The Economic Objective of a Contract as a Criterion for the Assessment of Taxation of a Transaction with Value Added Tax

Abstract

The article attempts to examine the impact of the intentions of the parties to a business transaction on the fiscal circumstances within the framework of value added tax. Analysis of the Court’s case law allows one to conclude that the economic objective of a contract between the parties to a transaction may be of considerable importance for the determination of the tax effects in VAT. This is because the economic and commercial reality is a fundamental criterion for the operation of the common VAT system, and it should be taken into account. In this respect, significant contractual terms may be important. In addition to the stipulations of the contract between the parties, objective interests of the parties, such as pricing and invoicing, may also be relevant. It is also possible to refer to the economic purpose of supply and the conventional rules and standards applicable in a given field as well as the economic practice.