VATupdate

Flashback on ECJ cases – C-392/09 Uszodaépitö – Right to deduct & Retrospective effect of invoicing requirements

Source Curia

Decision

Articles 167, 168 and 178 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding the retroactive application of national legislation which, in the context of a reverse charge regime, makes the deduction of value added tax relating to construction works conditional upon the amendment of invoices for those services and the submission of a supplementary, amending tax declaration, while the tax authority concerned has all the information necessary to establish that the taxable person is, as the recipient of the supply of services at issue, liable to value added tax, and to ascertain the amount of tax deductible.

Background

  • On 9 June 2006, the applicant in the main proceedings concluded a contract for works with NÁS MPS-4 kft, the developer, relating to construction work. The applicant in the main proceedings carried out the works with the participation of various subcontractors.

  • The work began in the spring of 2007 but came to a halt in the summer of 2007 because of financial problems. The invoices relating to the work completed at that point were issued. Both the applicant in the main proceedings and its subcontractors complied with their obligations as regards the declaration and payment of VAT under the previous VAT law.

  •  On 14 February 2008, following the entry into force of the new VAT law, the applicant in the main proceedings, the developer and the subcontractors, by a joint decision and in accordance with Paragraph 269(1) of that law, requested that the provisions of the new VAT Law be applied to the work carried out under both the contract between the applicant in the main proceedings and the developer and the contract entered into between the applicant and its subcontractors (‘the declaration of 14 February 2008’).

  • Following an examination by the tax authority of the VAT declaration made by the applicant in the main proceedings for the financial year 2007, by decision of 23 May 2008 the authority made a determination of a VAT debt of HUF 52 822 000 in respect of the period from April to September 2007 for which the applicant in the main proceedings was liable.

  • In that connection, the tax authority reasoned that the invoices issued by the subcontractors did not provide a basis for the applicant’s right to deduct, since those invoices did not comply with the provisions of the new VAT Law. Following the declaration of 14 February 2008, the new VAT law’s provisions relating to the reverse charge procedure were applicable retroactively to the invoices issued during the financial year 2007.

  • The authority submits that the invoices issued by the subcontractors ought to have complied with the provisions of Paragraphs 142(7) and 169(k) of the new law. Consequently, in order for the applicant in the main proceedings to be able to exercise its right to deduct in accordance with the provisions of the new VAT Law, the subcontractors should have amended the invoices issued and the applicant should have amended its VAT declaration for the financial year 2007 by means of a supplementary declaration.

  • Tax authorities may not apply retroactively national legislation which, in the context of a reverse charge regime, makes the deduction of value added tax relating to construction works conditional upon the amendment of invoices for those services and the submission of a supplementary, amending tax declaration, while the tax authority concerned has all the information necessary to establish that the taxable person is, as the recipient of the supply of services at issue, liable to value added tax, and to ascertain the amount of tax deductible.

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