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On August 1, 2025 ,the ECJ issued its decision in the case C-794/23 (Finanzamt Österreich).
Context: Request for a preliminary ruling – Value added tax (VAT) – Services – Incorrect, overstated VAT mentioned on invoices – Invoices issued to non-taxable persons who do not have a right to deduct input tax – Liability for the risk of loss of tax revenue – Identification of invoices posing a risk of loss of tax revenue – Procedural autonomy of the Member States – Burden of proof – Power of financial authorities to make estimates – Criteria for an appropriate estimate
Summary
- Context of the Case: The case concerns a preliminary ruling regarding the application of Articles 203 and 238 of the VAT Directive, focusing on the obligations of a taxpayer who issued invoices with incorrect VAT amounts and the conditions for correcting such amounts.
- Key Questions to the Court: The court was asked whether a taxpayer is liable for VAT incorrectly charged to a non-taxable person when they have also provided similar services to other taxable persons, and how to define “end consumers not entitled to deduct VAT.”
- Court’s Decision on VAT Liability: The court ruled that a taxpayer does not owe the incorrectly charged VAT to a non-taxable person if they have also provided services to other taxable persons, provided there is no risk to tax revenue.
- Clarification on End Consumers: It was determined that only non-taxable persons qualify as “end consumers not entitled to deduct VAT,” excluding taxable persons who are not entitled to a deduction for specific reasons.
- Establishment of Estimation Criteria: The court stated that tax authorities can estimate which invoices are subject to VAT liability under Article 203, provided all relevant circumstances are considered, ensuring the principles of tax neutrality and proportionality are upheld.
Articles on EU VAT Directive 20226/112/EC
Articles 193, 203, 220 and 238.
Article 193 (Liability to pay VAT)
VAT shall be payable by any taxable person carrying out a taxable supply of goods or services, except where it is payable by another person in the cases referred to in Articles 194 to 199b and Article 202
Article 203 (Liability to pay VAT)
VAT shall be payable by any person who enters the VAT on an invoice.
Article 220 (Issuance of an invoice)
1. Every taxable person shall ensure that, in respect of the following, an invoice is issued, either by himself or by his customer or, in his name and on his behalf, by a third party:
(1) supplies of goods or services which he has made to another taxable person or to a non-taxable legal person;
(2) supplies of goods as referred to in point (a) of Article 33 except where a taxable person is making use of the special scheme in Section 3 of Chapter 6 of Title XII;
(3) supplies of goods carried out in accordance with the conditions specified in Article 138;
(4) any payment on account made to him before one of the supplies of goods referred to in points (1) and (2) was carried out;
(5) any payment on account made to him by another taxable person or non-taxable legal person before the provision of services was completed.
2. By way of derogation from paragraph 1, and without prejudice to Article 221(2), the issue of an invoice shall not be required in respect of supplies of services exempted under points (a) to (g) of Article 135(1).
Article 238 (Simplified invoice)
1. After consulting the VAT Committee, Member States may, in accordance with conditions which they may lay down, provide that in the following cases only the information required pursuant to Article 226b shall be entered on invoices in respect of supplies of goods or services:
(a) where the amount of the invoice is higher than EUR 100 but not higher than EUR 400, or the equivalent in national currency;
(b) where commercial or administrative practice in the business sector concerned or the technical conditions under which the invoices are issued make it particularly difficult to comply with all the obligations referred to in Article 226 or 230.
3. The simplified arrangements provided for in paragraph 1 shall not be applied where invoices are required to be issued pursuant to points (2) and (3) of Article 220(1) or where the taxable supply of goods or services is carried out by a taxable person who is not established in the Member State in which the VAT is due or whose establishment in that Member State does not intervene in the supply within the meaning of Article 192a and the person liable for the payment of VAT is the person to whom the goods or services are supplied.
Facts
‘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.
Source: minbuza.nl
Questions
(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?
AG Opinion
(1) A person is not liable for VAT under Article 203 of the VAT Directive for the incorrect invoices it has issued to non-taxable persons, even if it has issued further incorrect invoices to other taxable persons, for which it is then liable for the tax under that article. If necessary, the proportion of such invoices is to be determined by means of an estimate.
(2) In that regard, the criteria for estimating the proportion of invoices that pose a risk of loss of tax revenue can be derived from the type of service and typical customers. Similarly, the circumstances giving rise to the error and the way in which the issuer of the invoice was involved in establishing the facts may be relevant criteria in that estimation.
Decision
1. Article 203 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive (EU) 2018/1695 of 6 November 2018,
must be interpreted as meaning that a taxable person who has supplied a service and who has stated on the invoice an amount of value added tax (VAT) calculated using the incorrect rate is not liable for the part of the VAT which was incorrectly invoiced to a non-taxable person, even if that taxable person has also supplied similar services to other taxable persons.
2. Directive 2006/112, as amended by Directive 2018/1695,
must be interpreted as meaning that it is appropriate to classify as ‘final consumers who do not have a right to deduct input VAT’, within the meaning of the judgment of 8 December 2022, Finanzamt Österreich (VAT invoiced incorrectly to final consumers) (C‑378/21, EU:C:2022:968), only non-taxable persons. Thus, taxable persons who, in a given situation, do not have a right to deduct input VAT are not covered by that concept.
3. Directive 2006/112, as amended by Directive 2018/1695,
must be interpreted as not precluding, in the case of simplified invoicing under Article 238 of Directive 2006/112, as amended, a tax authority or a national court from using an estimate in order to determine the proportion of the invoices in respect of which a taxable person who has incorrectly invoiced VAT is liable for that tax under Article 203 of Directive 2006/112, as amended, provided that for the purposes of such an estimate, all the relevant circumstances are taken into account, and a taxable person, in compliance with the principles of fiscal neutrality and proportionality and the rights of the defence, from calling into question the results obtained by that method.
Source
Briefing Document
Reference to other ECJ Cases
- Case C‑378/21: This case is specifically cited in relation to the interpretation of “final consumer who does not have a right to deduct input VAT.” It helps clarify whether this term refers only to non-taxable persons or also includes taxable persons using services for private purposes.
- General Case Law on Article 203: The opinion discusses the overarching principles established in previous CJEU rulings about the strict liability associated with incorrectly invoiced VAT, emphasizing that the risk of loss of tax revenue must be evaluated on a case-by-case basis.
- See Liability to pay VAT – VAT shall be payable by any person who enters the VAT on an invoice (Art. 203)
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