Source curia
Judgment of 21 November 2018 in case C-664/16 (Lucretiu Hadrian Vadan) regarding the deduction of input VAT where no invoice is available.
Decision
Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, in particular Articles 167, 168, 178(a) and 179, and the principles of the neutrality of value added tax (VAT) and proportionality, must be interpreted as meaning that, in circumstances such as those at issue in the main proceedings, a taxable person who is unable to provide evidence of the amount of input VAT he has paid, by producing invoices or any other document, cannot benefit from a right to deduct VAT solely on the basis of an assessment resulting from an expert report commissioned by a national court.
Facts
- Mr. Vădan, a Romanian national, undertook a construction project for a residential complex with several buildings. He also carried out several real estate transactions and sold building land.
- Mr. Vădan did not have a VAT registration and in the absence of submission of a VAT return to the Romanian tax authorities, the authorities raised a VAT assessment. The authorities furthermore denied the deduction of input VAT incurred prior to Mr. Vădan’s VAT registration.
- Mr. Vădan argued that he should be able to deduct this input VAT — even though he did not have any invoices or other documents to support this claim.
Deduction of VAT: Substance vs. Form
- Substantive conditions (article 168(a) of the VAT directive):
- the person concerned must be a taxable person within the meaning of that directive and
- the goods or services relied on to give entitlement to the right of deduction must be used by the taxable person for the purposes of his own taxed output transactions and those goods or services must be supplied by another taxable person as inputs.
- Formal condition (article 178(a) of the VAT Directive): an invoice drawn up in accordance with Article 226 of the VAT directive.
- From the fundamental principle of the neutrality and proportionality it follows that the tax authorities cannot refuse the right to deduct VAT on the sole ground that an invoice does not satisfy the conditions required by Article 226(6) and (7) of the VAT Directive if they have available all the information to ascertain whether the substantive conditions for that right are satisfied.
- It is for the taxable person seeking deduction of VAT to establish that he meets the conditions for eligibility.
Judgment
- CJEU held that a taxable person who is unable to provide evidence of the amount of input VAT he has paid (e.g., with an invoice), cannot benefit from the right to deduct VAT.
- CJEU ruled in this case that a taxable person who is unable to provide evidence of the amount of input VAT he has paid, by producing invoices or any other document, cannot benefit from a right to deduct VAT.
- However, a taxable person is required to provide objective evidence that goods and services were actually provided as inputs by taxable persons for the purposes of his own transactions subject to VAT, in respect of which he has actually paid VAT.
- That evidence may include, inter alia, documents held by the suppliers or service providers from whom the taxable person has acquired the goods or services in respect of which he has paid VAT.
Comments
- ECJ states, for the first time, that the submission of invoices is not a mandatory requirement for the deduction of input VAT.
- The strict application of the requirement to produce invoices would conflict with the principles of neutrality and proportionality.
- Hence, taxable persons can also claim input VAT deduction if they are able to prove the necessary (substantive) requirements by means of objective evidence.
Other CJEU cases on VAT deduction and incompliant invoices
- In Barlis 06: Substance over form: Authorities cannot refuse the right to deduct VAT on the sole ground that an invoice does not satisfy the VAT invoicing conditions.
- In Vădan, even while a taxable person does not have to be in the possession of an invoice that complies with all the EU VAT invoicing requirements in order to deduct input VAT, that taxable person should at least be in the possession of an invoice or any other piece of objective evidence
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