Landmark CJEU ruling: Invoice date cannot delay VAT deduction

Under the legal framework applicable prior to the CJEU ruling, if a taxpayer purchased goods for business purposes on 30 May but the supplier issued the invoice on 10 June, the taxpayer could not deduct VAT for the month of acquisition. Instead, the deduction could be made no earlier than for the VAT return covering June. In practice, this meant that taxpayers bore the negative consequences of their counterparties’ delays. Moreover, in certain cases, such limitations could have a significant adverse impact on companies’ cash flow.

The CJEU emphasised that the right to deduct VAT depends on fulfilling both substantive requirements (relating to the basis and scope of the right) and formal requirements laid down in the VAT Directive. According to the Court’s settled jurisprudence, and in light of the principles of VAT neutrality and proportionality, the right to deduct must be granted where all substantive requirements are met, even if certain formal requirements have not been complied with.

This means that the emergence of the right to deduct VAT may depend solely on substantive conditions provided for in the VAT Directive. The possession of an invoice should be classified as a formal requirement. However, under Article 178 of the VAT Directive, the taxpayer may exercise the right to deduct only once they are in possession of the invoice. It should be emphasised that the “arising of the right” and the “possibility to exercise the right” are two distinct concepts.

Polish provisions made the very existence of the right to deduct VAT dependent on the receipt of an invoice. The Polish legislator thus unlawfully extended the conditions for the emergence of that right, contrary to the VAT Directive. Furthermore, pursuant to Article 167 of the VAT Directive, the right to deduct should, as a rule, be exercised for the same period in which it arises.

The CJEU also rejected the argument of the Director of the National Revenue Information that linking the right to deduct VAT to the receipt of an invoice was justified under Article 273 of the VAT Directive as a measure to ensure proper tax collection and prevent tax fraud. The Court found that this solution infringed upon the principle of proportionality.

In conclusion, the judgment will have a positive impact on the business environment in Poland. For example, if a taxpayer acquires goods on 30 September and receives the invoice on 15 October, they will be entitled to deduct VAT on the VAT return covering September. In practice, this means that many taxpayers will be able to deduct VAT one month earlier, which may improve their cash flow.

---

Konrad Gańczarczyk has experience in ongoing tax advisory services to companies operating in the real estate, construction, and IT sectors.