Court of Justice (Third Chamber) 21 June 2012, C-80/11 and C-142/11 (Mahagében Kft v Nemzeti Adó- és Vámhivatal Dél-dunántúli Regionális Adó Főigazgatósága (C-80/11) and Péter Dávid v Nemzeti Adó- és Vámhivatal Észak-alföldi Regionális Adó Főigazgatósága (C-142/11).)

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The Court of Justice of the European Union ruled that Articles 167, 168(a), 178(a), 220(1), 226, and 273 of Directive 2006/112/EC preclude national tax authorities from refusing a taxable person's right to deduct input VAT solely due to the improper conduct or fraud of an invoice issuer or supplier. Such a refusal is only permissible if the authority establishes, based on objective evidence, that the taxable person knew or ought to have known of the fraud, rather than imposing a system of strict liability or requiring the taxpayer to perform the state's investigative tasks. Consequently, a taxpayer cannot be denied the right to deduct for failing to verify a supplier's tax compliance or for lacking supplementary documentation beyond a valid invoice, provided substantive and formal conditions are met and no grounds for suspicion exist.AI