ECJ C-146/19 (SCT) – Judgment – Reduction taxable amount, definitive non-payment, failure by vendor to take proper steps

On 11 June 2020, the European Court of Justice gave is judgment in case C-146/19 (SCT). The case deals with VAT recovery on bad debts.

See our previous post about this case HERE.


Article in the EU VAT Directive

Article 90, 273 of the EU VAT Directive 2006/112/EC

Article 90
1. In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.
2. In the case of total or partial non-payment, Member States may derogate from paragraph 1.

Article 273
Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.
The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.


SCT, established in Slovenia, wanted to correct earlier declared output VAT, after claims on two companies whose bankruptcy proceedings were definitively terminated had not been paid.

The Slovenian tax authorities denied the VAT refund, because SCT had not lodged those claims in the bankruptcy proceedings concerned and those claims had been extinguished in accordance with Article 296 ZFPPIPP. On that basis, it concluded that the conditions for qualifying for a VAT reduction were not met.

The Slovenian Court wanted to know if the EU VAT bad debt rules of article 90(2) of the VAT Directive allow Slovenia to deny a reduction of the taxable amount for VAT purposes, even with respect to cases of definitive non-payment, if the non-payment is caused due to the fact that the vendor did not take proper steps against a debtor (such as filing for a bankruptcy)? And if this is allowed, does it matter if the vendor can demonstrate that even if those steps were taken, he would not have received payment anyway?



Is Article 90(2) of the VAT Directive to be interpreted as permitting derogation from the right to reduce the taxable amount for VAT purposes even with respect to cases of definitive non-payment, where such definitive non-payment is a consequence of a failure on the part of the taxable person liable for the VAT to take proper steps, such as lodging a claim in bankruptcy proceedings commenced against his debtor, as in the present case?

If such derogation from the right to reduce the taxable amount for VAT purposes is permissible, must there nevertheless be a right to reduce the taxable amount for VAT purposes on the ground of non-payment where the taxable person is able to demonstrate that, even if he had lodged a claim in the bankruptcy proceedings, it would not have been satisfied, or is able to demonstrate that there were reasonable grounds for not lodging a claim?

Does Article 90(1) of the VAT Directive have direct effect even if the legislature of a Member State has exceeded the scope of the possibilities for derogation established by Article 90(2)?

AG Opinion



1.      Article 90(1) and Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding legislation of a Member State under which a taxable person is refused the right to a reduction of the value added tax paid in respect of an irrecoverable claim where he has failed to lodge that claim in insolvency proceedings commenced against the debtor, even though the taxable person has shown that, had he lodged the claim, he would not have been able to recover it.

2.      Article 90(1) of the Directive 2006/112 must be interpreted as meaning that national courts are required, by virtue of their obligation to take all appropriate measures to ensure the implementation of that provision, to interpret national law in conformity with that provision or, if such an interpretation is not possible, to disapply any national legislation the application of which would lead to a result contrary to that provision.

Personal comments/VATupdate 

If it were accepted that Member States could completely exclude the reduction of the taxable amount of VAT, this would run counter to the principle of neutrality of VAT, which in particular implies that the trader – as a tax collector on behalf of the State – must be fully relieved of the tax which he owes or has paid in the course of his economic activities which are themselves subject to VAT.

In the present case, SCT is denied the right to have the taxable amount lowered on the ground that that company has failed to comply with the requirement under national law that that reduction be conditional on the taxpayer’s submission of the uncollected claims in the bankruptcy procedure.

Source Curia

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