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(VAT) ECJ DECISION: Valériane SNC (Joined Cases C‑459/17 and C‑460/17)

Summary of the facts

SGI and Valériane were companies incorporated under French law with their registered office in Reunion (France).

These companies carried out purchases of equipment intended to be leased to operators established in Reunion (France). The tax authorities challenged SGI and Valeriane’s right to deduct VAT appearing on various invoices for the purchase of equipment on the grounds that, those invoices did not correspond to any actual delivery.

Therefore, SGI and Valeriane contested those additional Vat assessments, but the tribunal rejected their actions. SGi and Valeriane brought an appeal to Court of Cassation on the grounds that the Court Amministrative d’appel de Bordeaux had broken the law. In its request, SGI claimed that in the absence of any serious indication that the economic transactions at issue involved fraud, it was not obliged to verify that those transactions were actually carried.

Questions referred to the ECJ

Must the provisions of Article 17 of the [Sixth Directive], which have, in essence, been reproduced in Article 168 of [Council] Directive [2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1)] be interpreted as meaning that, in order to refuse a taxable person the right to deduct, from the [VAT] that he is liable to pay by reason of his own transactions, tax levied on invoices corresponding to goods or services that the tax authorities establish have not actually been supplied to the taxable person, it is necessary, in all cases, to examine whether it has been established that that taxable person knew, or ought to have known, that the transaction was connected with [VAT] fraud, regardless of whether that fraud was committed on the initiative of the issuer of the invoice, its recipient or a third party?

Conclusion by the ECJ

Article 17 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, as amended by Council Directive 91/680/EEC of 16 December 1991, must be interpreted as meaning that, in order to deny a taxable person in receipt of an invoice the right to deduct the VAT appearing on that invoice, it is sufficient that the authorities establish that the transactions covered by that invoice have not actually been carried out.

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Franco Falzon
(Managing Partner)


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