and proportionality are two features of the European VAT that often come into
play when judiciary is requested to rule on alleged frauds to the tax.
According to the well settled case law of the European Court of Justice (ECJ)
the right to deduct VAT can’t
be granted when such a fraudulent operation occurs. In the EN.SA. case, to the opposite, the Court rules that
neutrality is to be preserved even when the operation invoiced did not actually
take place, if very specific circumstances are met: namely, that no loss for
the national budget occurred, that the company invoiced was not actually planning
to erode its tax liability for VAT purposes and that the non-existent operation
was simulated for other commercial purposes (not directly affecting the tax
due). This conclusion is made possible making the principles of proportionality
(and reasonableness) to prevail over a mechanical application of the tax that
would otherwise prevent the right to deduct the tax charged.