In the recent case of VDP Dental Laboratory NV & ors (C-144/13) the ECJ has decided that a Dutch exemption for a supply which is ultra vires in respect of EC VAT legislation does not give a right to input tax deduction via EC legislation. The exemption precludes input VAT recovery, but has the effect of exempting imports and acquisitions into The Netherlands. The ECJ held that a taxable person who is not obliged to charge VAT on the supply of goods because national law (in contravention of Community law) provides for exemption, cannot however, rely on Community law to claim input tax deduction of VAT incurred on purchases incurred in respect of that supply. What this means though is that the exemption in Dutch domestic legislation means that the taxpayer will not be taxed on importations or acquisitions, irrespective of the VAT treatment in the Member State of an EU supplier.
Broadly, this means that a business cannot take advantage of domestic legislation and/or EC law in circumstances where it may benefit.