Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax: Articles 193, 203, 220 and 238.
‘P GmbH’ (hereinafter ‘P’) is a company that operates an indoor playground. In 2019, it applied a VAT rate of 20% to the entrance fees it charged for the playground. A rate of 13% should have been applied to the entrance fees. After issuing a receipt showing this 20%, it adjusted its VAT return. Finanzamt Österreich ruled that a subsequent correction of the 20% VAT rate for 2019 was not allowed, because the invoices could not be corrected and the credit notes resulting from the VAT difference could not be sent to the company’s customers. P appealed against Finanzamt’s decision, arguing that the services were ‘almost exclusively’ provided to private individuals, who are not entitled to deduct input tax. The court of appeal upheld the appeal. The court of appeal estimated that the proportion of customers who had deducted input tax was 0.5% of total turnover.
Grounds for referral:
Finanzamt claims that the court of appeal’s decision is not in line with the Court’s case-law. It follows from the case-law that a taxable person is not required to pay the incorrectly invoiced portion of the VAT if there is no risk of loss of tax revenue. In a previous case, the Court assumed that all of P’s customers were end-consumers who were not entitled to deduct input tax. However, in the present case, the risk of loss of tax revenue is not completely ruled out, which is why the referring court wonders whether the same reasoning can be applied. The referring court also has doubts as to how the concept of ‘end-consumer who is not entitled to deduct input tax’ within the meaning of Article 203 of the VAT Directive should be interpreted. The doubt here is whether this article means that a risk of loss of tax revenue exists only in relation to invoices issued to taxable persons.
Questions referred for a preliminary ruling:
(1) Must Article 203 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax be interpreted as meaning that a taxable person who has provided a service and who has shown on his invoice an amount of value added tax (VAT) calculated on the basis of an incorrect rate is not required, under that provision, to pay the incorrectly invoiced portion of the VAT where the service specified in that invoice was provided to a non-taxable person, even if that taxable person has also provided similar services to other taxable persons?
(2) Should the term ‘end-consumer who is not entitled to deduct input tax’ within the meaning of the judgment of the Court of 8 December 2022, Finanzamt Österreich (incorrectly invoiced VAT to end-consumers) (C-378/21, EU:C:2022:968), be understood to mean only a non-taxable person or also a taxable person who uses the specific service only for private purposes (or for other purposes for which there is no right to deduct input tax) and therefore has no right to deduct input tax?
(3) On the basis of what criteria should it be assessed, in the case of a simplified invoice as referred to in Article 238 of Directive 2006/112/EC, for which invoices (possibly by means of an estimate) the taxable person is not required to pay the incorrectly invoiced amount because there is no risk of loss of tax revenue?
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.