CJEU deals with actual supplier and related right to deduct VAT

The Court of Justice of the European Union has ruled on a question referred by the Czech Supreme Administrative Court whether the recipient of a taxable supply could be entitled to deduct VAT even if they were unable to properly prove the identity of the supplier named on the invoice.

Kemwater ProChemie, a Czech company, received advertising services from VIASAT SERVICE in 2010 and 2011. Kemwater claimed a VAT deduction on these services in the relevant VAT returns. Following a tax inspection, the tax authority denied the claimed deduction of VAT on the advertising services, arguing that Kemwater had failed to properly prove the identity of the supplier. The tax administrator also expressed doubts as to whether the company had actually received the supplies in question from the entity named on the invoice.

The dispute went all the way to the Supreme Administrative Court, which once again pointed out that it is the customer who must prove that the statutory conditions for claiming a VAT deduction are met if the supplier of the supply cannot be identified. Subsequently, the Supreme Administrative Court asked the CJEU for a ruling.

In its reasoning, the CJEU followed the recent Ferimet case, commented on in the previous issue of Tax and Legal Update. The CJEU again confirmed that to qualify for a VAT deduction, the customer must be able to prove the identity of the supplier and prove that the supplier acted in the capacity of a taxable person if the tax authority does not have sufficient evidence.

Considering the current interpretation of the CJEU, we note that the customer should always bear in mind that they may be called upon to prove who actually delivered or provided the supply. In case of ambiguity, the right to deduct VAT may be lost.

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