- Background and VAT Registration Issues: In August 2020, the Bulgarian company SEM Remont commissioned Gidrostroy-Russia for dredging works, but the contractor was not VAT-registered in Bulgaria and did not charge VAT. Following an audit, Gidrostroy-Russia was registered for VAT only in December 2020, leading to a demand for back payment of VAT.
- Formal Errors in Documentation: Gidrostroy-Russia issued a protocol to settle the overdue tax, but it contained formal errors, such as incorrectly identifying the parties involved and failing to properly deliver the document to SEM Remont. The Bulgarian tax authority rejected the protocol for VAT deduction, citing non-compliance with formal requirements and that the original invoices were incorrectly issued.
- CJEU Ruling and Implications: The CJEU ruled that the right to deduct VAT is contingent on VAT being due or paid, which was not the case here due to the lack of valid documentation. The court emphasized that while formal deficiencies can sometimes be remedied, they cannot rectify substantive issues related to VAT obligations. This ruling reinforces that substantive conditions for VAT deduction must be met, regardless of any formal errors in documentation.
Source MDDP
See also
- Join the Linkedin Group on ECJ VAT Cases, click HERE
- VATupdate.com – Your FREE source of information on ECJ VAT Cases
