Summary of ECJ C-127/22: No Adjustment of deductible VAT if he destruction is duly proven and the goods had objectively lost all usefulness in the taxable person’s economic activities

Background

BTK is a Bulgarian telecommunications company subject to VAT on its activities, including the provision of telecommunication services.
Between 2014 and 2017, BTK wrote off various goods, including installations, equipment, and appliances considered unsuitable for use or sale.
Some of these goods were sold as waste to taxable third-party undertakings, and others were destroyed or disposed of.
The write-off transactions led to adjustments involving the repayment of input VAT deducted in respect of the goods concerned.
BTK requested reimbursement of the sums paid in connection with those adjustments, but the request was refused. BTK brought legal action against this decision, but it was dismissed.
The referring court seeks clarification on the interpretation of certain concepts referred to in Article 185 of the VAT Directive, particularly in relation to the possible effect of the subsequent sale of written-off goods as waste by way of taxable transactions carried out as a taxable person.

Questions

The questions relate to the interpretation of Article 185(1) and (2) of the VAT Directive in relation to the deduction of VAT paid on goods that have been written off, destroyed, or disposed of.
The questions ask whether such events constitute a change in the factors used to determine the amount to be deducted and whether there is an obligation to adjust the deduction.
Additionally, the questions ask whether such events constitute a duly proved or confirmed case of the destruction or loss of goods, for which no obligation arises to adjust the deduction.
Finally, the questions ask whether national legislation requiring the adjustment of the deduction in such cases is precluded by the VAT Directive.

Decision

The European Court of Justice has issued a ruling on the interpretation of Article 185 of Directive 2006/112/EC regarding the deduction of value added tax (VAT) on goods that have been written off as unusable.
The court ruled that the sale of such goods as waste does not constitute a change in the factors used to determine the amount to be deducted, but the voluntary destruction of the goods does constitute a change.
However, if the destruction is duly proven and the goods had objectively lost all usefulness in the taxable person’s economic activities, it does not give rise to an adjustment obligation.
The court also ruled that national laws requiring the adjustment of input VAT deducted upon acquisition of written-off goods are precluded if the goods are subsequently destroyed or disposed of in a way that effectively means they have disappeared irreversibly.