Recent ECJ/General Court VAT Jurisprudence and Implications for EU Compliance (Jul–Aug 2025)

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Summary

This briefing document summarizes key themes and cases emerging from recent EU Court of Justice (ECJ) and General Court (GC) rulings and opinions related to Value Added Tax (VAT). The document covers topics including VAT fraud, the scope of exemptions, input tax deductions, penalties for non-compliance, transfer pricing adjustments, and the interaction of VAT with other legal principles.

I. VAT Fraud and Joint Liability

Theme: Member States can hold recipients jointly liable for VAT debts in cases of fraud, even if the recipient’s VAT deduction is denied.
Case: ECJ C-276/24 (KONREO)
Key Idea: Article 205 of the VAT Directive allows member states to impose joint liability. The ECJ emphasized this is “vital for effective VAT collection and combating tax evasion and that the burden should ultimately fall on the consumer.”
Quote: “…it does not preclude a national practice which imposes on the taxable person, the recipient of a supply of goods effected for consideration, a joint and several obligation to pay the value added tax (VAT) payable by the supplier of those goods, even though the right to deduct input VAT due or paid has been refused to the recipient of that supply of goods on the ground that he knew or ought to have known that he was participating in the VAT fraud.”

II. Penalties for VAT Non-Compliance

Theme: The proportionality and legality of penalties for VAT compliance breaches are under scrutiny. National laws limiting judicial review of penalties may be incompatible with EU law.
Case: ECJ C-304/25 (Lidl Bulgaria), ECJ C-605/23 (Ati-19” EOOD), ECJ C-733/23 (Beach and bar management)
Key Ideas:Confiscation of goods and financial penalties must be proportionate. The court will consider whether the cumulation of such penalties constitutes a disproportionate interference with property rights under Article 49(3) of the Charter of Fundamental Rights.
Article 47 of the Charter of Fundamental Rights prohibits national laws from restricting judicial review of coercive measures to only assessing potential damage.
National laws cannot impose double penalties for the same offense without judicial review options.
Quotes:Regarding Ati-19” EOOD: “The first paragraph of Article 47 of the Charter of Fundamental Rights of the European Union must be interpreted as precluding legislation of a Member State… limits the scope of the judicial review carried out in the context of an application for suspension of the provisional enforcement of a coercive administrative measure of a criminal nature solely to the existence of damage which is serious or reparable only with difficulty…”
Regarding Beach and bar management: “Article 325 TFEU, Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and Article 50 of the Charter of Fundamental Rights of the European Union must be interpreted as meaning that preclude national legislation which provides that a taxable person is to be fined a financial penalty where he has not issued receipts for sales, where that infringement has already been the subject of a coercive administrative measure to seal the premises in which that infringement was committed and to prohibit access to it.”

III. VAT Rates and Classification of Goods/Services

Theme: The interpretation of the Combined Nomenclature is crucial in determining the applicable VAT rate.
Case: ECJ C-375/24 (Keesing Deutschland)
Key Idea: Sudoku books qualify for the reduced VAT rate as “periodicals.” The court clarified that “‘printed matter’ is broader than just alphabetic text and includes materials like Sudoku puzzles.”

IV. VAT Exemptions

Theme: Defining the boundaries of VAT exemptions requires careful consideration of the specific activities and the potential for distortion of competition.
Cases: ECJ C-427/23 (Határ Diszkont), GC VAT Case – T-444/25 (Cavert), ECJ VAT C-379/24 & C-380/24 (Agrupació de Neteja Sanitaria), GC VAT T-366/25 (Szytelbiecka)
Key Ideas:Administering VAT refunds to foreign travellers is a separate, taxable service.
VAT Exemptions for Care Services in Dutch VAT Groups
Services essential for tax-exempt activities can be excluded, and how does distortion of competition affect this?
Does asset transfer to non-taxable individuals qualify for VAT exemption?

V. VAT Deductions (Input Tax Credit)

Theme: Formal compliance requirements for VAT deductions cannot override the principle of fiscal neutrality if the material conditions are met.
Case: ECJ C-521/24 (Aptiv Services Hungary Kft.)
Key Idea: The ECJ is considering whether VAT deductions can be denied based on procedural non-compliance if the material conditions are met.

VI. Intra-Community Supplies and Exports

Theme: Goods declared as intra-Community supplies can qualify for export exemptions if actually exported outside the EU, even without the supplier’s knowledge.
Case: ECJ C-602/24 (W.)
Key Idea: “Article 146(1)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the exemption provided for in that provision covers a supply of goods initially declared by the supplier as an intra-Community supply which, without the supplier’s knowledge, was made outside the territory of the European Union by the person acquiring the goods, where the export at issue has been established by the tax authorities on the basis of the customs documents.”

VII. Taxable Person: Legal Capacity vs. Legal Personality

Theme: A taxable person needs legal capacity (ability to act independently), not necessarily legal personality.
Case: ECJ C-796/23 (Česká síť)
Key Idea: A “taxable person is not required to have its own legal personality but must have its own legal capacity. The economic activity is carried out ‘independently’ where the taxable person is acting in his or her own name. This results from the actions and dealings with third parties (outwardly).”

VIII. Parent-Subsidiary Services and the “Single Supply” Concept

Theme: Parent-subsidiary services cannot always be treated as a single supply for VAT purposes.
Case: ECJ C-808/23 (Högkullen)
Key Idea: Services provided by a parent to subsidiaries should be assessed individually. “Articles 72 and 80 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding the services provided by a parent company to its subsidiaries in the context of the active management of those subsidiaries from being, in all situations, regarded by the tax authority as constituting a single supply which precludes the open market value of those services from being determined using the comparison method laid down in the first paragraph of Article 72 of that directive.”

IX. Incorrectly Charged VAT

Theme: Taxpayer may not be liable for incorrectly charged VAT to non-taxable persons.
Case: ECJ C-794/23 (Finanzamt Österreich)
Key Idea: “… 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.”

X. Transfer Pricing and VAT

Theme: Increasing scrutiny of the interplay between transfer pricing adjustments and VAT settlements.
Sources: Impact of CJEU Rulings on VAT and Transfer Pricing Adjustments: What to Expect?, Impact of European Court’s VAT Decision on Transfer Pricing and Customs Valuation, Intra-group settlements under the magnifying glass of the CJEU – key issues related to transfer pricing and VAT, VAT and Transfer Pricing – Four recent cases @ ECJ/CJEU – 2 cases decided, 1 AG Opinion issued
Key Issues:Recent ECJ/CJEU cases highlight the complex relationship between VAT and Transfer Pricing (TP) adjustments.
Högkullen case impacts transfer pricing and customs
Taxpayers should carefully document and settle transfer pricing adjustments.
Potential for differing corporate tax and VAT or duty values internationally and domestically.
Upcoming EU Court of Justice rulings may influence taxpayer and tax authority practices.
Businesses encouraged to reassess their intra-group transaction approaches.

XI. Ongoing Cases and Questions

Several cases are ongoing, seeking clarification on various aspects of EU VAT law:
- GC VAT Case T-397/25 (A&P Deco): Should VAT adjustments apply when immovable property is leased after a business transfer?
- GC VAT T-356/25 (Rapera) : Liability of tax representatives for VAT without direct involvement
- GC Customs T-296/25 (Lidikar): Can non-EU export values justify EU customs valuations?
- GC VAT Case T-308/25 (Direktsia „Obzhalvane i danachno-osiguritelna praktika“ – Plovdiv): Joint and several liability and VAT grouping.
- General Court Case T-413/25 (Peckeger): Taxable supply.
- General Court VAT T-366/25 (Szytelbiecka) : Does asset transfer to non-taxable individuals qualify for VAT exemption?