The Principle of Fiscal Neutrality and Economic Reality in EU VAT: Two Peas in a Pod?

University essay from Lunds universitet/Institutionen för handelsrätt

Author: Kevin Van Abswoude; [2022]

Keywords: Economic reality; fiscal neutrality; VAT; EU; principle; VAT reality; abuse of law; legal certainty; CJEU; legal neutrality; system neutrality; external neutrality; commercial reality; economic and commercial reality; actual economic situation; real economic situation; economic approach; Law and Political Science;

Abstract: Economic reality constitutes a fundamental criterion for the application of the common VAT system. Although its reference by the CJEU has increased over the past decades, significant legal uncertainty does still exist regarding its origin, legal status, functioning and terminology. Van Doesum and Nellen have identified two functions of economic reality. In this regard, its benchmark of VAT reality appears to share similarities with the principle of fiscal neutrality, particularly its legal and systematic component. Therefore, this research aims to identify to what extent economic reality might be (in)comparable to the principle of fiscal neutrality in EU VAT.

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