CJEU - Recent Developments in Value Added Tax 2023

S. 701. The EU VAT concept of “substance over form” - introductory remarks

This chapter will discuss the substance over form principle in the EU and local Dutch VAT law. The principle is defined in the online Cambridge Dictionary as follows: “The idea that a company’s accounts should show what it has really earned in a particular period, what it owns and owes, etc., rather than calculations that are formally or legally correct but do not describe the situation accurately.” For EU VAT, principle of substance over form is applied in three situations:

• It is used to establish the actual objective facts constituting a transaction or its objective purpose instead of its legally formalized description, e.g. the legal agreement regarding the transaction, for the purpose of applying the relevant EU VAT provisions.

• It is used to establish whether one or more transactions constitute an abuse of law. For that purpose, the activities that are agreed and performed are tested to determine whether they are carried out with the sole aim of obtaining a tax advantage without any other economic objective. In these cases, economic reality is used as a standard of normality.

• It ensures that supplies that do not ...