- Case Background: The CJEU case C-527/23 involved the Romanian company Weatherford Atlas Gip, which was denied the right to deduct VAT on administrative services purchased from other entities within the same group, as Romanian tax authorities argued the services were not necessary for its business activity and were also supplied to other group members.
- CJEU Ruling: The CJEU ruled that national legislation cannot deny the right to deduct VAT based solely on the simultaneous provision of services to multiple companies within the same group or the perceived necessity of the expenses, as long as the services are used for the company’s taxable transactions. The burden of proof lies with the taxpayer to demonstrate the connection between the services and their taxable activities.
- Implications for VAT Deductions: This judgment emphasizes that tax authorities cannot subjectively assess the reasonableness of expenses and must instead focus on objective documentation of service use. Consequently, while taxpayers retain the right to deduct VAT, they must ensure proper documentation to substantiate their claims, as the lack of reliable records could hinder their ability to justify VAT deductions in disputes with tax authorities.
Source: mddp.pl
Other sources
- CJEU Ruling on VAT Deduction: In Case C-527/23, the Court of Justice of the European Union (CJEU) ruled that the usefulness of purchased goods and services is not a criterion for VAT deduction, affirming that taxable persons have the right to deduct VAT on purchases used for taxable transactions regardless of their perceived utility or profitability.
- Neutrality of VAT System: The CJEU emphasized that the VAT system is designed to ensure the neutrality of the tax burden on transactions, meaning that the right to deduct VAT should not be limited based on the subjective assessment of the usefulness of the expenses incurred.
- Concerns Over Tax Authority Practices: The ruling addresses a concerning trend where tax authorities have increasingly limited the right to deduct VAT for taxpayers. The CJEU’s decision calls for a reassessment of such restrictive practices by tax authorities to ensure compliance with EU VAT principles.
Source Aurelie Soldai
See also
- C-527/23 (Weatherford Atlas Gip) – Refusal of the right to deduct if services are not used for taxable transactions
- Briefing document: ECJ C-527/23 (Weatherford Atlas Gip) – VAT Deduction for Group Services
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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.
