Maks Pen EOOD v Direktor na Direktsia "Obzhalvane i danachno-osiguritelna praktika" Sofia.
Date: 2014-02-13
23. 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 European Union legislation (see Case C‑285/11 Bonik  [2012] ECR, paragraph 25 and the case-law cited).
24. 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 Bonik , paragraph 26 and the case-law cited).
25. 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 Bonik , paragraph 29 and the case-law cited). Where those conditions are fulfilled, entitlement to deduction cannot in principle be refused.
26. That said, it must be borne in mind that the prevention of tax evasion, tax avoidance and abuse is an objective recognised and encouraged by Directive 2006/112. In that connection, the Court has held that European Union law cannot be relied on for abusive or fraudulent ends. It is therefore for the national courts and authorities to refuse the right of deduction, if it is shown, in the light of objective evidence, that that right is being relied on for fraudulent or abusive ends (see Bonik , paragraphs 35 to 37 and the case-law cited).
27. While that is the position where tax evasion is committed by the taxable person himself, the same is also true where a taxable person knew, or should have known, that, by his acquisition, he was taking part in a transaction connected with the evasion of VAT. He must therefore, for the purposes of Directive 2006/112, be regarded as a participant in that evasion, 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 Bonik , paragraphs 38 to 39 and the case-law cited).
28. Accordingly, a taxable person cannot be refused the right of deduction unless it is established on the basis of objective evidence 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 the evasion of VAT committed by the supplier or by another trader acting upstream or downstream in the chain of supply of those goods or services (see Bonik , paragraph 40 and the case-law cited).
29. 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 to which the preceding paragraph of this judgment refers is present. It is for the national courts subsequently to determine whether the tax authorities concerned have established the existence of such objective evidence (see, to that effect, Bonik , paragraphs 43 and 44).
30. It should be borne in mind in that regard that, in proceedings brought under Article 267 TFEU, the Court has no jurisdiction to check or to assess the factual circumstances of the case in the main proceedings. In the main proceedings, it is therefore for the referring court to carry out, in accordance with the rules of evidence under national law, an overall assessment of all the evidence and factual circumstances of those proceedings in order to determine, in the light of the objective evidence provided by the tax authorities, whether Maks Pen knew or should have known that a transaction relied on to give entitlement to the right to deduct was connected with tax evasion committed by its suppliers.
34. As observed in paragraph 26 above, European Union law requires of the national courts and authorities that they refuse entitlement to the right to deduct where it is established, in the light of objective evidence, that that right is being relied on for fraudulent or abusive ends. Moreover, even though European Union law is not relied upon by the parties, the national court must raise of its own motion points of law based on binding European Union law rules where, under national law, the national courts must or may do so in relation to a binding rule of national law (see, to that effect, Case C‑2/06 Kempter  [2008] ECR I‑411, paragraph 45 and the case‑law cited).
36. It must be recalled, in this connection, that it is for the national court to interpret the national law, so far as possible, in the light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive, which requires that it does whatever lies within its jurisdiction, taking the whole body of domestic law into consideration and applying the interpretative methods recognised by that law (see, to that effect, Case C‑212/04 Adeneler and Others  [2006] ECR I-6057, paragraph 111). It is therefore for the national court to ascertain whether the rules of national law on which it is relying and which, in its view, might be contrary to the requirements of European Union law, can be interpreted in accordance with the objective of preventing tax evasion on which those requirements are based.
37. In this respect, admittedly, European Union law cannot oblige a national court to apply European Union legislation of its own motion where this would have the effect of disregarding the principle, enshrined in its national procedural law, of the prohibition of reformatio in peius (Case C‑455/06 Heemskerk and Schaap  [2008] ECR I-8763, paragraph 46). However, it is not obvious, in any event, that, in a dispute such as that in the main proceedings which, from its origin, concerns the right to deduct the VAT included in a number of specific invoices, such a prohibition can apply to the submission by the tax authorities during court proceedings of new evidence which, concerning those same invoices, cannot be regarded as adversely affecting the situation of the taxable person who is relying on that right to deduct.
39. Accordingly, the answer to the second question is that, where the national courts must or may raise of their own motion points of law based on binding rules of national law, they must do so in relation to a binding rule of European Union law such as that which requires that national courts and authorities refuse entitlement to the right to deduct VAT where it is established, in the light of objective evidence, that that right is being relied on for fraudulent or abusive ends. It is incumbent on those courts, in the assessment of whether that right to deduct was relied on for fraudulent or abusive ends, to interpret the national law, so far as possible, in the light of the wording and the purpose of Directive 2006/112, in order to achieve the result sought by that directive, which requires that they do whatever lies within their jurisdiction, taking the whole body of domestic law into consideration and applying the interpretative methods recognised by that law.
The fourth and fifth questions
41. Under the common system of VAT, Member States are required to ensure compliance with the obligations to which taxable persons are subject and they enjoy in that respect a certain measure of latitude, inter alia, as to how they use the means at their disposal. Among those obligations, Article 242 of Directive 2006/112 provides, inter alia, that every taxable person is to keep accounts in sufficient detail to permit VAT to be applied and its application checked by the tax authority (see, to that effect, Case C‑188/09 Profaktor Kulesza Frankowski, Jóźwiak, Orłowski [2010] ECR I‑7639, paragraphs 22 and 23).
47. Further, any failure by the service provider to complete certain accounting requirements cannot call in question the right of deduction to which the recipient of services supplied is entitled in respect of the VAT paid for those services, where the invoices relating to the services supplied contain all the information required by Article 226 of Directive 2006/112 (see, to that effect, Case C‑324/11 Tóth  [2012] ECR, paragraph 32).