CJEU Clarifies VAT Deduction Rights Amid Formal Errors in Transactions

• CJEU ruling discussed VAT deduction rights related to a transaction between Bulgarian company SEM Remont and Russian company Gidrostroy Russia
• The transaction involved dredging works in Varna port during August 2020
• Gidrostroy Russia was not VAT registered in Bulgaria when the invoices were issued and did not charge VAT
• Post-audit in December 2020, it was found Gidrostroy Russia exceeded the VAT registration threshold in December 2019
• Bulgarian tax authorities demanded VAT payment for December 2019 to December 2020 from Gidrostroy Russia
• Gidrostroy Russia issued a memorandum for the VAT amount under the reverse charge mechanism
• The memorandum had errors including incorrect listing of parties and was submitted to the tax authority instead of the counterparty
• Bulgarian tax authority refused VAT deduction for SEM Remont citing formal errors and incorrect initial invoices
• SEM Remont appealed to the administrative court in Varna which referred questions to the CJEU
• CJEU stated that the right to deduct VAT is fundamental and should not be restricted without proper basis

Source: mddp.pl

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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