committed by the supplier or that another transaction forming part of the chain of supply, downstream or upstream of the transaction carried out by the taxable person, was vitiated by VAT fraud. The establishment of a system of strict liability would go beyond what is necessary to preserve the public exchequer’s rights.

(see paras 41-43, 45, operative part)