Right to Deduct VAT and Compliance with Formal Conditions

Summary

VAT deductions denied across multiple expense categories due to lack of supporting documents. SARL GM Sécurité, a private security company, was subject to a tax audit that resulted in the rejection of VAT deductions on mission expenses (restaurant receipts), maintenance and small equipment costs, and subcontracting charges. The administration’s basis for denial was the absence of sufficient supporting documents—invoices and import declarations—for these deductions. The company was unable to provide the necessary formal documentation to substantiate its VAT deduction claims.
The company argued substance over form, but the Court sided with the administration. GM Sécurité contended that the absence of certain invoices should not undermine its right to deduct VAT, since its accounts were properly maintained, some missing invoices resulted from water damage (force majeure), and the substantive conditions for deduction were met regardless of formal documentation. However, the Court confirmed that the right to deduct VAT requires the production of proper supporting documents and that the company had not provided sufficiently probative evidence to justify the substantive conditions.
Aligns with CJEU position: “objective evidence” of upstream operations is required. This decision reflects the well-established CJEU principle that a taxpayer invoking the substantive conditions for VAT deduction must provide “objective evidence” of the reality of upstream transactions. In this case, the company produced no justification whatsoever—neither formal nor substantive conditions were met. The ruling serves as a reminder that proper invoice management and archiving are essential to preserving VAT deduction rights.

Article

SARL GM Sécurité, a private security firm, saw its VAT deductions denied following a tax audit. The rejected deductions concerned mission expenses (restaurant receipts), maintenance and small equipment costs, and subcontracting charges, all due to the absence of sufficient supporting documentation—invoices and import declarations.

The company argued that missing invoices did not negate its right to deduct VAT, pointing to properly maintained accounts, water damage as force majeure for lost documents, and the argument that substantive conditions for deduction were met independently of formal requirements.

The Court confirmed the administration’s position: the right to deduct VAT requires the production of regular supporting documents. The company failed to provide sufficiently probative evidence to justify either the formal or substantive conditions for deduction. This aligns with the CJEU’s established position that taxpayers must furnish “objective evidence” of the reality of upstream transactions. Without any justification produced, neither formal nor substantive conditions were satisfied.

Source PwC