| Abstract [eng] |
The limitation of value added tax (VAT) deduction is one of the most complex and frequently disputed areas of tax law, where several fundamental elements of the VAT system intersect – the principle of tax neutrality, the requirement of legal certainty, and the imperative to protect the state budget. This thesis examines the concept of the right to VAT deduction, its role within the common VAT system, as well as the main grounds and principles for its limitation established in both European Union and Lithuanian law. The analysis explores how the VAT deduction mechanism ensures that the tax burden ultimately falls only on the final consumer, while at the same time revealing that this right is not absolute and may be restricted in cases where there is no sufficient link with taxable activities, where fraud or abuse is identified, or where activities are of a mixed or non- economic nature. Particular attention is devoted to the case law of the Court of Justice of the European Union and the Supreme Administrative Court of Lithuania, in which the main criteria and models for limiting VAT deduction are developed. The analysis of this case law aims to reveal how the direct and immediate link with taxable activity is assessed, how the “knew or should have known” criterion is applied in cases of fraud, and how proportional deduction is determined in situations involving mixed or non-economic activities. The research shows that although the jurisprudence of the Court of Justice of the European Union establishes general principles and doctrinal models for limitation, their application in practice is based on evaluative criteria that grant national courts a broad margin of discretion. The practice of the Supreme Administrative Court of Lithuania essentially adopts these criteria but applies them in a more detailed and often stricter manner, particularly emphasizing the importance of objective evidence, the assessment of economic substance, and the taxpayer’s obligation to substantiate the right to deduction. As a result, significant practical problems arise related to the allocation of the burden of proof, the ambiguity of limitation criteria, and the predictability of the right to VAT deduction. This leads to the conclusion that the limitation of VAT deduction remains a dynamic and complex area of law, in which a continuous balance must be sought between ensuring tax neutrality, effectively combating abuse, and maintaining an adequate level of legal certainty and stability for taxpayers. |
