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ECJ C-398/20 (ELVOSPOL) – Decision – Bad debts: Condition that debt did not arise during the 6 months preceding the declaration of bankruptcy is invalid

On November 11, 2021, the ECJ issued its decision in the case C-398/20 (ELVOSPOL).  This case is about the Czech legislation.  Is a condition that prevents taxpayers to apply a VAT bad debt relief, if they only received partial payment, if the claim arose less than six months before a court decision declaring the debtor insolvent.

Article in the EU VAT Directive

Article 90(1) and (2) of Council Directive 2006/112/EC (Taxable amount)

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.


In her tax returns for the tax period ‘May 2015’, the applicant revised the amount of VAT. The applicant did so because the company MPS Mont as failed to pay an invoice issued by it for the supply of goods, which stated 29 November 2013 as the date of performance of the taxable supply. MPS Mont as was declared bankrupt on 19 May 2014. On 14 December 2015, the Czech tax office asked the applicant to dispel its doubts as to the correctness and completeness of the amounts mentioned in the contested tax reform. Since, according to the tax office, the applicant did not do this adequately, he rejected the adjustment and obliged the applicant to pay additional VAT. The applicant appealed against that decision to the Board of Appeal. The latter has confirmed the decision on the basis of the time of the said claim, in particular because this claim arose during the period of six months preceding the date of the decision of the bankruptcy.


According to the referring court, the provision of the national VAT law covers situations in which the debtor has failed, in whole or in part, to pay the creditor for a taxable supply. Therefore, there are cases in which, in accordance with Article 90 (2) of Directive 2006/112, the Member States may provide for a derogation from the general rule of Article 90 (1). Nevertheless, he doubts whether the condition as to when the is in accordance with Article 90 of the Directive, where appropriate with its purpose and with the requirements set by the Court for the application of this Article.


Is national legislation contrary to the purpose of Article 90(1) and (2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax if it lays down a condition preventing value added taxpayers, where tax becomes chargeable on a taxable supply to another taxpayer who paid for the supply only in part or not at all, from making a correction to the amount of output tax in respect of the value of the claim if that claim arose less than six months before a court decision declaring the other taxpayer insolvent?

AG Opinion



Article 90 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding a national provision which makes adjustment of the amount of value added tax subject to the condition that the partially or totally unpaid claim must not have arisen during the six-month period preceding the declaration of insolvency of the debtor company, where it is not ruled out under that condition that such a claim may ultimately be definitively irrecoverable.






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