ECJ case: VAT deduction rules for Bulgarian taxpayers clarified
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The European Union Official Gazette published the preliminary ruling of the European Court of Justice (ECJ) in Case No. C-624/23, concerning Bulgarian rules on input VAT deductions. The case involved a Bulgarian construction company and the interpretation of Council Directive 2006/112/EC regarding the supplier’s VAT registration status.
Case background:
The Bulgarian taxpayer, a construction company, entered into a contract with a Russian supplier for dredging services.
The supplier was not registered for VAT in Bulgaria at the time the invoices were issued.
The taxpayer claimed a VAT deduction using the supplier’s invoices, which were issued before the supplier applied for VAT registration.
Following an audit, Bulgarian tax authorities denied the deduction, stating that the invoices were invalid due to the supplier’s failure to register for VAT prior to issuance.
Taxpayer’s appeal:
The taxpayer argued that denying the VAT deduction based on the supplier’s late registration violated Council Directive 2006/112/EC.
They also claimed this approach contradicted the neutrality principle.
ECJ ruling:
The ECJ provided clarification on the matter and held that:
National legislation may deny VAT deductions if the supplier has not registered for VAT prior to issuing invoices.
Member state laws can prohibit VAT invoice corrections using details provided during a tax audit.