Taxpayers unfairly do not recognize VAT deductions for companies and want the impossible from them. They also go against EU principles – Interview by Petr Varga for TREND

You can read in the interview with Peter Varga for TREND about the cases in which the tax administrator rejects the claim for VAT deduction and also that in many situations this is contrary to EU law.

During tax inspections carried out by the auditors of the Financial Administration of the Slovak Republic (FA), a common problem in practice from the point of view of entrepreneurs is the application of the right to deduct value added tax.

As tax attorney Peter Varga of Highgate Law & Tax points out, there are often situations when the tax authorities deny a businessman’s claim for deduction on the grounds that the person on the invoice did not supply the necessary service or goods, according to the tax authorities. This is contrary to EU law in many situations.

Often healthy companies pay the price, and in such cases they are also responsible for the fact that their supplier does not keep accounts in accordance with the law or has become uncontactable over the course of a few years, for example, does not receive shipments from the financial administration.

“However, such practice is often contrary to the established case law of the Court of Justice of the EU or the Constitutional Court of the Slovak Republic. Doubts about a supplier or customer in a certain chain of supplies are relevant only to assess their participation in fraud – thus, they cannot in themselves lead to the rejection of a VAT deduction claim,” explains a tax lawyer from Highgate Law & Tax.

Errors and inconsistency are also on the side of companies

For example, the taxpayer may not be able to prove the carriage if the supply of goods is connected with it. In such cases, the tax authorities do not want to recognise the exemption of the supply, for example when the goods are delivered to another Member State, and charge the taxpayer output tax.

So, if companies want to avoid VAT irregularities during tax audits, one option is to be extremely thorough. Verify your suppliers and customers in detail, document everything, take photographs or film everything.

The tax administrator should be able to prove unequivocally that fraud has been committed on the basis of sufficiently established facts and objective evidence in the event of suspicion. Not to mention the fact that in some segments it is virtually impossible for businesses to fully scrutinise their partners. In fact, there are companies on the market that have a very wide range of suppliers.

“We have encountered cases where auditors have accused the company of having no employees and therefore it is not possible to credibly prove who actually delivered the service in question. However, it is not in the power of a business to go into such detail. And if he wanted to do so, his business costs would increase extremely,” explains tax lawyer Peter Varga.

Read the full article at https://www.trend.sk/financie/daniari-neferovo-neuznavaju-firmam-odpocty-dph-chcu-nich-nemozne-idu-aj-proti-zasadam-eu.

Source: KULLOVÁ, Z.: Taxpayers unfairly do not recognize VAT deductions for companies and want the impossible from them. In: TREND, 6.3.2023. Available at: https://www.trend.sk/financie/daniari-neferovo-neuznavaju-firmam-odpocty-dph-chcu-nich-nemozne-idu-aj-proti-zasadam-eu

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