Comments on ECJ C-794/23: Indoor playground operator does not owe VAT for incorrect invoices

Tax Liability and Article 203: The CJEU ruled that Article 203 of the VAT Directive applies even when some invoices are issued to taxable persons and others to non-taxable consumers. The risk of tax revenue loss must be assessed on a case-by-case basis, confirming that VAT is due on invoices issued regardless of the recipient’s status.
Definition of Final Consumers: The court clarified that “final consumers who do not have a right to deduct input VAT” refers strictly to non-taxable persons. This means that if any of the invoices are issued to taxable persons, the provisions of Article 203 still apply.
Estimation and Domestic Law: The court determined that the use of estimation assessments for determining the proportion of invoices issued to business versus non-taxable customers is governed by domestic law. While member states have procedural autonomy, they must adhere to EU principles such as effectiveness, neutrality, and proportionality, ensuring taxpayers can correct erroneously invoiced VAT.

EU Court Ruling on VAT Liability: The EU Court of Justice ruled that P GmbH, which operates an indoor playground, is not liable for VAT on incorrect invoices issued to a non-taxable person. The court emphasized that the issuance of incorrect invoices to taxable persons is irrelevant to this decision.
Incorrect VAT Rate Application: Despite the entrance fees for the playground being subject to a reduced VAT rate of 13%, P GmbH mistakenly applied the normal rate of 20%. The Austrian tax authority denied P GmbH’s request for a refund of the excess VAT paid.
Conditions for VAT Assessment: The court concluded that there is no obligation for P GmbH to pay the incorrectly charged VAT, as long as the risk of tax revenue loss is negligible, given that the customers are final consumers without the right to deduct input tax. The Austrian court raised concerns about potential tax revenue loss based on estimated taxable turnover, leading to further prejudicial questions to the EU Court regarding the assessment and estimation methods used by the tax authority.