Strategizing Multinational Tax Risks

The Court of Justice of the European Union (CJEU) has clarified a Romanian court request that a company cannot be required to verify that a VAT supplier has met its reporting obligations re: fraudulent conduct.  The judgment was provided on June 4th, SC CF SRL v. AJFPM, DGRFPC, C-430/19 (CJEU 2020).  The court stated that tax authorities cannot require that a company have supporting VAT compliance documentation, nor ensuring that the supplier has the goods and is able to provide them.

The CJEU has established a valuable EU precedent, stating that a taxpayers’ right to deduct VAT is a fundamental principle of the VAT system without limitations, absent evidence of fraud.  Additionally, Article 178(a) of Council Directive 2006/112/EC (the VAT Directive) does not require such additional documentation.  This would violate the principle of neutrality.