EU blocks tax authorities from withholding new VAT registrations
- 18 March 2013 | Richard Asquith
The European Court of Justice has stepped into a case involving a Latvian trader that was being blocked from registering its company for an EU VAT number.
The case arose when the Latvian tax authorities refused to grant a resident VAT number to a Director who had previously VAT registered companies, but had then not carried out a taxable service. The tax office took the view that this was suspicious behaviour which indicated the possibility of VAT fraud.
However, on 14 March 2013, the ECJ held that the mere belief that a company does not have the resources or capital to commence taxable trade was not a sufficient basis to withhold issuing a EU VAT number. Instead, there must be specific evidence of potential VAT fraud.
Problems with EU VAT registrations hinders trade
There can be long delays in the granting VAT number in Europe currently, including intensive questioning and demands for additional information from the tax offices. This is due to problems of VAT fraud. This ruling may challenge this, and present difficulties for the VAT authorities.