“Should the national authorities and judicial bodies, on the basis of the 15 law of the European Union, refuse to apply the VAT exemption in respect of an intra-Community supply where it is established, on the basis of objective evidence, that there was VAT fraud in respect of the goods concerned and that the taxable person knew or should have known that he was participating therein, even if the national law does 20 not make provision under those circumstances for refusing the exemption?”
“Should the national authorities and courts, on the basis of the law of the European Union, refuse to apply the exemption pertaining to an 10 intra-Community supply, the right to the deduction of VAT in respect of the purchase of goods which, after the purchase, were dispatched to another Member State, or the refund of VAT pursuant to the application of the second sentence of Article 28b(A)(2) of the Sixth Directive, when, on the basis of objective data, it has been established 15 that there has been VAT evasion in respect of the goods concerned, and that the taxable person knew, or should have known, that it was participating therein, if national law does not make provision for refusal of the exemption, the deduction or the refund under those circumstances?” 20 31. In answering that question the CJEU noted at §§43 and 44 (citing Kittel) that EU law cannot be relied on by individuals for abusive or fraudulent ends and, derived from this, the Court had concluded that the right to deduct VAT should be refused where it was shown, in the light of objective evidence, that that right was being relied upon for those ends. In §45 it emphasised that, “no 25 one may benefit from the rights stemming from the Union’s legal system for abusive or fraudulent ends”
“48 In this regard, it is appropriate to note that it follows from the case-law cited in paragraph 44 of the present judgment that the central 30 function of the right of deduction provided for in Article 17(3) of the Sixth Directive, in the VAT mechanism designed to ensure complete neutrality of the tax, does not preclude that right from being refused to a taxable person in the event of participation in fraud (see to that effect, inter alia, judgments in Bonik, EU:C:2012:774, paragraphs 25 35 to 27 and 37, and Maks Pen, EU:C:2014:69, paragraphs 24 to 26). Similarly, the specific function of the right to a VAT refund, intended to ensure the neutrality of VAT, cannot preclude that right from being refused to a taxable person in such a situation. 40 49 In the light of the foregoing considerations, it is, in principle, the responsibility of the national authorities and courts to refuse the benefit of the rights laid down by the Sixth Directive when they are claimed fraudulently or abusively, irrespective of whether those rights are rights to a deduction, to an exemption or to a VAT refund in 45 respect of intra-Community supplies, as at issue in the case in the main proceedings. 11 50 It must further be noted that, according to settled case-law, that is the position not only where tax evasion has been carried out by the taxable person itself but also where a taxable person knew, or should have known, that, by the transaction concerned, 5 it was participating in a transaction involving evasion of VAT carried out by the supplier or by another trader acting upstream or downstream in the supply chain (see to that effect, inter alia, judgments in Kittel and Recolta Recycling, EU:C:2006:446, paragraphs 45, 46, 56 and 60, and Bonik, 10 EU:C:2012:774, paragraphs 38 to 40).”
“[I]f a trader should have known that 5 the only reasonable explanation for the transaction in which he was involved was that it was connected with fraud and if it turns out that the transaction was connected with fraudulent evasion of VAT then he should have known of that fact. He may properly be regarded as a participant for the reasons explained in 10 Kittel.”
“Dès lors, il appartient à la juridiction nationale de refuser le bénéfice du droit à déduction s’il est établi, au vu des éléments objectifs, que l’assujetti savait ou aurait dû savoir que, par son acquisition, il 15 participait à une opération impliquée dans une fraude à la TVA et ceci même si l’opération en cause satisfait aux critères objectifs sur lesquels sont fondées les notions de livraisons de biens effectuées par un assujetti agissant en tant que tel et d’activité économique.”
“how can a trader who is not part of a conspiracy know of a fraud before it happens?”
“49. It can be no objection to that approach to Community law (the 30 Kittel Test) that in purely domestic circumstances a trader might not be regarded as an accessory to fraud.”
“If the circumstances of that purchase are such that a person knows or should have known that his purchase is or will be connected with fraudulent evasion it cannot matter a jot that that evasion precedes or follows that purchase.”
“Lack of knowledge of the specific mechanics of a VAT fraud affords no basis for any argument that the decision of [the tribunal] 5 was wrong in law: what is required is simply participation with knowledge in a transaction ‘connected with fraudulent evasion of VAT’”