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principal / Two ECJ cases on invoice requirements and right to deduct
Last 15 September 2016 was a good day for European taxpayers. The ECJ gave its decision on two cases involving invoice requirements and time in which VAT can be deducted on an incomplete invoice. In both cases, the Court ruled in favour of the taxpayer.
Case Senatex GmbH (C-518/14) involves a company that received invoices between 2008 and 2011 on which VAT was deducted at the time of receiving these invoices. In the course of an audit, the German tax authorities found out that these invoices were not stating the VAT number of the supplier, hence they were considered invalid for VAT deduction purposes. As soon the taxpayer found out about this requirement, the invoices were corrected including the suppliers’ VAT number. However, the German authorities reduced the right to deduct on these invoices on the basis that this right only arised when the invoices were corrected (year 2013), and not when they were originally issued (years 2008 to 2011).
According to the ECJ, the right of deduction must be allowed when VAT is paid in the course of economic activities as long as the substantive requirements have been met. In the case at hand, the supplier’s VAT number was only a formal requirement and therefore the right to deduct arises at the moment when all substantive requirements were met. The taxpayer was allowed to deduct VAT from the moment the original invoice was received.
This position was reinforced by another ECJ decision issued on the same day. Barlis case (C-516/14) involved a Portuguese company receiving invoices from their lawyer with the following description of the service “legal services from 1 December 2007 to present date” (the starting date changed depending on the invoice). The Portuguese authorities denied deduction on these invoices on the grounds that the description was too wide to comply with the Portuguese invoice requirements. The ECJ agreed that the description was not detailed enough, however, the Court held that tax authorities cannot refuse the right to deduct solely because some of the invoice requirements are not met when these authorities have sufficient information to ascertain that the substantive conditions to exercise the right to deduct are satisfied.