- Growing businesses make major investments in equipment and furniture, and while VAT on such expenditures is immediately recoverable, it is only definitively deductible after a certain period known as the “review” period.
- If a company no longer uses these investment goods during this period, an adjustment must be made and part of the initially deducted VAT must be repaid.
- However, if investment goods are destroyed, stolen, or lost due to reasons beyond the company’s control, the initially deducted VAT can be definitively acquired and not subject to adjustment.
- In a case before the Court of Justice, a telecommunications company’s destruction of goods was considered voluntary by the Bulgarian tax authorities, leading to the regularization of the initially deducted VAT.
- However, the Court ruled in favor of the company, stating that the destruction of goods may be the result of voluntary action on the part of the business and must be considered as leading to its “destruction” if they actually result in the irreversible disappearance of the asset.
- To avoid any demand for repayment of part of the initially deducted VAT, companies must document the removal of investment goods from their assets in accordance with applicable forms and deadlines.
Source vatdesk.eu
See also
- Summary of ECJ C-127/22: No Adjustment of deductible VAT if he destruction is duly proven and the goods had objectively lost all usefulness in the taxable person’s economic activities
- C-127/22 (Balgarska telekomunikatsionna kompania) – Judgment – No Adjustment of VAT deductions if scrapping of goods is duly proven
- Roadtrip through ECJ Cases – Adjustment of deductions – Recalculation (Art. 184 – 186)
- Join the Linkedin Group on ECJ VAT Cases, click HERE
- For an overview of ECJ cases per article of the EU VAT Directive, click HERE
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