Biosafe - Indústria de Reciclagens SA v Flexipiso - Pavimentos SA.
Date: 2018-04-12
27


In that regard, it should be recalled that, according to settled case-law of the Court, the right of taxable persons to deduct the VAT due or already paid on goods purchased and services received as inputs from the VAT which they are liable to pay is a fundamental principle of the common system of VAT established by EU legislation (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 37 and the case-law cited).
28


The deduction system is intended to relieve the operator entirely of the burden of the VAT due or paid in the course of all his economic activities. The common system of VAT therefore ensures neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are in principle themselves subject to VAT (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 38 and the case-law cited).
29


As the Court has repeatedly held, the right to deduct provided for in Article 167 et seq. of the VAT Directive is an integral part of the VAT scheme and may not, in principle, be limited. In particular, the right to deduct is exercisable immediately in respect of all the taxes charged on input transactions (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 39 and the case-law cited).
30


The right to deduct VAT is, however, subject to compliance with both substantive requirements or conditions and formal requirements or conditions (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 40 and the case-law cited).
31


With regard to the substantive requirements or conditions, it is apparent from the wording of Article 168(a) of the VAT Directive that, in order to have the right to deduct, it is necessary, first, that the interested party be a ‘taxable person’ within the meaning of that directive and, second, that the goods or services relied on to confer entitlement to the right to deduct VAT be used by the taxable person for the purposes of his own taxed output transactions, and that, as inputs, those goods or services be supplied by another taxable person (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 41 and the case-law cited).
32


As to the detailed rules governing the exercise of the right to deduct VAT, which may be considered formal requirements or conditions, Article 178(a) of the VAT Directive provides that the taxable person must hold an invoice drawn up in accordance with Articles 220 to 236 and Articles 238 to 240 of that directive (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 42 and the case-law cited).
33


It follows from the foregoing that, although, under Article 167 of the VAT Directive, the right to deduct VAT arises on the date on which the tax becomes chargeable, Article 178 of that directive provides that, in principle, it can be exercised only once the taxable person holds an invoice (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 43 and the case-law cited).
35


Nevertheless, pursuant to Articles 180 and 182 of the VAT Directive, a taxable person may be authorised to make a VAT deduction even if he did not exercise his right during the period in which the right arose, subject, however, to compliance with certain conditions and procedures determined by national legislation (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 45 and the case-law cited).
36


However, the possibility of exercising the right to deduct VAT without any temporal limit would be contrary to the principle of legal certainty, which requires the tax position of the taxable person, having regard to his rights and obligations vis-à-vis the tax authority, not to be open to challenge indefinitely (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 46 and the case-law cited).
37


The Court has already held that a limitation period the expiry of which has the effect of penalising a taxable person who has not been sufficiently diligent and has failed to claim deduction of the input VAT, by making him forfeit his right to deduct VAT, cannot be regarded as incompatible with the regime established by the VAT Directive, in so far as, first, that limitation period applies in the same way to analogous rights in tax matters founded on domestic law and to those founded on EU law (principle of equivalence) and, second, that it does not in practice render impossible or excessively difficult the exercise of the right to deduct VAT (principle of effectiveness) (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 47 and the case-law cited).
38


In addition, under Article 273 of the VAT Directive, the Member States may impose other obligations which they deem necessary for the correct collection of VAT and for the prevention of evasion. The prevention of tax evasion, avoidance and abuse is a recognised objective and is encouraged by that directive. However, the measures that the Member States may adopt under Article 273 of that directive must not go further than is necessary to attain such objectives. Therefore, they may not be used in such a way that they would have the effect of systematically undermining the right to deduct VAT and, consequently, the neutrality of VAT (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 48 and the case-law cited).
39


Since the refusal of the right of deduction is an exception to the application of the fundamental principle constituted by that right, it is incumbent upon the competent tax authorities to establish, to the requisite legal standard, that the objective evidence establishing the existence of a fraud or abuse is present. It is for the national courts subsequently to determine whether the tax authorities concerned have established the existence of such objective evidence (judgment of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 52 and the case-law cited).
41


The Portuguese Government takes the view that Biosafe and Flexipiso have intentionally and consistently, over at least two and a half years, put into effect systematic practices of tax evasion and avoidance. Indeed, the existence of such practices cannot be excluded in such a situation. However, in proceedings under Article 267 TFEU, which are based on a clear separation of functions between the national courts and tribunals and the Court of Justice, any assessment of the facts falls with the jurisdiction of the national courts and tribunals. In particular, the Court of Justice is empowered to rule only on the interpretation or the validity of European Union acts on the basis of the facts placed before it by the national court or tribunal (judgment of 8 May 2008, Danske Svineproducenter, C‑491/06, EU:C:2008:263, paragraph 23, and order of 14 November 2013, Krejci Lager & Umschlagbetrieb, C‑469/12, EU:C:2013:788, paragraph 28). In the present case, the referring court states that the error as regards the choice of applicable VAT rate is clearly attributable to Biosafe.
43


Indeed, it was only following that adjustment that the substantive and formal conditions giving rise to a right to deduct VAT were met and that Flexipiso could therefore request to be relieved of the VAT burden due or paid in accordance with the VAT Directive and the principle of fiscal neutrality. Accordingly, since Flexipiso did not show any lack of diligence before the receipt of the debit notes, and failing any abuse or fraudulent collusion with Biosafe, a period which started to run from the date of issue of the initial invoices and which, for certain transactions, expired before this adjustment, could not validly be used to deny Flexipiso the exercise of the right to deduct VAT (see, to that effect, judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 50).