| REVENUE
— Value added tax — Deductibility of input tax — Fraud in one of
series of transactions — Whether innocent trader in another transaction in
series deprived of right of deduction — Council Directive 77/308/EEC ( as
amended), arts 2(1), 4, 5(1)
Optigen
Ltd and others v Customs and Excise Commissioners (Joined Cases C-354, 355 and
484/03
ECJ: President of Chamber Rosas, Judges Malenovský, Puissochet,
von Bahr and Lõhmus: 12 January 2006
The
right of a taxable person to deduct input VAT was to be assessed independently
of the fact that another transaction in the same chain of supply was vitiated
by VAT fraud.
The Third Chamber of the Court of Justice of the European Communities
so held on a reference for a preliminary ruling by the Chancery Division of the
High Court.
The claimants, companies in three separate cases which bought CPUs
in the United Kingdom and sold them in other member states of the EC, claimed
to deduct input VAT on their purchases but parts of their claims were refused
on the ground that in each of those instances the transaction entered into by
the claimant was part of a chain of transactions another link in which was tainted
by a VAT fraud known as "carousel fraud", in which a trader in the chain
either disappeared before accounting for VAT or used a VAT number belonging to
someone else. The commissioners accepted that the claimants had no knowledge of
or reason to be aware of the fraud, but that a trader's entitlement to deduct
was to be judged by reference to the totality of transactions of which the particular
one formed a part, and that if there was a defaulting trader in the chain of supply,
the entire chain was outside the VAT system. In the course of the sets of proceedings
brought by the claimants, the High Court referred to the European Court questions
on those issues and on the interpretation in the circumstances of arts 2(1), 4
and 5(1) of Directive 77/388 as amended by Directive 95/7/EC ("the Sixth
Directive").
Art 2(1) subjects to VAT "the supply of goods or services
… by a taxable person acting as such", art 4 defines "taxable person"
as a person carrying out an "economic activity", and art 5(1) defines
"supply of goods" as "the transfer of the right to dispose of tangible
property as owner".
THE COURT, for reasons given by it, ruled that
transactions such as those at issue, which were not themselves vitiated by VAT
fraud, constituted supplies of goods or services effected by a taxable person
acting as such and an economic activity within the meaning of arts 2(1), 4 and
5(1) of the Sixth Directive where they fulfilled the objective criteria on which
the definitions of those terms were based, regardless of the intention of a trader
other than the taxable person concerned involved in the same chain of supply and/or
the possible fraudulent nature of another transaction in the chain, prior or subsequent
to the transaction carried out by that taxable person, of which that taxable person
had no knowledge and no means of knowledge. The right of that person to deduct
input VAT could not be affected by the fact that in the chain of supply of which
those transactions formed part another prior or subsequent transaction was vitiated
by VAT which that person had no knowledge of or means of knowing.
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