The principle of ‘substance over form’ with respect to the exercise of the right to deduct input VAT – A critical analysis of the Barlis jurisprudence

Abstract

ABSTRACT In the autumn of 2016, the CJEU adopted a decision regarding formalism in the context of the exercise of the right to deduct input VAT which does not seem to have attracted the attention of VAT scholars, albeit that in the author’s view it constitutes a major development. In the Barlis case, the CJEU decided that Article 178(a) of the VAT Directive must be interpreted as precluding the national tax authorities from refusing the right to deduct value added tax solely because the taxable person holds an invoice which does not satisfy the conditions required by Article 226(6) and (7) of that directive, where those authorities have available all the necessary information for ascertaining whether the substantive conditions for the exercise of that right are satisfied. While this decision may, at first sight, be seen as a confirmation of the now established principle of ‘substance over form’ in relation to the exercise of the right to deduct, in this article the author highlights that this is the first time that this case-law based principle is being used to waive a clear and unconditional formal requirement provided for under the VAT Directive directly in relation to the exercise of the right to deduct.