According to the settled case-law of the Court of Justice of the European Union (TEU), the principle of VAT neutrality requires that deduction of input tax be granted if the substantive requirements are met, even if certain formal requirements have been disregarded by taxpayers (judgment of: 12 July 2012, EMS-Bulgaria Transport, C-284/11, EU:C:2012:458, point 62 and the caselaw cited therein; and of 28 July 2016, Astone, C-332/15, EU:C:2016:614, point 45).
This view was reiterated in the TEU judgment of 19 October 2017 on C-101/16 (Judgment). Refusal of the right to deduct VAT should be applied exceptionally and only to tax fraud rather than actual business transactions.
In its judgment, the TEU concluded that the tax must not assume that the transaction involved fraud simply because the company’s service provider did not submit a VAT return, which first declared it to be an inactive entrepreneur and consequently removed from the VAT register.
According to the view of the TEU, the mere fact that an entity has been removed from a given register or that it does not make the relevant declarations does not allow the tax to deprive its counterparties of the right to deduct taxes.
However, the Polish tax authorities interpret similar situations in a way that is negative for the taxpayer and as a result, we are very often faced with criminal proceedings in connection with the offence of Article 76 The IRS Penal Code.
This is because it is wrong to accept that the trader has provided factually incorrect information and as a result, the competent authority has been misled.
The consequence of this is that a number of traders waive their right to deduct VAT in order either to avoid a dispute or to immediately terminate the dispute with the tax authorities, fearing also the fiscal penalty.
In a situation where an entrepreneur does not use unfair invoices, there is no threat of fiscal liability, which after the amendment of the Code, the tax penalty in 2017 A lot of people are afraid.
The CJEU, on the other hand, points out that limiting the principle of VAT neutrality as a basic principle for the construction of this tax should only be used in exceptional cases rather than in general. In addition, this right must be taken into account if material conditions are met, even if the formal requirements are not met.