ECJ case C-518/14 (Senatex) – Judgment – VAT deduction for non-compliant invoices

With its decision on 15 September 2016, Senatex (C-518/14), the ECJ has opened the gateway to a retroactive invoice correction but left room for new questions. The German tax administration has yet to take a stand on this ruling.

Watch-out: this decision came out before the implementation of the Quick Fixes. As of Jan 1, 2020, the VAT number is a substantive requirement on invoices in case of intra-EU supples/acquisitions.

Context: Reference for a preliminary ruling — Common system of value added tax — Directive 2006/112/EC — Article 167, Article 178(a), Article 179 and Article 226(3) — Deduction of input tax — Invoices not showing a tax number or VAT identification number — Legislation of a Member State excluding the ex tunc correction of an invoice

Articles in the EU VAT Directive

Article 167, 178(a), 179 and 226(3) of the EU VAT Directive 2006/112/EC.

Facts

Senatex operates a wholesale textile business. In each of its tax returns for 2008 to 2011 it included deductions of input VAT in respect of commission statements issued to its commercial agents and the invoices of an advertising designer.
On 21 January 2013 the tax office decided to carry out between 11 February and 17 May 2013 an on-the-spot check to ascertain the correctness of Senatex’s tax returns for 2008 to 2011. In that check, the tax office found that the deduction of input tax in respect of commission statements issued by Senatex to its commercial agents was not possible, since those statements did not constitute regular invoices within the meaning of Paragraph 15(1) in conjunction with Paragraph 14(4) of the UStG. According to the tax office, the documents did not contain, either in the commission statements or in their annexes, the addressee’s tax number or VAT registration number. In addition, they did not refer to any other document from which those details could be deduced. For the same reasons, the tax office found that the deduction on the basis of the invoices issued by the advertising designer was also not allowed.
On 2 May 2013, while the on-the-spot check was still in progress, Senatex corrected the commission statements for 2009 to 2011 issued to its commercial agents, so that the tax number or VAT identification number of each commercial agent was added to those documents. The advertising designer’s invoices for 2009 to 2011 were also corrected in like manner on that date, that is, during the on-the-spot check.
Nonetheless, the tax office on 2 July 2013 issued amended tax notices for 2008 to 2011 in which, on the basis of the findings made in its on-the-spot check, they reduced the sums which Senatex was entitled to deduct as VAT, on the ground that the conditions for deduction had not been satisfied for those years, but were met only from the time of correction of the invoices in 2013.
By letter of 19 July 2013, Senatex brought an objection against the tax notices. In the objection procedure it turned out that Senatex had not corrected the commission statements issued in 2008 to which the tax notices referred. Consequently, it was only on 11 February 2014 that Senatex corrected, for 2008, the commission statements issued to its commercial agents and the invoices of the advertising designer by adding their tax number or VAT identification number.
By decision of 3 March 2014, the tax office dismissed Senatex’s objection and maintained its view that, since the conditions for the deduction of VAT were satisfied only from the time of correction of the invoices, in other words in 2013 and 2014, the correction of an invoice could not have retroactive effect from the date of supply of the service to which the invoice related.
That decision was the subject of the action brought on 5 March 2014 by Senatex before the referring court, the Niedersächsisches Finanzgericht (Finance Court of Lower Saxony, Germany). Senatex submits that the corrections it carried out have retroactive effect, as they were carried out before the final administrative decision, namely the decision of the tax office of 3 March 2014 dismissing its objection. By its action, Senatex therefore asks the referring court to annul the amended tax notices issued by the tax office for 2008 to 2011.

Questions

(1) Is the ex nunc effect of the first issue of an invoice, as established by the Court of Justice in the judgment of 29 April 2004, Terra Baubedarf-Handel (C‑152/02, [EU:C:2004:268]), qualified by the judgments of the Court of Justice of 15 July 2010, Pannon Gép Centrum (C‑368/09, [EU:C:2010:441]), and of 8 May 2013, Petroma Transports and Others (C‑271/12, [EU:C:2013:297]), as regards cases, such as the present, in which an incomplete invoice is completed, in so far as the Court of Justice ultimately intended to permit retrospective effect in such cases?

(2) What are the minimum requirements for an invoice to be capable of correction with retrospective effect? Is it necessary that the original invoice bears a tax number or a VAT identification number, or can these be added later with the consequence that the right to deduct input tax on the basis of the original invoice is retained?

(3) Is a correction to an invoice in time if it is only made in the course of objection proceedings against the decision (amended tax notice) of the tax authority?’

AG Opinion

In the light of the above considerations, I propose that the Court answer the questions referred by the Niedersächsisches Finanzgericht as follows:

Articles 167, 178(a), 179 and 226(3) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national legislation such as that at issue in the main proceedings under which the correction of an invoice in relation to certain required details, namely the VAT identification number, does not have retroactive effect, with the result that the right to deduct VAT may be exercised only for the year when the initial invoice was corrected and not for the year when that invoice was drawn up.

In this regard, the Member States may adopt measures to penalise failure to provide the required details, as long as they comply with the principle of proportionality, and also measures placing a temporal restriction on the possibility of correcting an incorrect or incomplete invoice, provided they apply in the same way to similar rights in tax matters based on domestic law and to such rights based on EU law (principle of equivalence) and do not render impossible in practice or excessively difficult the exercise of the right of deduction (principle of effectiveness).

Decision

Article 167, Article 178(a), Article 179 and Article 226(3) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national legislation, such as that at issue in the main proceedings, under which the correction of an invoice in relation to a detail which must be mentioned, namely the value added tax identification number, does not have retroactive effect, so that the right to deduct value added tax exercised on the basis of the corrected invoice relates not to the year in which the invoice was originally drawn up but to the year in which it was corrected.

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