When determining a posteriori the taxable amount of a transaction concealed by those subject to VAT, the amounts paid and received as reconstructed by the tax authorities must include that tax, the Court of Justice of the European Union ruled on Thursday 1 July (Case C-521/19).
A Spanish artistic agent was paid in cash and without an invoice by a company when he negotiated the participation of orchestras in local festivals. These amounts were not declared. As the agent did not issue an invoice, no VAT return was issued.
In order to regularise the infringement, the Spanish tax authorities claim annual amounts from the agent which, according to them, do not include VAT, an approach which the agent is contesting in the Superior Court of Justice of Galicia.
The Court of Justice of the EU ruled in favour of the agent. Invoking the principle of neutrality of VAT, it recalls that the tax can only burden the end consumer. Moreover, it adds, in the event of fraud, the determination of the taxable amount of a transaction between taxable persons cannot be used to punish the fraudsters.
Therefore, the Court concludes, the result of a transaction that was concealed when it should have been invoiced and declared must be deemed to include the VAT on that transaction when it is the result of a reconstruction carried out in the context of a direct tax audit.
See the judgment: https://bit.ly/3jyL4Jy (Original version in French by Mathieu Bion)