CJEU: Vădan (Case C-664/16)
Introduction – invoices and the right to deduct input VAT
According to the EU VAT Directive, a taxable person can only deduct input VAT if that person holds an invoice that complies with the EU VAT invoicing requirements. However, the CJEU ruled in several recent cases (e.g., Barlis 061) that tax authorities cannot refuse the right to deduct VAT on the sole ground that an invoice does not satisfy the conditions required. Instead, a taxable person should be able to deduct input VAT in cases where the substantive requirements are met, even if the taxable persons have failed to comply with some formal conditions.
In its judgment in the case at hand, the 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.
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. However, 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.
The 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. In its judgment, the CJEU repeats the principle set out in the Barlis 06 case by ruling that authorities cannot refuse the right to deduct VAT on the sole ground that an invoice does not satisfy the VAT invoicing conditions.
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.
In Barlis 06, the CJEU loosened the requirement laid down in the EU VAT Directive that in order to deduct input VAT, a taxable person needs to hold an invoice that complies with the EU VAT invoicing requirements. In Vădan, the CJEU draws a line in this respect and rules that even while a taxable person does 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.