On November 18, 2022, the European Court of Justice issued its preliminary ruling on Case C‑358/20. The case revolves around a Romanian company Promexor Trade Srl that was refused a right to deduct input VAT on the ground that the VAT registration was revoked since no transactions (subject to VAT) was indicated in the VAT returns filed for six consecutive months.
Tax authorities withdrew the company’s VAT registration because its VAT returns did not reveal any transactions subject to VAT. Since the applicant no longer had a valid VAT number, it issued invoices without the VAT. However, during a tax audit, the authorities found no errors with the VAT returns for the period audited. They were correctly submitted because the Romanian company submitted retroactive returns and claimed deductions upon VAT re-registration in order to avoid penalties for late filing submissions and late payment. The tax authorities did not grant the deductions. When the audit had ended, the applicant submitted corrective returns and adjusted the returns to nul (zero).
The court has ruled that under the VAT neutrality principle , the EU VAT directive does not prevent national legislation where the tax authority may require taxpayers to pay the VAT due on taxable transactions, provided that the taxpayers can re-register for VAT and deduct the input VAT paid.