5.  On 14 December 1998 the Business Support Centre entered into an agreement with the Austrian Ministry of Foreign Affairs to set up a business incubator for small and medium-sized enterprises in the town of Ruse. In the course of implementing the project, the applicant organisation undertook to renovate a property of the Ruse municipal council against being granted the right to use it for the needs of the business incubator for a period of ten years. The renovation was completed on 9 February 2000 and cost BGN 192,761 (EUR 98,558) all of which was paid by the applicant organisation. 6.  On 20 July 1999, apparently in the course of renovating the municipal property, the Business Support Centre received a supply from a sole trader (“the supplier”). It is unclear whether the transaction was for a supply of goods or services. As both entities were registered under the Value Added Tax Act of 1999 (“the VAT Act”) the transaction constituted a taxable supply under the said Act. 7.  The total cost of the received supply was BGN 68,400 (EUR 34,972), of which BGN 57,000 (EUR 29,144) was the value of the goods or services and BGN 11,400 (EUR 5,828) was value-added tax (“VAT”). The supplier issued invoice no. 126/20.07.1999 to the applicant organisation, which the latter paid in full, including the VAT. The applicant organisation recorded the supply in its accounting records for the month of July 1999 and filed its VAT return for that period on 16 August 1999. The supplier, on the other hand, failed to record the transaction in its accounting records, to file a VAT return and to settle its obligations with the State budget. 8.  On 11 April 2000 the tax authorities initiated an audit of the applicant organisation, covering, in respect of VAT, the period from 1 July 1999 to 29 February 2000. In the course of the inspection a cross-check of the supplier was conducted in order to ascertain whether it had properly reported and recorded the supply in its accounting records. As a result, its failure to comply with its VAT reporting and payment obligations was discovered (see paragraph 7 above). 9.  On 31 August 2000 the Central Tax Office of the Ruse Territorial Tax Directorate issued the applicant organisation with a tax assessment. In respect of VAT it found that the Business Support Centre had mistakenly deducted five payments it had made to suppliers for input VAT amounting to BGN 25,944.80 (EUR 13,265) and had failed to charge output VAT, in the amount of BGN 38,552.30 (EUR 19,711), on a taxable service it had provided. 10.  In particular, in respect of the transaction under invoice no. 126/20.07.1999 the tax authorities refused the applicant organisation the right to deduct the input VAT it had paid, amounting to BGN 11,400 (EUR 5,828), because the supplier had failed to record the transaction in its accounting records, to file a VAT return and to settle his obligations towards the State budget. Thus, they considered that no VAT had been “charged” on the supply in question and that the applicant organisation could not therefore deduct the input VAT. 11.  Based on the above conclusions, the tax authorities adjusted the applicant organisation's input and output VAT for the relevant reporting period. In respect of the supply under invoice no. 126/20.07.1999, this had the effect that the applicant organisation had to pay a second time the input VAT of BGN 11,400 (EUR 5,828). In addition, it was ordered to pay interest of BGN 1,396.83 (EUR 714) on that amount. 12.  On 4 October 2000 the applicant organisation appealed against the tax assessment. In a decision of 6 November 2000 the Ruse Territorial Tax Directorate confirmed in full the findings in the tax assessment in respect of the input VAT of BGN 11,400 (EUR 5,828). The applicant organisation appealed to the courts. 13.  On 28 May 2001 the Varna Regional Court found against the applicant organisation, which appealed further. In a final judgment of 13 August 2002 the Supreme Administrative Court upheld the lower court's findings and those of the tax authorities in respect of the input VAT of BGN 11,400 (EUR 5,828). In reaching their decisions, the courts likewise concluded that in so far as the supplier had failed to file VAT returns and to settle his obligations towards the State budget, the applicant organisation had no right to deduct the said input VAT.