Tax 

Supreme Administrative Court Ruling on the Rejection of a Tax Deduction Claim

In its recent ruling 5 Afs 60/2017, the Supreme Administrative Court addressed the possibility of rejecting a tax deduction claim made by a payer in a situation where the supplier declared the relevant tax, yet the subcontractor failed to pay VAT at the very beginning of the entire business chain.

The ruling has been recently referred to by the media as ground-breaking as, in certain cases, it benefits the fact that the tax administrator is generally unable to reject the tax deduction at all if VAT was not paid by an indirect, rather than direct, business partner. This would, indeed, be a revolutionary assertion. Nevertheless, the Court has not stated any such thing: it merely rejected the tax administrator’s assertions that the payer was demonstrably aware of the failure to pay tax, or should have and could have been aware of it.

The other sub-comments made by the court in relation to individual “errors” on the part of the payer are quite apt, yet in no way innovative: they merely uncover the fact that the tax administrator’s actions were entirely mistaken and rash and do not in any way advance the view on the issue of proving participation in tax fraud.

Nevertheless, we consider this ruling to be of great use and it will surely be a convenient means of protecting tax payers’ rights.

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