CJEU Clarifies VAT Deduction Rights Amid Formal Errors in Transactions

CJEU ruling discussed VAT deduction rights related to a transaction between Bulgarian company SEM Remont and Russian company Gidrostroy Russia
The transaction involved dredging works in Varna port during August 2020
Gidrostroy Russia was not VAT registered in Bulgaria when the invoices were issued and did not charge VAT
Post-audit in December 2020, it was found Gidrostroy Russia exceeded the VAT registration threshold in December 2019
Bulgarian tax authorities demanded VAT payment for December 2019 to December 2020 from Gidrostroy Russia
Gidrostroy Russia issued a memorandum for the VAT amount under the reverse charge mechanism
The memorandum had errors including incorrect listing of parties and was submitted to the tax authority instead of the counterparty
Bulgarian tax authority refused VAT deduction for SEM Remont citing formal errors and incorrect initial invoices
SEM Remont appealed to the administrative court in Varna which referred questions to the CJEU
CJEU stated that the right to deduct VAT is fundamental and should not be restricted without proper basis

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.