Altic (VAT - Right to deduct VAT - Opinion)

(Request for a preliminary ruling from the Augstākā tiesa (Supreme Court, Latvia))

(Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Right to deduct VAT — Refusal — Supply by co-contractors involved in tax fraud — Duty of care of the taxable person — Relevance of compliance by the taxable person with sectorial obligations — Regulation (EC) No 178/2002 — Obligation of traceability — Regulation (EC) No 852/2004 — Regulation (EC) No 882/2004 — Registration of food business operators)

SIA Altic bought rapeseed from two other companies and deducted the input value added tax (VAT) paid on those transactions. A subsequent inspection carried out by the Latvian tax authorities revealed that those companies were fictitious. The tax authorities therefore considered that the transactions had not taken place and ordered SIA Altic to pay the corresponding VAT. SIA Altic sought the annulment of that decision. Both the first- and the second‑instance national courts ruled in its favour.

According to Article 168 of the VAT 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;