Limits to Tax Planning

S. 593 1. Introduction

1.1. Scope and Structure

Over the past decades VAT became the most commonly used indirect tax. As this tax has become the major source for state budgets mainly within the EU, defining clear limits to planning and setting borders for avoidance and evasion in VAT has become increasingly important for the EU and all its Member States.

This paper outlines the limits of tax planning provided by the abuse of rights doctrine and its application to the VAT in the EU. I firstly present in which areas of VAT in general planning and therefore also avoidance and evasion take place and outline the means for setting limits in the EU VAT system against tax evasion and avoidance. I follow with a focus on the abuse of rights doctrine introduced to EU VAT system by the Court of Justice of the European Union and how this principle is applied in practice. I also look at the recent and possible future changes in using the anti-abuse principle in EU VAT.

1.2. Tax Planning in VAT

It is almost impossible to list every aspect or option of planning that has been used in the EU VAT, because notwithstanding the practices in individual EU Member States, only the history of the VAT-related decisions...