Polish VAT Act to Be Amended Following EU Court Ruling – Companies Can Already Deduct VAT Faster

Summary

The EU General Court ruled that Polish VAT rules delaying input VAT deduction until invoice receipt breach EU law, as the right to deduct arises when VAT becomes chargeable, not when the invoice is received. [vatupdate.com]
The Ministry of Finance has announced that the VAT Act will be amended, but has not provided a timeline; the amendment is intended to align Polish law with EU requirements. [vatupdate.com]
Companies do not need to wait for the legislative change: based on the EU court ruling and the primacy of EU law, VAT may already be deducted in the correct tax period, provided the invoice is available when the VAT return is filed. [crowe.com]

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

Detailed version

Background to the dispute

For many years, Polish VAT practice required taxpayers to deduct input VAT only in the period in which the invoice was received, even if the taxable supply of goods or services took place earlier. If an invoice was issued or delivered late, the VAT deduction was deferred to a later reporting period.

This approach was challenged before the EU courts, leading to a landmark judgment of the EU General Court (case T‑689/24) concerning the compatibility of Polish VAT rules with the VAT Directive (Directive 2006/112/EC). [vatupdate.com]

What the EU Court decided

The Court confirmed a fundamental principle of EU VAT law:

The right to deduct VAT arises at the moment VAT becomes chargeable, i.e. when the supply of goods or services takes place.
Possession of an invoice is a formal condition for exercising the right, but it does not create the right itself.
National legislation that automatically postpones VAT deduction solely because the invoice is received in a later period violates the principles of VAT neutrality and proportionality.

The Court held that if the taxpayer has the invoice at the time of submitting the VAT return, the deduction must be allowed in the period in which the taxable transaction occurred, even if the invoice was received later. [vatupdate.com], [mddp.pl]

Position of the Polish Ministry of Finance

Following the judgment, the Polish Ministry of Finance publicly confirmed that the VAT Act will be amended to reflect the EU Court’s interpretation. However, no concrete deadline or draft legislation has been announced.

Importantly, the Ministry’s statement does not suspend the application of EU law in the meantime. Under established EU principles, national authorities and courts must already apply EU law in line with the judgment, even if domestic legislation has not yet been formally changed. [vatupdate.com]

What companies can do already

Tax advisers and professional firms consistently emphasize that:

Taxpayers may already deduct VAT in the period in which the tax obligation arose, provided the invoice is available when the VAT return is submitted.
There is no requirement to wait for the amended VAT Act.
Denying such deduction solely due to late invoice receipt exposes the tax authority to a strong EU‑law‑based challenge.

This interpretation is widely supported in post‑judgment analyses by tax advisory firms and VAT specialists. [crowe.com], [vatupdate.com]

Practical implications for businesses

The judgment has immediate operational consequences:

Faster VAT recovery, improving cash flow and reducing temporary VAT financing by businesses.
Lower dispute risk regarding timing mismatches between supply and invoicing.
Greater legal certainty ahead of mandatory e‑invoicing (KSeF), where technical or timing delays in invoice availability are expected to occur more frequently.

Advisers note that the ruling shifts the focus from formal invoice timing to substantive economic reality, which is consistent with the direction of EU VAT reform and digital reporting initiatives. [mddp.pl]

Broader EU relevance

Although the case concerns Polish VAT law, the Court’s reasoning is fully grounded in EU VAT principles and therefore relevant beyond Poland. The distinction between substantive conditions (taxable event) and formal conditions (documentation) is central to EU VAT jurisprudence and will be increasingly important in the context of ViDA, real‑time reporting, and e‑invoicing systems across the EU.

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