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CJEU Case C-430/19 - C.F.

In this issue:

CJEU Decision in case C-430/19 - C.F.

Rights of the defence


CJEU Case C-430/19 - C.F.

The case analyzes whether, during tax audit proceedings, the fact that a person did not have the opportunity access the information in his administrative file requires the annulment of the decision issued by the tax authority.

The national court also asks, in essence, whether in the event that the tax authority, based on mere unsubstantiated suspicions, doubts whether the economic transactions for which a VAT invoice was issued have actually been carried out, the taxable person may be denied the right to deduct VAT if it is unable to provide, in addition to the said invoice, other evidence  that the economic transactions have actually been carried out.


Facts of the case and Court Decision

CF, a commercial company under Romanian law, was subject to a tax audit performed by the local administration regarding corporate income tax and VAT.

The tax audit was suspended for six months in order to allow the regional anti-fraud directorate to carry out an investigation, in which the Prosecutor's Office of the Cluj Tribunal also participated. The criminal investigation ended with a decision to dismiss the case.

In the tax audit report, the local administration considered that the commercial operations between CF and two of its suppliers were fictitious, for the reason that these two suppliers did not have the technical and logistical capacity to provide the services they invoiced to CF. Also, according to these authorities, the fictitious nature of the commercial transactions between CF and these two suppliers resulted from the fact that CF could not present any other supporting documents than invoices.

CF challenged the said tax audit report and requested access to its entire administrative file. It stated that it was not informed, at the time of the tax audit, of the manner in which the criminal investigation could have influenced the tax audit carried out by the tax authorities.

Following the rejection of its challenge by the tax authorities, CF filed an action with the national court.


In these circumstances, the CJEU decided that:

1.      The general principle of European Union law of respect for the rights of the defence must be interpreted as a requirement that, in national administrative procedures of inspection and establishment of the basis for VAT assessment, where a taxable person has not been able to access the information in its administrative file considered by the tax authority when it adopted its decision to levy additional tax obligations, and the court finds that, in the absence of this irregularity, the procedure could have had a different result, this principle requires that this decision to be annulled.

2.      The principles governing the application by Member States of the common system of VAT, in particular the principles of fiscal neutrality and legal certainty, must be interpreted as precluding, in the presence of mere unsubstantiated suspicions of the national tax administration regarding the reality of the economic operations which formed the basis for issuing a tax invoice, the denial of the right to the deduct VAT by the taxable person to whom this invoice is issued if it is unable to provide, in addition to that invoice, other evidence that the economic transactions have actually been carried out.


Impact of the decision

This decision should be considered by taxpayers who, during tax audits performed by the tax authorities, are denied access to the documents and information on which the tax decision is based.

This decision may also be invoked by taxpayers who are denied the right to deduct VAT on the grounds of mere unsubstantiated suspicions of the tax authorities, even though the taxpayer presents an invoice in the exercise of the right to deduct.

For more details, please do not hesitate to contact us in order to clarify any further issues related to CJEU Decision in case C-430/19 - C.F. and its applicability.

Prepared by:
Emanuel Băncilă – Partner, Tax Policy and Controversy Leader 
For additional information, please contact:
Alex Milcev – Partner, Tax & Law Leader Romania
Ernst & Young SRL
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