The good faith requirement in VAT

Abstract

ABSTRACT The requirement that taxable persons act in good faith first appeared in the Court of Justice’s case law in 1989. Given that there is an indisputable link between it and the rights to deduct input VAT, exempt intra-Community transactions and adjust improperly invoiced VAT, the requirement has potentially serious financial repercussions for taxable persons across the EU. However, as exemplified by the high number of preliminary references relating to the requirement, national courts have been slow to engage with the concept. This article comprehensively evaluates the VAT requirement. It determines its application and categorises the legal standard within the VAT system of rules. It highlights the competing interests of fiscal neutrality and third party liability for VAT losses, and the role the requirement has assumed in this regard. Finally, as a means of ensuring legal certainty, the article calls for the formalisation of the requirement at an EU level.