In accordance with the resolution of the Economic Administrative Central Court (TEAC) dated April 27th 2015, input VAT borned before starting business activity will be tax deductible provided that at the moment such VAT amounts were borne; the taxpayer can prove the intention of affecting such goods or services acquired to a future business activity.
The analyzed case on the mentioned resolution starts with the non-acceptance by the Tax Inspection of the VAT deductibility borned before the beginning of the economic activity of real estate promotion, for not having performed, since its creation to its dissolution, the delivery of any goods or provision of any services.
During Tax Inspection procedure it has been proved that the entity has not issued invoices and the received invoices correspond mainly to the purchase option on land. Later on, after two years it was celebrated a transactional agreement by virtue of which the resolution of the purchase option was agreed. The Tax Inspection regularized the tax situation of the entity by denying input VAT deductibility before starting business activity because real estate activity was not finally performed and there was not a possibility to start it in the future, due to company dissolution.
The Administrative Court (TEAC) understands that the intention of allocating goods and services on which VAT was deducted to a business activity, i.e. real estate, has been duly proved, and the fact that at a further moment such activity is not finally performed does not impede the right for VAT deductibility of the transactions performed.
In accordance with case law of the European Justice Court it must be clarified that VAT deductibility before the starting of business activities, will depend on the circumstances occurred at the moment of such VAT was borned. Then, if at such moment it was estimated that the requirements for the VAT deductibility were met, other future facts that impeded the performance of the business activity, cannot determine, with retroactive effect, that such goods and services acquired were not affected to the activity, unless fraud and abusive circumstances were met.