CJEU Case C-144/22 – Fictious and invalidity of the transactions stated solely based on the civil law cannot result in refusing the taxpayer right to deduct input VAT. It is necessary to establish that the criteria for classifying, under EU law that transactions as fictious are met.
On 25 May 2023, the Court of Justice of the European Union issued a judgment in case C-114/22 in which the Court explained how Article 88 section 3a point 4 letter c of Polish VAT Act must be interpreted in the light of the principles of the fiscal neutrality and proportionality.
Article 88 section 3a point 4 lit c of Polish VAT Act states that the taxpayer is not entitled to deduct input VAT from invoices/customs documents which confirms activities to which the Articles of 58 and 83 of Polish Civil Code refers to. The Articles of 58 and 83 of Polish Civil Code states conditions under which on certain actions can be treated as invalid or fictious hence they have no legal effect.
The proceedings concerned the taxpayer who was refused the right to deduct input VAT from purchase invoices documenting the purchase of trademarks from the other taxpayer which after sale of the trademark based on separate arrangements still used the trademark for the business purposes. The Supreme Administrative Court in Poland referred the question to the CJEU where it asked for an assessment as to whether the Polish provisions (namely Article 88 section 3a point 4 letter c of VAT Act) precluded the right to deduction of input VAT on illusory transaction is in line with the EU law.
The CJEU states that provisions of Directive 2006/112/EC on input VAT deduction must be interpreted as precluding national legislation under which a taxable person is deprived of the right to deduct input VAT, solely because a taxable transaction is regarded as fictitious and invalid under the provisions of national civil law, without having to prove that fictionality/deception has taken place.
The judgement of the Court of Justice of the European Union is available here.
The above information was kindly provided by Independent Tax Advisers (Poland). If you require more information, feel free to contact Dorota Baczewska-Golinska directly at: [email protected].