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An extended panel of judges of the Supreme Administrative Court of Lithuania (SACL) has examined an administrative case in which the tax authority inter alia denied the applicant’s right of value added tax (VAT) deduction. Such denial was due to a decision that the applicant, when acquiring the immovable property and seeking to deduct input value added tax, abused rights because they knew or should have known that the borrower would not pay the output VAT into the State budget.

After the evaluation of SACL and CJEU case-law, the extended panel of judges concluded that in order to allay doubts regarding interpretation of relevant provisions of EU legislation, it is appropriate to issue a request to CJEU for a preliminary ruling. The referred question is whether  Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, in conjunction with the principle of fiscal neutrality, ought to be interpreted as prohibiting or not prohibiting a practice of national authorities under which the right of a taxable person to deduct input VAT is denied where that person, when acquiring items of immovable property, knew (or should have known) that the supplier, due to his insolvency, would not pay (or would not be able to pay) the output VAT into the State budget.

Administrative case No. eA-2121-968/2021.

Case ID C-227/21

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