Comments on ECJ C-164/24: The end of automatic VAT deregistrations? The ECJ draws the line

The Court of Justice of the European Union (ECJ) ruling in Case C-164/24 emphasizes the necessity for individual assessments before the automatic deregistration of VAT numbers, challenging the practice of systematic cancellations by tax authorities in cases of alleged tax violations.
The case involved Cityland EOOD, which argued that its VAT non-payments were due to legitimate commercial difficulties rather than fraudulent behavior; the court ruled that deregistration without evaluating a taxpayer’s intent or remediation efforts is disproportionate and undermines legal certainty.
This judgment mandates that tax administrations must conduct thorough evaluations of a taxpayer’s conduct and the nature of infractions before deregistration, reinforcing the principles of proportionality and good administration within the EU VAT framework.

The Court of Justice of the European Union ruled that the Bulgarian scheme for VAT exclusion is contrary to EU law because it does not examine the nature of the infringements or the conduct of the taxable person.
Cityland EOOD, a construction company, was removed from the VAT register by Bulgarian tax authorities for systematically failing to comply with VAT obligations. Cityland disagreed and the case was referred to the Court of Justice.
The Court highlighted that exclusion from the VAT system can occur after three formal infringements without thorough investigation, causing issues for buyers and recipients of services from the excluded taxable person, such as uncertainty in proving the right to deduct VAT.