Continuing with the VAT neutrality topic. To define the concept in this series of articles, it must be clarified that “The principle of tax neutrality is equivalent to the absence of adverse economic effects derived from taxation; the analysis of this principle of external neutrality concerning VAT is carried out in greater depth” (Tax Neutrality).
The mechanism for the manifestation of VAT neutrality is found in the recognition of the credit and the determination procedure of the obligation. In simple terms, art. 16 contains the material elements for this recognition and art. 20 contains the norm that deals with the report, that is the formal requirements.
In the interpretation of these rules, we take as an explanatory ruling that emanated from the Court of Justice of the European Union, which clarifies how VAT rules should be interpreted: “The fundamental principle of VAT neutrality requires that the deduction of the tax paid be granted if the material requirements are met, even if the taxable person has omitted certain formal requirements. From the moment the Tax Administration has the necessary data to determine that the material requirements are met, it cannot impose – concerning the right of the taxable person to deduct the VAT – additional requirements whose effect may be the absolute impossibility of exercising such right. Read more
