The ECJ delivers its judgment in case on VAT “carousel fraud”
In its judgment delivered on 12 january 2006, the ECJ has taken part for protection of innocent party to the so called VAT “carousel fraud”.
The cases were brought to the ECJ by three companies who had purchased computer components from a dealer in United Kingdom who absconded without paying the VAT. They resold the goods to a customer in another member state without charging VAT. Although they claimed that their transactions were valid, the tax authorities denied them a deduction for the input tax paid to the fraudulent suppliers. The tax authorities claimed namely that the transactions were part of a series designed to defraud and were therefore without business substance.
The ECJ decided in favour of the traders and held that in a supply chain, each transaction must be considered on its merits as a separate economic activity. The right of a taxable person to deduct VAT cannot be affected by the fact that, without that person knowing or having any means of knowing, another transaction in the chain is vitiated by fraud.
Read joined cases C-354/03, C-355/03 & C-484/03.
