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European Commission v Republic of Hungary

Hungarian legislation provided that where a taxable person had an ‘excess’ of input tax within Article 183 of Directive 2006/112/EC but part of that excess related to transactions where the taxable person had not actually paid the supplier the full amount for the purchase in question the taxable person could be required to carry the excess forward to the following tax year instead of receiving a refund.

In European Commission v Republic of Hungary (ECJ Case C-274/10) the Commission applied to the ECJ for a ruling that this went beyond what was permitted by Article 183.

The ECJ granted the declaration holding that Hungary had failed to fulfil its obligations under the Directive.

Why it matters: Article 183 of Directive 2006/112/EC provides that ‘where for a given tax period the amount of deductions exceeds the amount of VAT...

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