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

Summary

On 11 February 2026, the General Court ruled in T-689/24 (I. S.A. v Dyrektor KIS) that Articles 167, 168 (a) and 178 (a) of the VAT Directive, read with neutrality and proportionality, preclude Polish rules delaying input VAT deduction until physical receipt of the invoice where the invoice arrives before the return is filed. [eur-lex.europa.eu], [bdo.global]
The Court distinguished the moment the right arises (chargeability of VAT + substantive conditions) from the exercise of the right (holding an invoice). Article 86(10b)(2)(1) of the Polish VAT Act — postponing deduction to the period of invoice receipt — is incompatible with EU law. Businesses could unlock billions of PLN in working capital. [vatupdate.com], [martinitax.pl]
Twist: the First Advocate General has invoked the exceptional Article 62 review procedure (C-167/26 RX). The ECJ Reviewing Chamber will assess consistency with Terra Baubedarf-Handel (C-152/02) and Aptiv Services Hungary (C-521/24, 12 March 2026). The judgment is therefore not yet final. [vatupdate.com], [abctax.com.pl]

Article

In T-689/24, Dyrektor Krajowej Informacji Skarbowej v I. S.A. (11 February 2026), the General Court of the EU — deciding a Polish preliminary reference under the post-reform Article 50b of the CJEU Statute — held that Polish legislation making input VAT deduction dependent on receipt of the invoice in the same tax period violates EU law where the invoice arrives before the VAT return is filed. [eur-lex.europa.eu]

The clearing-house taxpayer received invoices for gas and electricity transactions in the period after the underlying supply, but before the VAT return deadline. Polish law refused deduction in the earlier period. The Court drew a sharp line between when the right arises (with the chargeability of VAT and satisfaction of the substantive conditions) and the exercise of the right, for which possession of the invoice is only a formal condition. National law cannot elevate formality into substance. [bdo.global], [vatupdate.com]

MartiniTAX and ABC Tax note this creates a “loophole” in Article 86 (10b)(2)(1) of the Polish VAT Act, potentially allowing taxpayers to revisit historic deductions and unlock significant working capital — the Rzeczpospolita/Skarbiec commentary highlights amounts of “billions of PLN” nationally. [martinitax.pl], [abctax.com.pl]

But the story isn’t over. The First Advocate General (M. Szpunar) requested a review under the exceptional Article 62 procedure. On the Reviewing Chamber’s decision, the ECJ is now reassessing whether T-689/24 is consistent with Terra Baubedarf-Handel (C-152/02) and, more recently, Aptiv Services Hungary (C-521/24, 12 March 2026) — the first tax judgment ever to undergo this scrutiny. Interested parties have one month from service to file written observations. Companies should therefore treat the judgment as binding but under review and coordinate any recovery/reclaim strategy with counsel. [vatupdate.com]

Sources

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.

Source Tomasz Michalik – MDDP

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General Court T-689/24 (Dyrektor Krajowej Informacji Skarbowej) – Judgment – VAT deductible for the right period if you get the invoice before filing – VATupdate

Earliest Date for Claiming a VAT Deduction: The Tax Administration Weighs in

A recent General Court judgment (Case T‑689/24 I.S.A.) suggested that input VAT could be deducted in the period of supply, even if the invoice arrived later, provided it was received before the return for that period was filed.
However, the Czech Tax Administration has stated it will not follow this judgment, maintaining its existing rule that VAT deduction can only occur in the tax period the invoice is received, citing the pending review of the judgment by the CJEU (Case C‑167/26 RX).
Until the CJEU’s review is complete, Czech taxpayers cannot rely on the General Court’s judgment or the direct effect of the VAT Directive to deduct VAT before receiving the invoice, as the Tax Administration’s current administrative practice remains in force.

Source Roedl

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.

Source Meridian

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.

Source VATvocate.com

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.

Source BTW Jurisprudentie

Landmark EU General Court ruling — faster input‑VAT recovery (T‑689/24)

On 11 February 2026, the EU General Court ruled that Poland’s Art. 86(10b)(1) — tying deduction to physical receipt of the invoice — breaches the VAT Directive and the neutrality/proportionality principles. [businessin…der.com.pl]
The Court distinguished the origination of the deduction right (when the transaction occurs) from its exercise (needing an invoice at the time the return is filed). [crowe.com]
Practical impact: businesses may deduct earlier and consider correcting past returns, improving cash flow — especially in high‑volume sectors. [crowe.com]