An invoice is an important document for VAT purposes. However, an invoice alone is not sufficient proof that a transaction involving goods has actually taken place.
Trade
The North Holland District Court recently ruled in the case a wholesaler of flowers, plants and related items. These goods were purchased from a Dutch supplier and subsequently resold to customers in Russia (sometimes via Czech companies).
The wholesaler naturally deducts the VAT calculated by the Dutch supplier. And VAT is charged to its Russian customers at the 0% rate. After all, this concerns the export of goods to a destination outside the European Union.
Fraud
You’ve probably already sensed something was amiss: the Dutch supplier has not paid the VAT. The wholesaler has become embroiled in a fraud scheme. The tax authorities maintain that the wholesaler should not have been allowed to deduct this VAT. It is not in dispute that the wholesaler has invoices issued in their name on which VAT has been charged.
However, in order for VAT to be deductible, it is also required that this VAT has been charged in respect of services provided to the trader. The Tax and Customs Administration therefore justifies its refusal to allow the VAT deduction on the grounds that the goods to which the invoices relate were not actually supplied.
Proof
The burden of proof that VAT has been correctly deducted rests with the trader claiming the deduction. In this case, that is the wholesaler. However, the audit of the accounts carried out by the Tax and Customs Administration reveals that the records contain no information regarding purchase orders. Nor are there any copies of transport documents or other supporting documents. Furthermore, the supplier does not state a VAT registration number on its invoices. And the payments are made to a Latvian bank account.
The Court therefore concludes that the wholesaler has not demonstrated that the invoices are based on genuine transactions involving goods. The Court considers that any business to which deliveries of such a scale are made must keep records containing, in addition to the invoices, documents relating to the purchase transactions, transport and quality controls.
The Tax and Customs Administration was right to impose an additional VAT assessment on the amount that had been deducted.