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C1. VAT fraud in general
General effect of fraud​
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- Criminal behaviour does not, of itself, entail a different VAT treatment
"[50] In that context, as the referring court observed, it is settled case-law that the principle of fiscal neutrality prevents any general distinction between lawful and unlawful transactions. Consequently, the mere fact that conduct amounts to an offence does not entail exemption from tax; that exemption applies only in specific circumstances where, owing to the special characteristics of certain goods or services, any competition between a lawful economic sector and an unlawful sector is precluded (see, inter alia, Case C-158/98 Coffeeshop ‘Siberië’ [1999] ECR I-3971, paragraphs 14 and 21, and Case C‑455/98 Salumets and Others [2000] ECR I‑4993, paragraph 19). It is common ground, however, that that is not the case with either the computer components or the vehicles at issue in the main proceedings." (Kittel C-439/04)
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Proportionality of anti-fraud measures​
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- Anti-fraud provisions must cause the least possible detriment to the objectives/principles of the legislation
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"[19] In particular, as regards the principle of proportionality, the Court has already held that, in accordance with that principle, the Member States must employ means which, whilst enabling them effectively to attain the objectives pursued by their domestic laws, cause the least possible detriment to the objectives and principles laid down by the relevant Community legislation (see Molenheide and Others, paragraph 46, and Case C‑409/04 Teleos and Others [2007] ECR I-0000, paragraph 52).
[20] Therefore, whilst it is legitimate for the measures adopted by the Member State to seek to preserve the rights of the public exchequer as effectively as possible, such measures must not go further than is necessary for that purpose (see, in particular, Molenheide and Others, paragraph 47, and Federation of Technological Industriesand Others, paragraph 30)." (Netto Supermarket C-271/06)
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- Sharing of risk of fraud between supplier and tax authorities must be consistent with proportionality
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"[22] This is why the objective of preventing tax evasion referred to in Article 15 of the Sixth Directive sometimes justifies stringent requirements as regards suppliers’ obligations. However, any sharing of the risk between the supplier and the tax authorities, following fraud committed by a third party, must be compatible with the principle of proportionality (Teleos and Others, paragraph 58)." (Netto Supermarket C-271/06)
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- Clearly disproportionate to hold supplier liable for fraudulent acts over which it had no influence
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"[23] That will not be the case if a tax regime imposes the entire responsibility for the payment of VAT on suppliers, regardless of whether or not they were involved in the fraud committed by the purchaser (see, to that effect, Teleos and Others, paragraph 58). As the Advocate General has pointed out in point 45 of his Opinion, it would clearly be disproportionate to hold a taxable person liable for the shortfall in tax caused by fraudulent acts of third parties over which he has no influence whatsoever." (Netto Supermarket C-271/06)
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- Not disproportionate to require supplier to take every step reasonably required to be satisfied not participating in fraud
"[24] On the other hand, as the Court has already held, it is not contrary to Community law to require the supplier to take every step which could reasonably be required of him to satisfy himself that the transaction which he is effecting does not result in his participation in tax evasion (see Teleos and Others, paragraph 65, and the case-law cited there)." (Netto Supermarket C-271/06)
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Supervision​
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Effect of fraud on innocent parties​
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- Restricting VAT grouping to supervised entities proportionate
"[38] The second paragraph of Article 11 of the VAT Directive also permits Member States to adopt any measures needed to prevent tax evasion or avoidance through the use of the first paragraph of the article. Such measures may, however, be taken only in compliance with European Union law. Thus, with that reservation, it is permissible for Member States to restrict the application of the scheme provided for under Article 11 to combat tax evasion or avoidance.
[39] In the present case, as has been stated in paragraph 26 of this judgment, the Kingdom of Sweden submits that, in order to prevent tax evasion and avoidance, in accordance with the second paragraph of Article 11 of the VAT Directive, it decided to restrict the possibility of forming a VAT group to those undertakings which are placed, directly or indirectly, under the supervision of the Finance Inspectorate and which are therefore covered by a public monitoring system. The Commission has failed to show convincingly that, in the light of the need to combat tax evasion and avoidance, that measure is not well founded."(Commission v. Sweden C-480/10)
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- Innocent party entitled to rely on falsified proof of export to claim zero-rating
"[27] It follows that a supplier must be able to rely on the lawfulness of the transaction that he carries out without risking the loss of his right to exemption from VAT, if, as in the case in the main proceedings, he is in no position to recognise – even by exercising due commercial care – that the conditions for the exemption were in fact not met, because the export proofs provided by the purchaser had been forged." (Netto Supermarket C-271/06)
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- Different position to customs law
"[28] Moreover, it must be added that, contrary to what has been submitted by the German Government, the case-law of the Court in the field of customs law – according to which an operator who cannot provide evidence that the conditions necessary for the grant of remission from export or import duties are satisfied must bear the consequences arising from that inability, despite having acted in good faith – cannot be relied on in a situation such as that in the case in the main proceedings, in order to call in question the foregoing considerations. As the Advocate General has noted in point 53 of his Opinion, that case-law cannot be transposed to the specific situation of a taxable person under the common system of VAT put in place by the Sixth Directive, because of the differences in structure, object and purpose between such a system and the Community regime on the levying of customs duties." (Netto Supermarket C-271/06)
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