European Court T-84/26 (Rotex Europe) – Order – No physical‑presence condition for pre‑registration VAT deduction

ECJ T‑84/26 (Rotex Europe Ltd) – Reasoned Order – VAT deduction on goods acquired before registration and the (impermissible) condition of their physical presence at the date of registration

On 10 July 2026, the General Court (Fifth Chamber) released its reasoned Order in case T‑84/26 (Rotex Europe Ltd v Direktor na Direktsia “Obzhalvane i danachno‑osiguritelna praktika” Sofia).

Context

The reference for a preliminary ruling was made under Article 267 TFEU by the Varhoven administrativen sad (Supreme Administrative Court, Bulgaria) by decision of 19 January 2026, received on 20 January 2026, and was referred by the Court of Justice to the General Court on 6 February 2026 pursuant to the third paragraph of Article 50b of the Statute.
It concerns the interpretation of Articles 9, 167, 168(a), 178, 179, 213, 214, 250 to 252 and 273 of Council Directive 2006/112/EC of 28 November 2006 (the “VAT Directive”), as amended by Council Directive 2010/45/EU, read in the light of the principles of fiscal neutrality and proportionality.
The dispute opposes Rotex Europe Ltd — a company established in the United Kingdom which acquired agri‑food machinery from Bulgarian suppliers and resold it to customers in other Member States without being VAT‑registered in Bulgaria despite being obliged to register — and the competent Bulgarian tax authority, which refused the right to deduct input VAT.
Rotex Europe registered late (application 1 August 2023, effective registration 9 August 2023), was fined under Article 178 ZDDS for late registration, and in its August 2023 return declared both the pre‑registration acquisitions and sales, deducting BGN 1 738 165.67 of input VAT and claiming a refund of BGN 1 749 284.60.
The refusal was grounded on Articles 74 and 75 ZDDS, which make the right to deduct input VAT on assets acquired before registration conditional on the physical presence of those goods on the date of registration — a condition Rotex Europe could not meet as the goods had already been sold. The precise legal mechanism in dispute is thus whether such a national physical‑presence requirement is compatible with the right of deduction under the VAT Directive and the principles of neutrality and proportionality.

Questions Referred

The referring court submitted a single question: 1. Are Articles 167, 168(a), 178 and 179, 9, 213 and 214, 250, 251, 252 and 273 of the VAT Directive, as well as the principle of neutrality of VAT charges and the principle of proportionality, to be interpreted as permitting national legislation such as that provided for in Articles 74 and 75 ZDDS, in conjunction with Articles 102 and 103 of that law, on the basis of which the right to deduct input VAT on goods purchased — with which taxable supplies were made before the taxable person was registered — must be refused, bearing in mind that those supplies and purchases were declared immediately after the taxable person had belatedly complied with his obligation to register for VAT purposes and that the tax authorities imposed the administrative penalty provided for by national law for the late registration?

AG Opinion None. (The case was disposed of by reasoned order under Article 226 of the Rules of Procedure of the General Court, the Advocate General — J. Martín y Pérez de Nanclares — being heard, but no Opinion was delivered.)

Decision / Order of the Court

The decision is a reasoned Order (not a judgment), adopted under Article 226 of the Rules of Procedure of the General Court because the answer to the question referred could be clearly deduced from settled case‑law. The General Court first reformulated the question, holding that only Article 167, Article 168(a), Article 178 and Article 273 of the VAT Directive — read in the light of fiscal neutrality and proportionality — were relevant, and that there was no need to interpret Articles 9, 179, 213, 214 and 250 to 252, as the dispute concerned neither taxable‑person status, the deduction period, nor identification/reporting obligations.

On the substance, the Court ruled that EU law precludes the national legislation at issue.

Article 167, Article 168(a) and Articles 178 and 273 of the VAT Directive, read in the light of the principles of fiscal neutrality and proportionality, must be interpreted as precluding national legislation which denies a taxable person the right to deduct input VAT on goods acquired and used to make taxable supplies before its registration for VAT purposes, on the sole ground that those goods were no longer physically present on the date of that (late) registration, even though the transactions concerned were declared immediately after that late registration.

Argumentation

(Recourse to Article 226 – reasoned order) The Court held that the interpretation sought could be clearly inferred from the settled case‑law of the Court of Justice, justifying disposal by reasoned order after hearing the Advocate General (paragraphs 27–28).
(Reformulation of the question) In the cooperation framework of Article 267 TFEU, the Union judicature must give a useful answer and may, where appropriate, reformulate the questions. Since the dispute concerned only the physical‑presence condition, the Court confined its analysis to Articles 167, 168(a), 178 and 273, discarding the other provisions cited as immaterial to the actual dispute (paragraphs 29–33).
(Right of deduction as a fundamental principle) The right of deduction under Article 167 et seq. is an integral part of the VAT system, is in principle unlimited, is exercised immediately for all input tax, and is designed to relieve the trader entirely of the VAT burden, thereby guaranteeing neutrality across all economic activities that are themselves subject to VAT (paragraph 34).
(Substantive v. formal conditions) The right is subject to substantive and formal conditions. The substantive conditions (Article 168) require that the person be a taxable person and that the goods/services be used for his taxable transactions and supplied by another taxable person. The formal conditions govern control and the proper functioning of the system; under Article 178(a) the exercise of the right is subject to a single formal condition — possession of a compliant invoice (paragraphs 35–37).
(Registration/identification is merely formal) Article 213 does not authorise Member States to postpone or deprive the taxable person of the right of deduction for failure to declare; identification under Article 214 and the obligations under Article 213 are formal requirements for control purposes, not acts constituting the right of deduction, which arises when the tax becomes chargeable (paragraphs 38, 41).
(Primacy of neutrality over formalities) The fundamental principle of neutrality requires that input VAT be deducted where the substantive requirements are met, even if certain formal requirements have been omitted; provided the tax authority has the information necessary to establish that the substantive conditions are satisfied, it cannot refuse the deduction (paragraph 39).
(Article 273 and proportionality) Measures adopted under Article 273 to ensure correct collection and prevent evasion must not go beyond what is necessary and must not undermine neutrality (paragraph 40).
(Application to the facts) Applying Nidera, a taxable person who identifies himself within a reasonable period after the transactions giving rise to the right of deduction cannot be deprived of that right merely because he was not registered before using the goods. Here, the applicant’s taxable‑person status was not contested, the goods were supplied by taxable suppliers, and they were used for the applicant’s own taxable transactions (paragraphs 42–43).
(The physical‑presence condition is disproportionate and breaches neutrality) Article 168 does not make the right to deduct goods acquired before registration conditional on their physical presence at the date of registration. Such a condition — which is impossible to satisfy where the taxable person has, for his taxable transactions, already sold the goods before registration — systematically calls into question the exercise of the right of deduction and hence VAT neutrality, even where no fraud is established. Therefore, subject to the absence of fraud (a matter for the referring court to verify), the right cannot be refused (paragraphs 44–48).

References to Other ECJ Case Law

Roquette Frères, C‑88/99, EU:C:2000:652 (para. 18) — cited for the duty of the Union judicature to give the national court a useful answer and, where appropriate, to reformulate the questions referred.
APIA – Centrul Judeţean Bistriţa‑Năsăud, C‑434/24, EU:C:2026:247 (para. 28) — cited, together with the case‑law there referred to, for the same principle of reformulation and provision of a useful answer.
Promexor Trade, C‑358/20, EU:C:2021:936 (paras 33 and 34) — cited for the right of deduction as a fundamental, in principle unlimited, immediately exercisable principle of the common VAT system; and for the rule that neutrality requires deduction where substantive requirements are met even if formal ones are omitted.
Finanzamt N and Finanzamt G (Communication of assignment), C‑45/20 and C‑46/20, EU:C:2021:852 (paras 33 and 35) — cited for the distinction between the substantive and formal conditions of the right of deduction.
Dyrektor Izby Administracji Skarbowej w Warszawie (VAT – Fictitious acquisition), C‑114/22, EU:C:2023:430 (para. 30) — cited for the substantive requirements of the right of deduction listed in Article 168 (taxable‑person status; input goods/services used for taxable transactions and supplied by another taxable person).
Nidera Handelscompagnie, C‑385/09, EU:C:2010:627 (paras 47, 48, 49, 50 and 54) — the principal authority, cited for: the single formal invoice condition under Article 178(a); that Article 213 does not allow postponement or deprivation of the right of deduction; that Article 273 measures must respect proportionality and neutrality; that identification/registration is a formal control requirement, not constitutive of the right; and that the Directive precludes denying deduction to a taxable person who identifies himself within a reasonable period after the transactions giving rise to the right.

Source

Curia

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Executive Summary This briefing document summarizes two provided sources. The first, “New Note,” highlights VATupdate.com as an essential resource for professionals seeking timely and expertly curated insights into EU VAT law, including ECJ, CJEU, and General Court rulings. The second and primary source is a General Court Order dated July 10, 2026, in Case T-84/26 (Rotex Europe Ltd.), which addresses a crucial question concerning the right to deduct input VAT. The core of the General Court’s order reaffirms the fundamental principles of fiscal neutrality and proportionality within the common system of VAT. It explicitly rules against national legislation that denies a taxable person the right to deduct input VAT on goods acquired and used for taxable supplies before VAT registration, solely because these goods are no longer physically present at the time of late registration. This decision underscores that substantive conditions for deduction outweigh certain formal conditions, particularly when no fraud is established and the tax authority has the necessary information. 1. General Court Order (T-84/26) – VAT Deduction: Fiscal Neutrality & Goods Presence Case Identification:

Case: T-84/26, Rotex Europe Ltd vs. Direktor na Direktsia « Obzhalvane i danachno-osiguritelna praktika » Sofia pri Tsentralno upravlenie na Natsionalna agentsia za prihodite
Court: THE GENERAL COURT (Fifth Chamber)
Date: July 10, 2026
Type of Decision: Order under Article 226 of the Rules of Procedure, meaning the answer can be “clearly deduced from the case-law.”

A. Background and National Legislation (Bulgaria)

The Dispute: Rotex Europe Ltd, a UK-based company, acquired machinery in Bulgaria and sold it to customers in other Member States before being registered for VAT in Bulgaria, despite having an obligation to register. Rotex Europe later registered belatedly and declared these transactions, seeking to deduct input VAT paid on the acquired goods.
Bulgarian National Law (ZDDS): Article 74 of the Bulgarian Zakon za danak varhu dobavenata stoynost (ZDDS) makes the right to deduct input VAT on goods acquired before registration conditional on the physical presence of those goods at the date of registration.
Refusal of Deduction: The Bulgarian tax authority refused Rotex Europe’s deduction claim (amounting to approximately €888,710.50) because the goods were no longer physically present at the date of its late registration, having already been sold. Rotex Europe had already incurred an administrative penalty for late registration.

B. Key Legal Questions & EU Legal Framework

Question Referred: The Varhoven administrativen sad (Supreme Administrative Court, Bulgaria) sought a preliminary ruling on whether EU VAT Directive Articles 167, 168(a), 178, 273, and the principles of fiscal neutrality and proportionality, preclude national legislation like Bulgaria’s Article 74 ZDDS, which denies deduction based on the physical absence of goods at registration, even if transactions were declared immediately after late registration and a penalty was imposed.

Relevant VAT Directive (2006/112/EC) Provisions:Article 167: “The right of deduction shall arise at the time when the deductible tax becomes chargeable.”
Article 168(a): Grants taxable persons the right to deduct VAT on goods/services used for taxable transactions.
Article 178(a): Specifies the formal condition of holding an invoice for deduction.
Article 273: Allows Member States to impose “other obligations” to ensure correct VAT collection and prevent fraud, but these must “not go beyond what is necessary” and “must not call into question the neutrality of VAT.”
Principles: Fiscal neutrality and proportionality are central to the interpretation.

C. Court’s Analysis and Key Principles

Reformulation of the Question: The General Court narrowed the scope of the original question to focus on Articles 167, 168(a), 178, and 273 in conjunction with fiscal neutrality and proportionality, as the other articles (e.g., concerning taxable person status, reporting obligations) were not directly at issue for the refusal of deduction.

Fiscal Neutrality and the Right to Deduction:The Court reiterates that the right to deduct input VAT is a “fundamental principle of the common system of VAT” and “cannot, in principle, be limited.”
“The deduction system is intended to relieve the trader entirely of the burden of VAT due or paid in the course of all his economic activities… provided that those activities are, in principle, themselves subject to VAT.” (Para 34, citing Promexor Trade)
“The fundamental principle of the neutrality of VAT requires that input VAT be deducted if the substantive requirements are satisfied, even if certain formal requirements have been omitted by taxable persons.” (Para 39, citing Promexor Trade)
Substantive vs. Formal Conditions:Substantive: The person must be a “taxable person,” and the goods/services must be used for their taxable transactions (Article 168).
Formal: Relate to “accounting, invoicing and reporting” (e.g., holding an invoice under Article 178(a)).
Crucially, the Court emphasizes that if substantive requirements are met, formal omissions should not lead to denial of deduction, especially if the tax authority has sufficient information.
Limitations on Member State Measures (Article 273):While Member States can impose obligations for correct VAT collection and fraud prevention, these measures “must not go beyond what is necessary to attain such objectives and must not call into question the neutrality of VAT.” (Para 40, citing Nidera Handelscompagnie)
Impact of Late Registration:The Court previously held that while taxable persons must declare commencement of activities (Article 213), failure to do so timely does not authorize Member States “to postpone the exercise of the right of deduction… or to deprive the taxable person of the exercise of that right.” (Para 38, citing Nidera Handelscompagnie)
Provided the taxable person registers “within a reasonable period of time from the completion of the transactions,” they should not be deprived of their deduction right.
The “Physical Presence” Condition:The General Court explicitly states that Article 168 “does not make the right to deduct goods acquired before the registration of a taxable person for VAT purposes subject to a condition that the goods must be physically present on the date of that registration.” (Para 46)
Such a condition is deemed problematic because it “is liable systematically to call into question the exercise of the right to deduct VAT and, therefore, the neutrality of VAT, even when no fraud is established.” (Para 46)

D. The Ruling The General Court ruled: “Article 167, Article 168(a) and Articles 178 and 273 of Council Directive 2006/112/EC of 28 November 2006… read in the light of the principles of fiscal neutrality and proportionality, must be interpreted as meaning that: preclude national legislation which denies a taxable person the right to deduct input value added tax (VAT) paid on goods acquired and used to make taxable supplies before its registration for VAT purposes, on the sole ground that those goods were no longer physically present on the date of that registration, which took place late, even though the transactions concerned were declared immediately after this late registration.” (Para 48, final ruling) 2. Main Themes and Most Important Ideas/Facts

Primacy of Fiscal Neutrality: The overarching theme is the fundamental importance of VAT fiscal neutrality. The Court consistently emphasizes that the VAT system aims to relieve traders entirely of the tax burden on their inputs, provided they are used for taxable outputs. This principle cannot be undermined by formal requirements or disproportionate national measures.
Right to Deduction as a Core Principle: The right to deduct input VAT is fundamental and generally cannot be limited. It arises when the tax becomes chargeable and is subject primarily to substantive conditions.
Substantive vs. Formal Conditions: The distinction is critical. If the substantive conditions (taxable person, goods used for taxable transactions) are met, the right to deduction should generally be granted, even if formal requirements (like timely registration) are delayed, provided no fraud exists and authorities have the necessary information.
Limits on Member States’ Powers (Article 273): National measures designed to ensure VAT collection or prevent evasion must be proportionate and must not jeopardize fiscal neutrality. Requiring physical presence of goods at the time of late registration was found to be disproportionate and contrary to neutrality.
Late Registration is Not a Bar to Deduction (if Substantive Conditions Met): While late registration can incur penalties (as Rotex Europe experienced), it should not, by itself, lead to the forfeiture of the right to deduct input VAT, especially when the underlying transactions are taxable and declared, and the taxable person registers within a reasonable period.
“Physical Presence” Requirement is Unlawful: National legislation that mandates the physical presence of goods at the time of VAT registration for deduction of pre-registration VAT is contrary to the VAT Directive and the principles of neutrality and proportionality. This is the most direct and impactful finding of the ruling for national tax authorities.
Importance of Specialized Legal Information: The “New Note” source indirectly highlights the need for specialized platforms like VATupdate.com to disseminate such complex and evolving legal interpretations effectively to professionals.

3. Conclusion and Implications The General Court’s order in T-84/26 provides important clarity regarding the scope of the right to deduct input VAT, particularly in situations involving late registration and national conditions that go beyond the spirit of the VAT Directive. It reinforces that the fundamental principle of fiscal neutrality must prevail over overly strict or disproportionate formal requirements imposed by Member States, even when aimed at preventing evasion. Tax authorities must ensure that their measures do not lead to a systematic denial of deduction where substantive conditions are met and no fraud is established. This ruling will have significant implications for national tax laws that impose similar “physical presence” conditions for VAT deduction on pre-registration transactions.