VATupdate Newsletter Week 15 2025

OVERSTRETCHED

I recently renewed my membership at the gym. Last time, I already overstretched some muscles just by signing up. Later, I was suspended for not wiping down the machine I was struggling with (it nearly strangled me). This time, I’m determined to follow the gym rules more strictly — and actually go there more often.

Rules matter. Whether it’s cleaning up your sweat at the gym, returning your books on time at the library, or stopping at a red light — break the rules, and you might face consequences. A fine. A warning. Or a polite suggestion never to touch the rowing machine again.

In the VAT world, though, the consequences can be even more drastic: you can lose your VAT registration altogether. In a recent case before the European Court of Justice, it was decided that this might be stretching things a bit too far.

In the Cityland case (C‑164/24), a Bulgarian construction company was removed from the VAT register after years of somewhat inconsistent compliance — including late payments of VAT, sometimes as little as BGN 0.46. The tax authorities called this “persistent non-compliance” and decided that enough-was-enough: deregistration.

But the ECJ wasn’t buying it. It ruled that simply counting slip-ups — without considering their nature or context — goes against the principles of proportionality and legal certainty. In short: you can’t revoke someone’s VAT number just because they forgot their towel a few times. The tax authorities must go deeper. Was there intent to deceive? Was tax revenue at risk? Or was it just clumsy admin and a minor cash-flow hiccup?

So yes — follow the rules, in the gym and in your VAT returns. But if you do slip up, the system shouldn’t treat you like a criminal mastermind when you’re clearly just someone trying to hold it all together (in Lycra or otherwise).

For VAT case law updates that don’t skip leg day, visit www.vatupdate.com.

If you have any comments, questions, or ideas that you want to share with us, please send us an email at [email protected] or leave a comment under the posts of this newsletter on LinkedIn.

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