Right to deduct

The taxpayer company was an Italian resident. It carried out intra-community acquisitions from French and Dutch companies but did not record invoices in certain registers as required by Italian law.

The local tax authority decided the failure to register the transactions was a substantive breach and issued a notice imposing a penalty of 100% of the tax ignoring the taxpayer’s right to deduct VAT.

The taxpayer appealed to the Italian Court of Cassation which referred the matter to the Court of Justice of the European Union (CJEU) for a preliminary ruling.

The court ruled that Italy’s tax department had all the necessary information on the taxable intra-community acquisitions of goods according to article 17(2)(d) of the Sixth Directive as to the right to deduct the VAT.

The entitlement could not be denied to the taxpayer just because it had not satisfied the formal requirements laid down...