Bonik EOOD v Direktor na Direktsia ‘Obzhalvane i upravlenie na izpalnenieto’ — Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite.
Date: 2012-12-06
25. It should be borne in mind that, according to settled case-law, the right of taxable persons to deduct 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 the relevant EU legislation (see Joined Cases C-80/11 and C-142/11 Mahagében and Dávid [2012] ECR, paragraph 37 and the case-law cited).
26. In that regard, the Court has consistently held that the right of deduction provided for in Article 167 et seq. of Directive 2006/112 is an integral part of the VAT scheme and in principle may not be limited. In particular, the right of deduction is exercisable immediately in respect of all the taxes charged on transactions relating to inputs (see Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others  [2000] ECR I-1577, paragraph 43; Case C-63/04 Centralan Property [2005] ECR I-11087, paragraph 50; Joined Cases C-439/04 and C-440/04 Kittel and Recolta Recycling [2006] ECR I-6161, paragraph 47; and Mahagében and Dávid , paragraph 38).
27. The deduction system is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT consequently ensures neutrality of taxation of all economic activities, whatever the purpose or results of those activities, provided that they are themselves subject to VAT (see Case 268/83 Rompelman  [1985] ECR 655, paragraph 19; Case C-37/95 Ghent Coal Terminal  [1998] ECR I-1, paragraph 15; Gabalfrisa and Others , paragraph 44; Case C-32/03 Fini H  [2005] ECR I-1599, paragraph 25; Case C-255/02 Halifax and Others  [2006] ECR I-1609, paragraph 78; Kittel and Recolta Recycling , paragraph 48; Case C-438/09 Dankowski [2010] ECR I-14009, paragraph 24; and Mahagében and Dávid , paragraph 39).
28. The question whether the VAT payable on the prior or subsequent sales of the goods concerned has or has not been paid to the public purse is irrelevant to the right of the taxable person to deduct input VAT. VAT applies to each transaction by way of production or distribution after deduction of the VAT directly borne by the various cost components (see Joined Cases C-354/03, C-355/03 and C-484/03 Optigen and Others [2006] ECR I-483, paragraph 54; Kittel and Recolta Recycling , paragraph 49; and Mahagében and Dávid , paragraph 40).
29. In addition, it is apparent from the wording of Article 168(a) of Directive 2006/112 that, in order to have a right of deduction, 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 give entitlement to that right be used by the taxable person for the purposes of his own taxed output transactions, and that, as inputs, those goods or services must be supplied by another taxable person (see Centralan Property , paragraph 52, and Case C-324/11 Tóth [2012] ECR, paragraph 26).
32. However, it should be borne in mind that, in proceedings brought under Article 267 TFEU, the Court has no jurisdiction to check or to assess the factual circumstances of the case before the referring court. It is therefore for the national court, in accordance with the rules of evidence of national law, to carry out an overall assessment of all the facts and circumstances of the case in order to establish whether Bonik may exercise a right of deduction on the basis of those supplies of goods (see, to that effect, Case C-273/11 Mecsek-Gabona [2012] ECR, paragraph 53).
35. That being so, it must also be borne in mind that the prevention of tax evasion, avoidance and abuse is an objective recognised and encouraged by Directive 2006/112 (see, inter alia, Halifax and Others , paragraph 71; Kittel and Recolta Recycling , paragraph 54; Case C-285/09 R  [2010] ECR I-12605, paragraph 36; Case C-504/10 Tanoarch  [2011] ECR I-10853, paragraph 50; and Mahagében and Dávid , paragraph 41).
36. In that connection, the Court has held that EU law cannot be relied on for abusive or fraudulent ends (see, inter alia, Fini H , paragraph 32; Halifax and Others , paragraph 68; Kittel and Recolta Recycling , paragraph 54; and Mahagében and Dávid , paragraph 41).
37. 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 (see Fini H , paragraph 34; Kittel and Recolta Recycling , paragraph 55; and Mahagében and Dávid , paragraph 42).
38. That is the position where a tax fraud is committed by the taxable person himself. In such a case, the objective criteria which form the basis of the concepts of ‘supply of goods or services effected by a taxable person acting as such’ and ‘economic activity’ are not met (see Halifax and Others , paragraphs 58 and 59, and Kittel and Recolta Recycling , paragraph 53).
39. By the same token, a taxable person who knew, or should have known, that, by his purchase, he was taking part in a transaction connected with VAT fraud must, for the purposes of Directive 2006/112, be regarded as a participant in that fraud, whether or not he profits from the resale of the goods or the use of the services in the context of the taxable transactions subsequently carried out by him (see, to that effect, Kittel and Recolta Recycling , paragraph 56, and Mahagében and Dávid , paragraph 46).
40. It follows that a taxable person cannot be refused the right of deduction unless it is established on the basis of objective factors that that taxable person – to whom the supply of goods or services, on the basis of which the right of deduction is claimed, was made – knew or should have known that, through the acquisition of those goods or services, he was participating in a transaction connected with VAT fraud committed by the supplier or by another trader acting upstream or downstream in the chain of supply of those goods or services (see, to that effect, Kittel and Recolta Recycling , paragraphs 56 to 61, and Mahagében and Dávid , paragraph 45).
41. On the other hand, 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 (see, to that effect, Optigen and Others , paragraphs 52 and 55; Kittel and Recolta Recycling , paragraphs 45, 46 and 60; and Mahagében and Dávid , paragraph 47).
42. The establishment of a system of strict liability would go beyond what is necessary to preserve the public exchequer’s rights (see Mahagében and Dávid , paragraph 48).
43. Consequently, 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, the objective evidence needed to substantiate the conclusion 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 fraud committed by the supplier or by another trader acting upstream or downstream in the chain of supply (see Mahagében and Dávid , paragraph 49).
44. It follows that, if the referring court were to find that the supplies of goods at issue in the case before it had actually been carried out and that Bonik had subsequently used those goods for the purposes of its taxed transactions, it would be for that court subsequently to determine whether the tax authorities concerned had established the existence of objective evidence to the effect described above.
45. In those circumstances, the answer to the questions referred is that Articles 2, 9, 14, 62, 63, 167, 168 and 178 of Directive 2006/112 must be interpreted as meaning that, in circumstances such as those of the case before the referring court, 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.
Costs