Global Ink Trade Kft. v Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (C-537/22)

Contents

Judgment of the Court (First Chamber)11 January 2024^note(Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Refusal of the right to deduct — Obligations of the taxable person — Duty of diligence — Burden of proof — Principles of fiscal neutrality and legal certainty — Primacy of EU law — Conflict between the case-law of a national court and EU law)In Case C‑537/22,REQUEST for a preliminary ruling under Article 267 TFEU from the Fővárosi Törvényszék (Budapest High Court, Hungary), made by decision of 31 May 2022, received at the Court on 11 August 2022, in the proceedingsGlobal Ink Trade Kft.vNemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága,THE COURT (First Chamber),composed of A. Arabadjiev, President of the Chamber, T. von Danwitz (Rapporteur), P.G. Xuereb, A. Kumin and I. Ziemele, Judges,Advocate General: A.M. Collins,Registrar: A. Calot Escobar,having regard to the written procedure,after considering the observations submitted on behalf of:– the Hungarian Government, by M.Z. Fehér and K. Szíjjártó, acting as Agents,– the European Commission, by J. Jokubauskaitė and A. Sipos, acting as Agents,having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,gives the following

Judgment

1This request for a preliminary ruling concerns the interpretation of the principle of the primacy of EU law, and of Article 167, Article 168(a) and Article 178(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) (‘the VAT Directive’), read in the light of the principles of fiscal neutrality and legal certainty.

2The request has been made in proceedings between Global Ink Trade Kft. and the Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (Appeals Division of the National Tax and Customs Administration, Hungary) (‘the tax authority’) concerning the latter’s refusal of the right to deduct value added tax (VAT) relating to acquisitions of goods.

Legal context

3Article 167 of the VAT Directive provides that the right of deduction arises at the time the deductible tax becomes chargeable.

4Under Article 168(a) of that directive:‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;…’

5Under Article 178(a) of that directive, in order to exercise the right of deduction referred to in Article 168(a), the taxable person must hold an invoice drawn up in accordance with the requirements set out in that directive.

6The first paragraph of Article 273 of the VAT Directive provides:‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

7Global Ink Trade carries on a wholesale business in Hungary. During the period July 2012 to June 2013 that undertaking made various purchases of office supplies. Most of the invoices relating to those purchases state that the supplier of the goods in question was the Hungarian undertaking Office Builder Kft.

8During checks conducted at the premises of Office Builder, the tax authority found, inter alia, that the undertaking did not carry on any real economic activity and had not complied with its tax obligations. According to the tax authority, the director of that undertaking, who was imprisoned in March 2013, denied that he had issued any invoices or maintained any correspondence with Global Ink Trade. The tax authority also found that the email address used for the exchanges between Office Builder and Global Ink Trade was not Office Builder’s official email address.

9The tax authority also questioned witnesses, who, it asserts, confirmed that the goods in question had been supplied to Global Ink Trade. The director of that undertaking stated that he entered into a commercial relationship with Office Builder after the latter placed an advertisement in a local newspaper, and that he had checked its data in the commercial register and had met a representative of the undertaking in person, although all subsequent exchanges took place by email.

10On the basis of the evidence gathered, the tax authority found that the invoices addressed to Global Ink Trade allegedly issued by Office Builder lacked credibility, since Office Builder’s director had expressly denied issuing them. The tax authority accordingly inferred that the transactions featuring on those invoices had not taken place between the two undertakings. That authority therefore refused Global Ink Trade the benefit of the right to deduct the VAT appearing on those invoices on the ground, inter alia, that it had not acted with due diligence in carrying on its activity, in particular by failing to obtain sufficient information about the true identity of its supplier and the latter’s compliance with its tax obligations, and had thereby committed passive tax evasion.

11Global Ink Trade brought an action against that decision before the Fővárosi Törvényszék (Budapest High Court, Hungary), which is the referring court, claiming that the refusal by the tax authority to allow it to benefit from the right to deduct the VAT relating to the invoices at issue was based on facts that had not been established, and that the tax authority had failed to have regard to the fact that it bore the burden of proof.

12In that context, the referring court notes that the Court of Justice has interpreted the relevant provisions of the VAT Directive in similar cases, relating to Hungary, in the orders of 3 September 2020, Vikingo Fővállalkozó (C‑610/19, EU:C:2020:673; ‘the order in Vikingo Fővállalkozó’), and of 3 September 2020, Crewprint (C‑611/19, EU:C:2020:674; ‘the order in Crewprint’). According to the referring court, the Kúria (Supreme Court, Hungary) has continued to apply its case-law as it existed prior to those orders, which appears to restrict the right to deduct VAT by means of requirements that have no basis in the VAT Directive, on the ground that those orders are not capable of containing new elements for the interpretation of EU law.

13Specifically, according to the referring court, the case-law of the Kúria (Supreme Court) has the effect of requiring all taxable persons to carry out complex and far-reaching checks as to their suppliers, in particular as regards whether those suppliers have complied with their obligations to declare and pay VAT, whereas it is clear from the order in Vikingo Fővállalkozó that a taxable person who exercises the right to deduct VAT cannot be required to carry out those checks. There is, therefore, a difference of opinion between the Hungarian courts as to the implications of the Court’s case-law. Against that background, the tax authority, likewise, has continued to impose requirements that are incompatible with the provisions of the VAT Directive, as interpreted by the Court. Those requirements conflict, moreover, with the circular aimed at taxable persons published by the tax authority, thereby, according to the referring court, giving rise to an infringement of the principle of legal certainty. Those requirements include, in particular, obligations to maintain contact in person with each supplier and to use only the supplier’s official email address.

14Since the referring court is, in principle, bound by the judgments of the Kúria (Supreme Court) and must state reasons for any legal ruling that departs from those judgments, which constitute a binding precedent, it entertains doubts as to whether, in the light of the principle of the primacy of EU law, it must in fact disregard the judgments of the Kúria (Supreme Court) that appear to it to be incompatible with the provisions of the VAT Directive, as interpreted by the Court in the orders in Vikingo Fővállalkozó and Crewprint.

15In those circumstances the Fővárosi Törvényszék (Budapest High Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:(1) Does the fact that a court in a Member State, adjudicating at last instance, interprets a decision of the Court of Justice (adopted in the form of an order in response to a request for a preliminary ruling specifically concerned with the case-law developed by the self-same court adjudicating at last instance) as meaning that there is nothing in that decision which has or is likely to have the effect of overturning earlier decisions of the Court of Justice or bringing about a change in the previous national case-law developed by the court adjudicating at last instance, constitute an infringement of the principle of the primacy of EU law and of the right to effective judicial protection guaranteed in Article 47 of the Charter of Fundamental Rights of the European Union (“the Charter”)?(2) Must the principle of the primacy of EU law and the right to effective judicial protection guaranteed in Article 47 of the Charter be interpreted as meaning that the principle of the primacy of decisions of the Court of Justice applies even in the case where a court in a Member State, adjudicating at last instance, also relies on [the] earlier judgments [of the Court of Justice] as precedent? Is a different answer conceivable, in the light of Article 99 of the Rules of [Procedure] of the Court of Justice, where the decision of the Court of Justice takes the form of an order?(3) Within the framework of the taxable person’s general obligation to exercise scrutiny, irrespective of the performance and nature of the economic transaction shown on the invoices concerned, and regard being had to [Article] 167, [Article] 168(a) and [Article] 178(a) of the VAT Directive and to the principles of legal certainty and fiscal neutrality, may the taxable person be required, as a condition of benefiting from the right to deduct VAT – and notwithstanding the absence of a legislative provision to this effect in the Member State concerned – to maintain contact in person with the issuer of the invoice or to contact his supplier – only at the officially communicated e-mail address? May these circumstances be regarded as revealing a failure, demonstrated by objective facts, to exercise the due diligence to be expected of the taxable person, account being taken of the fact that those circumstances did not yet exist at the time when the taxable person carried out the relevant checks before entering into the business relationship in question, but are features of the existing business relationship between the parties?(4) Are a legal interpretation and a practice developed in a Member State, whereby a taxable person who has an invoice in conformity with the VAT Directive is refused the benefit of the right to deduct VAT on the ground that he has not acted with due diligence in the course of trade because he has failed to demonstrate conduct such as to support the determination that his activity was not simply confined to the mere receipt of invoices meeting the formal requirements laid down, consistent with the aforementioned articles of the VAT Directive, with the principle of fiscal neutrality and, above all, with the case-law of the Court of Justice – which, when interpreting those provisions, places the burden of proof on the tax authority – even in the case where the taxable person has enclosed all documentation relating to the transactions at issue and the tax authority has rejected other offers to furnish evidence made by the taxable person during the tax proceedings?(5) In the light of the aforementioned articles of the VAT Directive and the fundamental principle of legal certainty, may the finding, reached in connection with due diligence, that the issuer of the invoice was not engaged in any economic activity at all, constitute an objective fact, in the case where the tax authority takes the view that there has been a failure to demonstrate the actual performance (and, therefore, the genuine existence) of an economic transaction – as documented by means of invoices, contracts and other supporting accounting documentation, and by correspondence, and as confirmed by the statements of the warehousing undertaking and the taxable person’s director and employee – and bases that view exclusively on the statement of the supplier undertaking’s director denying the existence of that transaction, without taking into account the circumstances in which that statement was made, the interests of the person making the statement or the fact that, according to the documents in the case file, that undertaking had been founded by the very person making the statement and, according to the information available, an agent was acting on its behalf?(6) Must the provisions of the VAT Directive relating to the deduction of VAT be interpreted as meaning that, in the case where the tax authority discovers during the tax proceedings that the goods mentioned on the invoices concerned are of [European] Community origin and that the taxable person is the second member of a chain [of supplies], the configuration of that scenario – given that goods of Community origin are exempt from VAT and the first Hungarian purchaser is not therefore entitled to deduct VAT, only the second member of that chain being so entitled – is an objective fact sufficient in itself to demonstrate tax evasion, or must the tax authority, in that case, also show, on the basis of objective facts, which member or members of that chain committed tax evasion, by what modus operandi it or they did so, and whether the taxable person was or could have been aware of this through the exercise of due diligence?’

Consideration of the questions referred

The first and second questions

16As a preliminary point, in view of the fact that by the first and second questions the referring court enquires of the Court as to the interpretation to be given to the principle of the primacy of EU law and to Article 47 of the Charter, it should be noted that, by virtue of the national legislation at issue in the main proceedings, the referring court considers itself bound by the judgments of higher national courts, even where those judgments contain legal rulings which appear to the referring court to be incompatible with EU law.

17Nevertheless, the referring court has not set out how it establishes a link between Article 47 of the Charter, enshrining the right to an effective judicial remedy, and that national legislation. Furthermore, as the European Commission submitted in its written observations, the order for reference mentions nothing that would prevent that court from referring questions to the Court of Justice for a preliminary ruling in the event of uncertainty as to whether the national case-law concerned is compatible with EU law. In those circumstances, the first and second questions should be answered solely in the light of the principle of the primacy of EU law.

18Accordingly, the Court considers that, by its first and second questions, which it is appropriate to answer together, the referring court asks, in essence, whether the principle of the primacy of EU law must be interpreted as precluding national legislation according to which the legal rulings of a higher national court are binding on lower national courts, which must state reasons for any departure from those rulings, even where, in the light of an interpretation of a provision of EU law provided by the Court of Justice, the lower national courts consider those rulings to be inconsistent with EU law.

Admissibility

19The Hungarian Government submits that those questions are inadmissible. According to that government, the referring court thereby seeks to call into question the decisions delivered by the Kúria (Supreme Court) in the cases which gave rise to the orders in Vikingo Fővállalkozó and Crewprint, on the ground that they are not consistent with those orders. Those questions are therefore irrelevant for the purposes of resolving the dispute in the main proceedings, which is unrelated to those cases.

20In that respect, according to settled case-law, questions on the interpretation of EU law referred by a national court in the factual and legislative context which that court is responsible for defining and the accuracy of which is not a matter for the Court to determine, enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of EU law that is sought is unrelated to the actual facts of the main action or its object, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (judgment of 14 September 2023, Bezirkshauptmannschaft Feldkirch, C‑55/22, EU:C:2023:670, paragraph 35 and the case-law cited).

21In the present case the referring court indicates a potential contradiction between the decisions of the Kúria (Supreme Court) and the orders in Vikingo Fővállalkozó and Crewprint. Since the referring court considers that it must have regard to the guidance contained in those orders for the purposes of resolving the dispute in the main proceedings and since, according to the national legislation at issue in the main proceedings, it is nevertheless bound by the decisions of the Kúria (Supreme Court), the questions referred are related to the subject matter of the dispute in the main proceedings and are not hypothetical. Moreover, the Court has before it the factual and legal material necessary to give a useful answer to those questions.

22The first and second questions are therefore admissible.

Substance

23According to settled case-law, the principle of the primacy of EU law establishes the pre-eminence of EU law over the law of the Member States. That principle therefore requires all Member State bodies to give full effect to the various EU provisions, and the law of the Member States may not undermine the effect accorded to those various provisions in the territory of those States. It follows that, by virtue of the principle of the primacy of EU law, a Member State’s reliance on rules of national law, even of a constitutional order, cannot be allowed to undermine the unity and effectiveness of EU law (see, to that effect, judgments of 5 June 2023, Commission v Poland (Independence and private life of judges), C‑204/21, EU:C:2023:442, paragraph 77, and of 24 July 2023, Lin, C‑107/23 PPU, EU:C:2023:606, paragraph 128 and the case-law cited).

24In that context, the national court, having exercised the discretion conferred on it by Article 267 TFEU, is bound, for the purposes of the decision to be given in the main proceedings, by the interpretation of provisions of EU law provided by the Court and must therefore, if necessary, disregard the rulings of a higher national court if it considers, in the light of the interpretation provided by the Court, that those rulings are not consistent with EU law, if necessary refusing to apply the national rule requiring it to comply with the decisions of that higher court (see, to that effect, judgment of 24 July 2023, Lin, C‑107/23 PPU, EU:C:2023:606, paragraphs 132 and 133 and the case-law cited).

25In those circumstances, the requirement to give full effect to EU law includes the obligation, on the national court in question, to alter established case-law, where necessary, if that case-law is based on an interpretation of national law that is incompatible with EU law (judgment of 9 September 2021, Dopravní podnik hl. m. Prahy, C‑107/19, EU:C:2021:722, paragraph 47 and the case-law cited).

26In addition, where the Court’s case-law has already provided a clear answer to a question concerning the interpretation of EU law, that national court must do everything necessary to ensure that that interpretation is applied (see, to that effect, judgment of 10 March 2022, Grossmania, C‑177/20, EU:C:2022:175, paragraph 42 and the case-law cited).

27In that respect, as the Hungarian Government and the Commission have maintained, it is irrelevant whether the Court’s interpretation takes the form of a judgment or of a reasoned order under Article 99 of the Rules of Procedure. There is no provision of the Treaties, the Statute of the Court of Justice of the European Union or those rules of procedure that establishes any distinction, in preliminary ruling procedures, between the scope and effects of judgments and those of reasoned orders. A national court may not therefore disregard an order on the ground that, unlike a judgment, it contains no new elements for the interpretation of EU law.

28In this case, therefore, the referring court is bound, for the purposes of the decision to be given in the main proceedings, by the interpretation of EU law provided by the Court of Justice and must, if necessary, disregard a ruling made by the Kúria (Supreme Court) in previous decisions which have the force of a binding precedent under national law if, in the light of that interpretation, it considers that ruling to be inconsistent with EU law.

29It is apparent from the information provided by the referring court and the Hungarian Government that under the national legislation at issue in the main proceedings that court is entitled to depart from earlier decisions of the Kúria (Supreme Court), even if those decisions constitute a binding precedent, provided that, inter alia, it considers those decisions to be incompatible with EU law and states reasons for that finding. In such a context, the referring court’s obligation to state reasons in that regard does not appear, in itself, to be such as to undermine the primacy of EU law, since the file submitted to the Court contains nothing to indicate that such an obligation would constitute an obstacle liable to make it excessively difficult for the referring court to exercise its discretion to depart from the earlier decisions of the Kúria (Supreme Court).

30In the light of those considerations, the answer to the first and second questions is that the principle of the primacy of EU law must be interpreted as requiring a national court, which has exercised the discretion conferred on it by Article 267 TFEU, to disregard the legal rulings of a higher national court if it considers, in the light of the interpretation of a provision of EU law provided by the Court in the form of a judgment or a reasoned order within the meaning of Article 99 of its Rules of Procedure, that those rulings are not consistent with EU law. That principle does not, however, preclude national legislation that merely requires lower national courts to state reasons for any departure from those rulings.

The third to fifth questions

31By its third to fifth questions, which it is appropriate to answer together, the referring court asks, in essence, whether Article 167, Article 168(a) and Article 178(a) of the VAT Directive, read in the light of the principles of fiscal neutrality and legal certainty, must be interpreted as precluding a practice by which the tax authority refuses a taxable person the right to deduct the VAT relating to the acquisition of goods supplied to that taxable person, on the ground that credence cannot be given to the invoices relating to those acquisitions on account of circumstances that demonstrate a lack of diligence attributable to that taxable person and which are assessed, in principle, in the light of a circular aimed at taxable persons published by that authority.

32According to settled case-law of the Court, the right of taxable persons to deduct the VAT due or already paid on goods purchased and services received as inputs from the VAT which they are liable to pay is a fundamental principle of the common system of VAT. As the Court has repeatedly held, the right to deduct provided for in Article 167 et seq. of the VAT Directive is an integral part of the VAT scheme and in principle may not be limited if the substantive and formal requirements or conditions to which this right is subject are respected by taxable persons wishing to exercise it (judgment of 11 November 2021, Ferimet, C‑281/20, EU:C:2021:910, paragraph 31 and the case-law cited).

33As regards the substantive requirements or conditions to which the right to deduct VAT is subject, it is apparent from Article 168(a) of the VAT Directive that, in order for that right to be available, first, the person concerned must be a ‘taxable person’ within the meaning of that directive and, secondly, the goods or services relied on as the basis for claiming the right of deduction must be used by the taxable person for the purposes of his or her own taxed output transactions, and that, as inputs, those goods or services must be supplied by another taxable person. As to the detailed rules governing the exercise of the right to deduct VAT, which may be considered formal requirements or conditions, Article 178(a) of that directive provides that the taxable person must hold an invoice drawn up in accordance with the requirements set out in that directive (see, to that effect, judgment of 11 November 2021, Ferimet, C‑281/20, EU:C:2021:910, paragraph 26 and the case-law cited).

34Those substantive conditions for the right to deduct are satisfied only if the supply of goods or services to which the invoice relates has actually been carried out. The Court has held that verifying whether there is a taxable transaction must be done in accordance with the rules of evidence under national law, carrying out an overall assessment of all the facts and circumstances of the case (order of 9 January 2023, A.T.S. 2003, C‑289/22, EU:C:2023:26, paragraph 46 and the case-law cited, and judgment of 25 May 2023, Dyrektor Izby Administracji Skarbowej w Warszawie (VAT – Fictitious acquisition), C‑114/22, EU:C:2023:430, paragraph 36).

35The taxable person may however be refused the right to deduct if it is established, in the light of objective evidence, that the right is being relied on for fraudulent or abusive ends. It must be noted that the fight against tax evasion, avoidance and abuse is an objective recognised and encouraged by the VAT Directive and that the Court has repeatedly held that EU law cannot be relied on for fraudulent or abusive ends. Therefore, even if the substantive conditions for the right of deduction are met, it is for the national authorities and courts to refuse that right if it is established, in the light of objective evidence, that that right is being invoked fraudulently or abusively (judgment of 25 May 2023, Dyrektor Izby Administracji Skarbowej w Warszawie (VAT – Fictitious acquisition), C‑114/22, EU:C:2023:430, paragraphs 40 and 41 and the case-law cited).

36In the case of fraud, according to settled case-law, the right of deduction is to be refused not only where VAT fraud is committed by the taxable person himself or herself, but also where it is established, in the light of objective evidence, that the taxable person – to whom the supply of goods or services, on the basis of which the right of deduction is claimed, was made – knew or ought to have known that, through the purchase of those goods or services, he or she was participating in a transaction connected with such fraud (judgment of 25 May 2023, Dyrektor Izby Administracji Skarbowej w Warszawie (VAT – Fictitious acquisition), C‑114/22, EU:C:2023:430, paragraph 42 and the case-law cited).

37Since the refusal of the right of deduction is an exception to the application of the fundamental principle constituted by that right, it is incumbent on the tax authorities to establish, to the requisite legal standard, the objective evidence from which it may be concluded that the taxable person committed VAT fraud or knew or ought to have known that the transaction relied on as a basis for the right of deduction was connected with such a fraud. It is for the national courts subsequently to determine whether the tax authorities concerned have established the existence of such objective evidence (judgment of 25 May 2023, Dyrektor Izby Administracji Skarbowej w Warszawie (VAT – Fictitious acquisition), C‑114/22, EU:C:2023:430, paragraph 43 and the case-law cited).

38In that respect, since EU law lays down no rules relating to the procedures for taking evidence in connection with VAT fraud, that objective evidence must be established by the tax authorities in accordance with the rules of evidence laid down in national law. However, those rules must not undermine the effectiveness of EU law (judgment of 11 November 2021, Ferimet, C‑281/20, EU:C:2021:910, paragraph 51 and the case-law cited).

39In such a context, the diligence required of the taxable person and the measures which may reasonably be required of him or her to satisfy him or herself that, through his or her acquisition, he or she is not participating in a transaction connected with fraud committed by a trader at an earlier stage of a transaction depend on the circumstances of the case and, in particular, on whether or not there are indications available to the taxable person, at the time of his or her acquisition, pointing to an infringement or fraud. Accordingly, where there are indications of fraud, the taxable person may be expected to exercise greater diligence. However, the taxable person cannot be required to carry out complex and far-reaching checks, such as those which the tax authority has the means to carry out (judgment of 1 December 2022, Aquila Part Prod Com, C‑512/21, EU:C:2022:950, paragraph 52, and order of 9 January 2023, A.T.S. 2003, C‑289/22, EU:C:2023:26, paragraph 70).

40The question whether the taxable person has exercised sufficient diligence forms part of the assessment of the facts in the main proceedings and, consequently, falls within the exclusive jurisdiction of the national courts. It is for those courts to assess whether, in the light of the circumstances of that particular case, the taxable person has exercised sufficient diligence and has taken the measures which may reasonably be required of him or her in those circumstances (see, to that effect, judgment of 1 December 2022, Aquila Part Prod Com, C‑512/21, EU:C:2022:950, paragraph 53 and the case-law cited).

41In that respect, the VAT Directive does not, in principle, preclude Member States from adopting legislation or publishing a circular in order to specify the level of diligence required of a taxable person and to guide the tax authorities in their assessment by laying down criteria in that regard. Indeed, under the first paragraph of Article 273 of that directive, Member States may impose obligations other than those provided for by that directive where they consider such obligations necessary in order to ensure the correct collection of VAT and to prevent evasion.

42However, as is apparent from settled case-law, any such measure must not have the effect of systematically undermining the right to deduct VAT and, consequently, the neutrality of VAT (see, to that effect, judgment of 11 November 2021, Ferimet, C‑281/20, EU:C:2021:910, paragraph 32 and the case-law cited). Nor can the measure be allowed to undermine the effectiveness of EU law as regards the taking of evidence in connection with VAT fraud.

43Accordingly, the measure may not undermine the obligation on the tax authorities, referred to in paragraph 37 of the present judgment, to establish to the requisite legal standard the objective evidence from which it may be concluded that a taxable person has committed VAT fraud, or knew or should have known that the transaction concerned was connected with VAT fraud. Similarly, according to the case-law referred to in paragraph 39 of the present judgment, the measure may not have the effect of requiring taxable persons to undertake complex and far-reaching checks on their suppliers.

44Consequently, where the tax authority relies in particular on infringements committed in the sphere of the issuer of an invoice, the assessment of the evidence cannot have the effect of indirectly requiring that taxable person, recipient of the invoice, to carry out checks of the other party to the contract which are not, in principle, the responsibility of that taxable person (see, to that effect, order of 16 May 2013, Hardimpex, C‑444/12, not published, EU:C:2013:318, paragraph 27 and the case-law cited).

45Lastly, a measure such as that referred to in paragraph 41 of the present judgment must be implemented in compliance with the principle of legal certainty. It should be borne in mind that according to settled case-law, the principles of legal certainty and protection of legitimate expectations must be observed not only by the EU institutions, but also by Member States in the exercise of the powers conferred on them by EU directives (judgment of 9 July 2015, Cabinet Medical Veterinar Tomoiagă Andrei, C‑144/14, EU:C:2015:452, paragraph 33 and the case-law cited).

46As the Court has repeatedly held, it follows, in particular, that EU legislation must be certain and its application foreseeable by those subject to it, and that requirement of legal certainty must be observed all the more strictly in the case of rules liable to entail financial consequences, in order that those concerned may know precisely the extent of the obligations which they impose on them. Similarly, in areas covered by EU law, the Member States’ legal rules must be worded unequivocally so as to give the persons concerned a clear and precise understanding of their rights and obligations and enable national courts to ensure that those rights and obligations are observed (judgment of 9 July 2015, Cabinet Medical Veterinar Tomoiagă Andrei, C‑144/14, EU:C:2015:452, paragraphs 34 and 35 and the case-law cited).

47In the present case, it is apparent from the information provided by the referring court that Global Ink Trade was refused the right to deduct the VAT relating to the acquisition of goods supplied to it, on the ground that credence could not be given to the invoices relating to those goods on account, in particular, of uncertainty as to the true identity of the supplier of those goods. In that context, it appears that the tax authority also relied on the fact that the director of the undertaking that issued those invoices had failed to discharge his obligations to declare and pay VAT, and that Global Ink Trade should have been aware of that circumstance. The tax authority found, in that regard, that Global Ink Trade had committed passive tax evasion.

48As can be seen from the case-law summarised in paragraphs 37 and 40 above, it is for the referring court to ascertain whether the tax authority has established to the requisite legal standard the objective evidence from which it may be concluded that the taxable person committed VAT fraud, or knew or should have known that the transaction concerned was connected with VAT fraud, and to determine whether, in the light of the circumstances of the present case, that taxable person exercised sufficient diligence and took the measures which could reasonably be required of a taxable person in those circumstances.

49Although it is true that where there are indications of VAT fraud, such a taxable person may be expected to exercise greater diligence, it is nevertheless for the referring court to verify that the requirements imposed by the tax authority do not have the effect of requiring taxable persons to carry out complex and far-reaching checks as to their suppliers, thereby de facto transferring to the taxable person the investigative tasks which are the responsibility of the tax authority, as referred to in the case-law cited in paragraphs 39 and 44 of the present judgment.

50In particular, it should be recalled that that tax authority may not, as a general rule, require a taxable person wishing to exercise the right to deduct VAT to verify that the issuer of the invoice relating to the goods and services in respect of which the exercise of that right is requested has fulfilled his or her obligations to declare and pay VAT (see, to that effect, order in Vikingo Fővállalkozó, paragraph 56 and the case-law cited).

51Lastly, it is also for the referring court to determine whether the tax authority complied with the principle of legal certainty in the exercise of the powers conferred on it. That court is responsible for determining whether the circular aimed at taxable persons published by the tax authority and applicable to the facts at issue in the main proceedings was worded unequivocally, whether its application was foreseeable by those subject to it, within the meaning of the case-law referred to in paragraphs 45 and 46 above, and whether the requirements imposed by the authority conflicted with the circular.

52The answer to the third to fifth questions is therefore that Article 167, Article 168(a) and Article 178(a) of the VAT Directive, read in the light of the principles of fiscal neutrality and legal certainty, must be interpreted as not precluding a practice by which the tax authority refuses a taxable person the benefit of the right to deduct VAT relating to the acquisition of goods supplied to that taxable person, on the ground that credence cannot be given to the invoices relating to those acquisitions on account of circumstances that demonstrate a lack of diligence attributable to that taxable person and which are assessed, in principle, in the light of a circular aimed at taxable persons published by that authority, provided that:– the practice and the circular in question do not undermine the obligation on that authority to establish to the requisite legal standard the objective evidence from which it may be concluded that the taxable person committed VAT fraud, or knew or should have known that the transaction concerned was connected with such fraud;– the practice and the circular in question do not require the taxable person concerned to undertake complex and far-reaching checks on the other party to the contract;– the requirements imposed by the tax authority are consistent with those laid down in that circular; and– the circular published for taxable persons is worded unequivocally and its application is foreseeable by those subject to it.

The sixth question

53By the sixth question the referring court asks, in essence, whether, where a tax authority intends to refuse a taxable person the right to deduct the input VAT paid, on the ground that the taxable person concerned has participated in a VAT carousel fraud, the VAT Directive must be interpreted as precluding that tax authority from merely establishing that that transaction forms part of a circular invoicing chain, without identifying all the operators involved in that fraud and their respective conduct.

54It is apparent from the case-law referred to in paragraphs 35 to 38 above that where a tax authority intends to refuse a taxable person the benefit of the right to deduct VAT it must establish to the requisite legal standard, in accordance with the rules of evidence laid down in national law and without undermining the effectiveness of EU law, both the objective evidence establishing the existence of a VAT fraud per se and the objective evidence establishing that the taxable person committed that fraud or knew, or ought to have known, that the acquisition of goods or services relied on as a basis for that right was connected with the fraud in question.

55That evidential requirement prohibits, irrespective of the type of fraud or the conduct under examination, the use of assumptions or presumptions which, by reversing the burden of proof, would have the effect of undermining the fundamental principle of the common system of VAT constituted by the right of deduction and, therefore, of impairing the effectiveness of EU law (judgment of 1 December 2022, Aquila Part Prod Com, C‑512/21, EU:C:2022:950, paragraph 34).

56Accordingly, although the existence of a circular invoicing chain is strong evidence of the existence of fraud, which must be taken into account in the overall assessment of all the evidence and all the factual circumstances of the case, there are no grounds for accepting that the tax authority may, for the purpose of proving the existence of carousel fraud, merely establish that the transaction in question forms part of a circular invoicing chain (see, to that effect, judgment of 1 December 2022, Aquila Part Prod Com, C‑512/21, EU:C:2022:950, paragraph 35).

57It is for the tax authority, first, to provide an accurate description of the constituent elements of the fraud and to adduce evidence of the fraudulent conduct and, secondly, to establish that the taxable person actively participated in that fraud or knew, or ought to have known, that the acquisition of goods or services relied on as a basis for that right was connected with that fraud. However, establishing the existence of the fraud and of the taxable person’s participation in that fraud does not necessarily entail identifying all the operators involved in the fraud and their respective conduct. It is for the national courts to verify that the existence of those elements has been established to the requisite legal standard by the tax authority (see, to that effect, judgment of 1 December 2022, Aquila Part Prod Com, C‑512/21, EU:C:2022:950, paragraph 36).

58The answer to the sixth question is therefore that the VAT Directive must be interpreted as meaning that:– where a tax authority intends to refuse a taxable person the right to deduct the input VAT paid on the ground that the taxable person concerned has participated in a VAT carousel fraud, it precludes that tax authority from merely establishing that that transaction forms part of a circular invoicing chain;– it is for that tax authority – without necessarily identifying all the operators involved in the fraud and their respective conduct – first, to provide an accurate description of the constituent elements of the fraud and to prove fraudulent conduct, and, secondly, to establish that the taxable person actively participated in that fraud or knew, or ought to have known, that the acquisition of goods or services relied on as a basis for that right was connected with that fraud.

Costs

59Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (First Chamber) hereby rules:

1.The principle of the primacy of EU lawmust be interpreted as requiring a national court, which has exercised the discretion conferred on it by Article 267 TFEU, to disregard the legal rulings of a higher national court if it considers, in the light of the interpretation of a provision of EU law provided by the Court in the form of a judgment or a reasoned order within the meaning of Article 99 of its Rules of Procedure, that those rulings are not consistent with EU law. That principle does not, however, preclude national legislation that merely requires lower national courts to state reasons for any departure from those rulings.

2.Article 167, Article 168(a) and Article 178(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in the light of the principles of fiscal neutrality and legal certainty,must be interpreted as not precluding a practice by which the tax authority refuses a taxable person the benefit of the right to deduct value added tax (VAT) relating to the acquisition of goods supplied to that taxable person, on the ground that credence cannot be given to the invoices relating to those acquisitions on account of circumstances that demonstrate a lack of diligence attributable to that taxable person and which are assessed, in principle, in the light of a circular aimed at taxable persons published by that authority, provided that:– the practice and the circular in question do not undermine the obligation on that authority to establish to the requisite legal standard the objective evidence from which it may be concluded that the taxable person committed VAT fraud, or knew or should have known that the transaction concerned was connected with such fraud;– the practice and the circular in question do not require the taxable person concerned to undertake complex and far-reaching checks on the other party to the contract;– the requirements applied by that authority are consistent with those laid down in that circular; and– the circular published for taxable persons is worded unequivocally and its application is foreseeable by those subject to it.

3.Directive 2006/112must be interpreted as meaning that:– where a tax authority intends to refuse a taxable person the right to deduct the input VAT paid on the ground that the taxable person concerned has participated in a VAT carousel fraud, it precludes that tax authority from merely establishing that that transaction forms part of a circular invoicing chain;– it is for that tax authority – without necessarily identifying all the operators involved in the fraud and their respective conduct – first, to provide an accurate description of the constituent elements of the fraud and to prove fraudulent conduct, and, secondly, to establish that the taxable person actively participated in that fraud or knew, or ought to have known, that the acquisition of goods or services relied on as a basis for that right was connected with that fraud.