ECJ – C-895/19 (A. (Exercice du droit à déduction)) – Judgment – Timing of exercising right to deduct VAT on intra-community acquisitions of goods

On March 18, 2021, the ECJ issued its decision in the case C-895/19 (A. (Exercice du droit à déduction)). The case deals with the timing of exercising right to deduct VAT on intra-community acquisitions of goods.

Context: Reference for a preliminary ruling – Indirect taxation – VAT – Directive 2006/112 / EC – Intra-Community acquisition of goods – Deduction of input tax due in respect of such an acquisition – Formal requirements – Substantive requirements – Deadline for filing the tax return – Principles of fiscal neutrality and proportionality

Summary

Context of the Case: The Court’s judgment arises from a preliminary ruling request by the Wojewódzki Sąd Administracyjny w Gliwicach (Poland) regarding the interpretation of the VAT Directive (2006/112/EC), specifically concerning the deduction of input VAT on intra-Community acquisitions and the implications of procedural and substantive requirements.
Legal Issues Addressed: The case focuses on whether national legislation that imposes a three-month deadline for declaring VAT on intra-Community acquisitions is compatible with EU law, particularly Articles 167 and 178 of the VAT Directive, which govern the right to deduct VAT.
Judgment Outcome: The Court ruled that the national legislation in question, which restricts the right to deduct VAT based on procedural compliance within a specified timeframe, conflicts with EU law as it does not consider the good faith of the taxpayer or other relevant circumstances.
Principles of VAT: The judgment emphasizes the principles of fiscal neutrality and proportionality, asserting that the right to deduct VAT should not be hindered by procedural requirements that could impose undue burdens on taxable persons, particularly when no VAT is payable to the tax authority in intra-Community transactions.
Implications for Member States: The ruling clarifies that while Member States can implement procedural conditions for VAT deductions, these must align with EU law principles and cannot effectively deny the right to deduction based on non-compliance with procedural deadlines, especially when the substantive conditions for deduction are met.

Article in the EU VAT Directive

Articles 167 en 178 of the EU VAT Directive 2006/112/EC

Article 167 (Right to deduct VAT – Origin and Scope of Right of Deduction)
A right of deduction shall arise at the time the deductible tax becomes chargeable.

Article 178 (Right to deduct VAT – Rules Governing Exercise of the Right of Deduction)
In order to exercise the right of deduction, a taxable person must meet the following conditions:

(a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;
(b) for the purposes of deductions pursuant to Article 168(b), in respect of transactions treated as the supply of goods or services, he must comply with the formalities as laid down by each Member State;
(c) for the purposes of deductions pursuant to Article 168(c), in respect of the intra-Community acquisition of goods, he must set out in the VAT return provided for in Article 250 all the information needed for the amount of VAT due on his intra-Community acquisitions of goods to be calculated and he must hold an invoice drawn up in accordance with Sections 3 to 5 of Chapter 3 of Title XI;
(d) for the purposes of deductions pursuant to Article 168(d), in respect of transactions treated as intra-Community acquisitions of goods, he must complete the formalities as laid down by each Member State;
(e) for the purposes of deductions pursuant to Article 168(e), in respect of the importation of goods, he must hold an import document specifying him as
consignee or importer, and stating the amount of VAT due or enabling that amount to be calculated;
(f) when required to pay VAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down by each Member State.

Facts

A Polish referral asking whether Article 167 of the VAT Directive, in conjunction with Article 178, is to be interpreted as precluding national law which makes the exercise of the right to deduct VAT in the same accounting period as that in which the tax due was payable on transactions constituting Intra-Community acquisitions of goods, subject to entry of the tax due on those transactions in the appropriate tax declaration? Whether Article 167 of the VAT Directive, in conjunction with Article 178, is to be interpreted as precluding national law which makes the exercise of the right to deduct VAT in the same accounting period as that in which the tax due was payable on transactions constituting Intra-Community acquisitions of goods, subject to entry of the tax due on those transactions in the appropriate tax declaration?

Question

Is Article 167 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (as amended), in conjunction with Article 178 thereof, to be interpreted as precluding national legislation which makes the exercise of the right to deduct input tax in the same accounting period as that in which the tax due was payable on the transactions constituting Community acquisitions of goods subject to entry of the tax due on those transactions in the appropriate tax declaration submitted within the mandatory period (in Poland, three months) following the end of the month in which the tax liability arose in relation to the goods and services acquired?

AG Opinion

None

Decision

Articles 167 and 178 of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2010/45 / EU of 13 July 2010 , must be interpreted as meaning that they are opposed to national regulations under which the exercise of the right to deduct value added tax (VAT) relating to an intra-Community acquisition, during the same period taxable than that during which the VAT is due, is subject to the mention of the VAT due in the tax return filed within three months from the end of the month during which the tax obligation relating to the goods acquired took birth.

Source

Curia

Reference to other ECJ Cases

Idexx Laboratories Italia (C‑590/13): This case is cited to highlight that the right of taxable persons to deduct VAT is a fundamental principle of the common VAT system established by EU legislation.
Senatex (C‑518/14): Cited to emphasize that the right to deduct VAT is integral to the VAT scheme and should not be limited unduly.
Terra Baubedarf-Handel (C‑152/02): Referenced to illustrate that the right to deduct VAT is generally exercised in the same period in which the tax has become chargeable.
EMS-Bulgaria Transport (C‑284/11): This case is used to establish that Member States can set procedural conditions for VAT deductions, as long as they do not undermine the neutrality of VAT.
Zabrus Siret (C‑81/17): Cited to reaffirm that the right of deduction should typically occur in the same period as the tax becomes chargeable.