Comments on ECG T-689/24: Confirms Incompatibility of Polish Input VAT Deduction Rules with EU Law

The General Court, in case T‑689/24 (I. S.A. v Dyrektor Krajowej Informacji Skarbowej), upheld the view that Polish rules on input VAT deduction are incompatible with the VAT Directive, marking a successful first appearance before the Court for the author.
Beyond reaffirming that unmet formal requirements cannot override fulfilled material conditions for VAT deduction, the ruling crucially addresses the treatment of so‑called “late invoices” under Polish law.
The Court distinguished the case from earlier case law (notably C‑152/02 Terra Baubedarf‑Handel), confirming that where an invoice is received before the deadline for filing the return for the relevant period, restricting deduction to a later period breaches EU law—making legislative change in Poland unavoidable.

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EU court confirms Poland cannot delay input VAT deduction

Polish VAT Deduction Rules Incompatible with EU Law: The European General Court (ECG) ruled in I.S.A. v. Dyrektor Krajowej Informacji Skarbowej (T‑689/24) that Poland’s requirement for physical invoice possession to deduct input VAT in the same period is incompatible with EU law, marking a significant victory for taxpayers.
Right to Deduct Arises When VAT Becomes Chargeable: The ECG clarified that the right to deduct input VAT arises when the VAT becomes chargeable, not upon invoice receipt. National rules that delay this deduction due to late invoice reception, if the invoice is held by the VAT return filing deadline, violate EU principles of fiscal neutrality, proportionality, and effectiveness.
Implications for Poland and Businesses: This decision mandates Poland to align its VAT Act with the EU VAT Directive, allowing businesses to deduct input VAT in the period the VAT is chargeable, provided the invoice is received before the VAT return deadline. This prevents forced deferrals of deductions and strengthens fiscal neutrality for companies operating in Poland.

The General Court (Case T-689/24) ruled that a Polish company could deduct VAT in its tax return for the month in which goods (gas and electricity) were purchased, even if the invoice was received in the subsequent month, provided it was received before the tax return for the first month was submitted.
The Court clarified that while the exercise of the right to deduct VAT depends on possessing an invoice (formal condition), the right itself arises when the VAT becomes chargeable (i.e., when goods are delivered, a substantive condition), independently of invoice possession.
This decision emphasizes the principle of VAT neutrality, stating that taxpayers should exercise their right to deduct in the period the right arises to avoid bearing the burden of VAT, and that national regulations requiring invoice possession for the right to arise are contrary to the VAT Directive.

Immediate VAT Deduction Right Affirmed Despite Invoice Receipt Delay

The court ruled that the right to VAT deduction cannot be postponed to the period of invoice receipt if the invoice is already in possession at the time of filing the tax return for the period of supply.
The case involved the Polish company ISA, which faced delays in receiving invoices for gas and electricity purchases, leading the tax authority to assert that VAT deductions could only be claimed once the invoice was received, contrary to EU VAT directives.
The court emphasized that the right to deduct VAT arises when the tax becomes due, and delaying this right based solely on formal conditions violates principles of tax neutrality and proportionality, aligning with prior case law.