Recent ECJ and General Court VAT Jurisprudence and Implications for EU Compliance – April 2026

Short version

Overview

This briefing document provides a detailed review of the key ECJ and General Court VAT rulings, Advocate General (AG) Opinions, and emerging cases published during April 2026. The information is sourced from VATupdate.com, a platform recognized for delivering “clear, timely, and expertly curated insights” into EU VAT jurisprudence, essential for tax professionals navigating the complexities of EU VAT law.

The period’s developments underscore “stringent enforcement of VAT rules and the nuanced boundaries of national discretion,” offering crucial insights into compliance processes, documentation, reporting obligations, and audit risk management for EU businesses.

1. Key Judgments of April 2026

April 2026 saw significant judgments from both the European Court of Justice (ECJ) and the General Court (GC), clarifying critical aspects of VAT penalties, bad debt relief, and customs procedures impacting VAT.

1.1. ECJ C-544/24, Nekilnojamojo turto valdymas (VAT Default Interest & Penalties)

Issue: This Lithuanian case addressed whether a national regime that imposes a fixed penalty component on late payment interest for VAT arrears, without any possibility for reduction regardless of infringement severity, violates EU law principles (proportionality, ne bis in idem), especially when parallel criminal proceedings exist for the same VAT infractions.

Decision: The ECJ ruled that EU law does not preclude such a national system. Member States can impose fixed default interest on VAT arrears without discretionary reduction, even if the same conduct is subject to criminal prosecution. This is permissible “provided the national law outlines limited scenarios for interest waiver and thereby respects EU-law proportionality requirements.” The Court, following AG Rantos’s Opinion, reasoned that late payment interest is primarily compensatory, not criminal, thus avoiding ne bis in idem concerns.

VAT Compliance Implications:

• Penalties & Interest: Businesses must anticipate minimal leniency. “Tax authorities need not reduce or waive fixed interest on late VAT payments.” Robust VAT compliance is crucial to avoid steep, non-negotiable charges.
• Coordination with Criminal Sanctions: The ruling confirms that “parallel tax and criminal penalties are permissible if they serve distinct purposes (compensatory vs punitive).” This means corporate compliance officers must understand that VAT underpayments can lead to both financial and criminal liabilities without automatic offset.

Member State Reaction: The ruling effectively validates Lithuania’s strict approach. A Dutch tax newsletter (Taxlive) noted that this outcome “confirms that EU law does not require Member States to introduce discretionary relief in fixed default interest schemes,” offering comfort to other Member States with similar strict regimes.

1.2. GC T-233/25, Mokoryte (VAT Adjustment for Insolvent Customers – Assignees)

Issue: This Romanian case questioned whether a subcontractor, who acquires an unpaid invoice (claim) from a main contractor, can reduce its VAT taxable amount (and reclaim VAT) due to non-payment by the final customer.

Decision: The General Court answered “no.” The right to reduce output VAT for non-payment remains tied to the taxable person who made the original taxed supply (the main contractor). It “does not transfer with the civil-law assignment of the claim.” The Court clarified that since the subcontractor’s own claim against the main contractor was settled via the assignment (an economically valuable consideration), “there was no ‘unpaid’ consideration owed to the subcontractor by the final customer, hence no basis for a VAT reduction by the subcontractor assignee.”

VAT Compliance Implications:

• VAT Credit Notes & Bad Debts: Subcontractors cannot issue credit notes for VAT recovery in place of the main contractor, even if they bear the loss. “Companies involved in multi-tier supply chains (especially construction) should ensure contracts and assignment arrangements reflect which party holds the VAT adjustment rights.”
• Insolvency & Factoring: The judgment highlights that “assignment of receivables (e.g. in factoring or insolvency scenarios) does not shift the VAT ‘bad debt’ relief away from the original supplier.” Businesses acquiring debts must be cautious, as they cannot claim VAT refunds for the original unpaid supply.

Member State Reaction: This outcome supports existing Romanian tax authority practices. It adds clarity across the EU, confirming that if a Member State’s law denies VAT relief for assignees of unpaid debts, it is consistent with the VAT Directive.

1.3. General Court (Customs) T 589/24 (Outward Processing Relief – Strict Compliance)

Issue: A German company with an outward processing authorization (OPR) was denied partial exemption from import duties upon re-import because its goods were initially exported via a non-authorized customs office (not listed in its OPR license).

Decision: The General Court ruled that partial exemption must be denied in such circumstances. OPR duty relief “requires strict compliance with authorization conditions, including using the designated export offices.” A non-authorized exportation “precludes the duty-free re-importation benefit, even if outward processing was otherwise performed abroad.”

VAT Compliance Implications:

• Customs & VAT Planning: Companies using special customs regimes like OPR must “meticulously follow all customs authorization conditions.” Deviations, such as using non-designated export locations, can result in the loss of expected duty and import VAT relief.
• Interplay with VAT: This case, though primarily customs-related, directly impacts import VAT costs. “Failing OPR conditions means not only customs duties but also additional import VAT, underscoring that customs compliance is also a VAT compliance issue.”

Member State Reaction: Deloitte commentary highlighted that the Belgian customs administration quickly issued guidance reinforcing that OPR duty relief depends on using authorized export offices, indicating Member States’ alignment with the Court’s strict ruling.

2. Significant Advocate General (AG) Opinions

Advocate General Opinions offer a preview of the ECJ’s likely direction, providing valuable insights for future compliance. April 2026 saw several notable AG Opinions with wide-ranging implications.

2.1. ECJ C-321/25, Gidzhinov (National Limitation Periods for VAT Fraud)

Issue: This Bulgarian criminal VAT-fraud case questioned whether national limitation periods that threaten to bar prosecution or penalization of serious VAT offenses are incompatible with EU law (particularly Article 325 TFEU on protecting the EU’s financial interests).

AG View: AG M. Campos Sánchez-Bordona opined that overly lenient or short limitation rules can conflict with EU law obligations to combat VAT fraud. If national time limits “systematically prevent punishment of serious VAT offenses, they undermine EU law’s effectiveness, and national courts may need to set aside such rules.” The opinion aligns with previous ECJ jurisprudence, suggesting a strict approach to limitation rules where VAT fraud is concerned.

Compliance Relevance:

• Extended Enforcement Exposure: Businesses and individuals involved in VAT fraud schemes “cannot count on short statutory deadlines to escape liability if the ECJ follows the AG.” Historical non-compliance may remain actionable for longer periods.
• Monitoring Legal Reforms: Indirect tax managers should monitor potential legislative changes in Member States, as countries might “lengthen limitation periods or tighten criminal VAT law.”

2.2. General Court T-397/25, A&P Deco (VAT Adjustment on Assets Retained After TOGC)

Issue: A Belgian company, after a transfer of a going concern (TOGC), retained ownership of a building and leased it VAT-exempt to the buyer. The question was whether EU VAT law requires an adjustment of previously deducted input VAT on that building due to its subsequent exempt use.

AG View: AG Maja Brkan opined that VAT rules do require the transferor to adjust the input VAT on the building. She reasoned that “leasing out the property is an exempt service distinct from the one-off business transfer, and thus not covered by the TOGC non-supply rule.” Consequently, the transferor must adjust a portion of its VAT deduction since the asset’s use shifted to an exempt purpose.

Compliance Relevance:

• TOGC Transactions: M&A and corporate restructuring teams “must assess VAT consequences of partially retained assets.” If a seller retains property post-transfer and uses it in an exempt manner (e.g., VAT-free renting), they should anticipate input VAT adjustment liabilities.
• Leaseback Arrangements: The opinion suggests that such arrangements “won’t shield the original owner from VAT adjustments.” Companies should seek advice and consider opting to tax leases where possible to mitigate adjustment costs.

2.3. General Court T-268/25, Sampension Livsforsikring (VAT Grouping – 100% Ownership Requirement)

Issue: A Danish life insurer, conducting VAT-exempt activities, had its VAT group dissolved after reducing its ownership in a service subsidiary below 100%. The company’s subsequent application to re-register a VAT group (with 94% stake) was rejected, raising the question of whether Article 11 of the VAT Directive precludes a Member State from requiring 100% ownership for VAT grouping.

AG View: AG Maja Brkan concluded that EU law does not per se forbid such a rule, “provided it genuinely aims to prevent undue VAT advantages and is proportionate.” While a 100% ownership requirement is not inherent in “close financial links” (Art. 11(1)), it can be permissible under the anti-evasion/avoidance provisions of Article 11(2) if it specifically targets tax avoidance and respects proportionality. The AG rejected arguments about “organizational fiscal neutrality,” stating that VAT grouping aims to simplify administration and neutralize distortions, not to allow exempt entities additional input VAT recovery they wouldn’t individually have.

Compliance Relevance:

• Financial & Insurance Groups: If the ECJ follows this reasoning, “countries with strict VAT group rules (like Denmark) may be able to preserve 100% ownership requirements for grouping in exempt sectors,” provided these are demonstrably anti-avoidance and proportionate.
• Mixed and Cross-Sector Groups: The opinion suggests that Member States can scrutinize and restrict VAT grouping arrangements for partly exempt entities if they are deemed to create unintended tax advantages. Tax directors should “assess existing VAT groups where some entities are not fully owned, as well as future M&A or joint venture plans.”
• Watch for Proportionality: The AG emphasized that any anti-avoidance measure must be proportionate. Companies should monitor the final judgment for potential conditions on the extremity of grouping restrictions.

3. Emerging VAT Issues: New Case Referrals

April 2026 also saw facts and legal questions released for new ECJ/General Court cases, indicating upcoming areas of EU VAT interpretation.

3.1. T-171/26, Meori (VAT Exemption for Health Services – Historical Cut-off Dates)

Facts: An Italian health clinic’s massage therapy services were denied VAT exemption because the therapists obtained qualifications after a specific historical cut-off date (17 March 1999) imposed by national law. Question: “Does EU law (principles of competition and fiscal neutrality) allow a Member State to grant VAT exemption only to practitioners who qualified before a historical date, thereby taxing identical services provided by equally qualified professionals who qualified later?” This raises concerns about unjustified discrimination.

3.2. T 172/26, bett1.de (VAT on Reimbursed Legal Costs/Statutory Warnings)

Facts: A German company received legal cost reimbursement from a competitor after sending a warning letter for misleading advertising (without a prior service contract). German authorities treated these reimbursed costs as consideration for a VAT-taxable service. Question: “Should the VAT Directive… be interpreted such that sending a statutory warning letter (with no pre-agreed service request) constitutes a ‘supply of services for consideration,’ given that the payment is mandated by law rather than by contract?” This follows the ECJ’s recent Svilosa ruling on non-contractual reimbursements.

4. Practical Takeaways for EU VAT Compliance

The April 2026 case law developments necessitate several proactive measures for EU indirect tax teams:

• Review VAT Positions & Contracts: “Scrutinize current VAT treatments in light of new judgments.” For multi-tier contracts or invoice factoring, ensure VAT adjustment rights are correctly assigned (per Mokoryte).
• Assess Member State Nuances: Identify local rules potentially impacted or validated. “Companies should monitor national tax authority guidance and potential legislative changes following these cases, especially where AG Opinions suggest current local law may be incompatible with EU law” (e.g., Gidzhinov, Sampension).
• Align Internal Policies & Documentation: Update VAT manuals and compliance checklists for invoice issuance, credit note procedures, and bad debt relief based on original supplier entitlement (Mokoryte).
• Customs and VAT Coordination: For special customs regimes like outward processing, strengthen inter-departmental coordination. “The T-589/24 outcome highlights that customs missteps… directly cause VAT/duty costs, so treat customs compliance as integral to VAT strategy.”
• Monitor Divergent Implementations: “Pay close attention to consultant commentary and VATupdate.com newsletters highlighting differences in Member State implementation,” as national reactions can vary in speed and interpretation.
• Interaction with Digital Reporting (ViDA): Although not directly addressed in these cases, the upcoming VAT in the Digital Age (ViDA) reforms will enhance tax authorities’ ability to detect VAT underpayments and fraud. Businesses should leverage these rulings as part of a broader risk management strategy, using improved data analytics and e-invoicing systems to minimize errors.

5. Conclusion

The April 2026 ECJ and General Court VAT jurisprudence underscores two consistent themes: stringent enforcement of VAT rules and the nuanced boundaries of national discretion. Final judgments, such as Nekilnojamojo turto valdymas and Mokoryte, have reinforced Member States’ powers to apply strict interest regimes and limit bad debt relief, provided core EU principles are respected. Conversely, AG Opinions like Gidzhinov, A&P Deco, and Sampension Livsforsikring, alongside new case referrals, signal areas where EU law may soon demand changes to national practices, from VAT grouping criteria to the treatment of reimbursed legal costs.

The overarching message for businesses is clear: vigilance is paramount. Tax leaders must proactively “update processes and documentation in light of judicial decisions, and closely following national implementation guidance… to ensure local operations align with the evolving VAT landscape.” In an environment moving towards real-time reporting and digital oversight, integrating insights from EU jurisprudence with on-the-ground Member State reactions is essential for robust, future-proof VAT compliance.

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Long version

1. Introduction

ECJ and General Court VAT jurisprudence remains critical for EU VAT compliance because it continuously shapes how key principles—like VAT neutrality, the balance of formal vs substantive requirements, and the limits of Member States’ discretion—are interpreted in practice. This overview is based on VATupdate.com postings during April 2026, consolidating the period’s major ECJ and General Court developments. It covers: (i) recent Court rulings (judgments and orders) affecting VAT; (ii) notable Advocate General (AG) Opinions; (iii) newly released facts and questions in pending ECJ/EGC cases; and (iv) newly registered VAT cases with no substantive details yet. [vatupdate.com]

Importantly, beyond the judgments and opinions, this article integrates practical insights from consultant/market commentary on VATupdate.com to highlight how national tax authorities and businesses are reacting to the evolving case law. The focus is on practical VAT compliance implications—how these developments may alter VAT treatment, compliance processes, documentation, reporting obligations (including ViDA e-invoicing and digital reporting initiatives), or audit risk management for EU businesses. [vatupdate.com]

2. ECJ and General Court Judgments

ECJ C‑544/24, Nekilnojamojo turto valdymas (ECJ, judgment of 30 April 2026) [vatupdate.com]

Bullet‑point summary:

• Issue: Whether a national regime for VAT default interest and penalties—imposing a fixed penalty component on late payment interest (for VAT arrears) without any possibility for reduction by the tax authority regardless of the infringement’s severity—violates EU law principles (proportionality, ne bis in idem). [vatupdate.com], [vatupdate.com]
• Question: Does EU law (notably Article 273 of the VAT Directive, Article 325 TFEU, and Articles 49(3) & 50 of the EU Charter) preclude a fixed-rate VAT interest system that includes a punitive element (penalty interest) even when parallel criminal proceedings for the same VAT infractions exist? [ECJ VAT C-…law – 91直播], [vatupdate.com]
• Decision: The ECJ ruled that EU law does not preclude such a national system. In other words, a Member State can impose fixed default interest on VAT arrears, without discretionary reduction, even if the same conduct is subject to criminal prosecution, provided the national law outlines limited scenarios for interest waiver and thereby respects EU-law proportionality requirements. [vatupdate.com] [ECJ VAT C-…law – 91直播], [vatupdate.com]

Detailed analysis: This Lithuanian case arose from a company (Nekilnojamojo turto valdymas) disputing €3.15 million in late payment interest (and related fines) imposed on a €6.5 million VAT underpayment from a tax audit into a VAT fraud scheme. The taxpayer argued that the fixed interest penalty, on top of a criminal VAT-fraud prosecution for the same conduct, infringed EU principles by duplicating sanctions without flexibility. The ECJ – following the Opinion of AG Rantos – held that the late payment interest is primarily compensatory, not criminal, thereby avoiding ne bis in idem concerns. Moreover, the Court reasoned that EU law’s proportionality principle permits a fixed default interest rate if the law provides for some exemptions or caps and ensures total sanctions aren’t excessive. By confirming no conflict with Article 49(3) of the Charter (proportionality of penalties), the Court effectively upheld Lithuania’s strict VAT interest regime as consistent with EU law. [vatupdate.com] [vatupdate.com], [ECJ VAT C-…law – 91直播]

VAT compliance implications:

• Penalties & interest: The ruling confirms that Member States can enforce rigid interest/penalty schemes for VAT arrears. Businesses must anticipate minimal leniency: tax authorities need not reduce or waive fixed interest on late VAT payments. Companies should therefore invest in robust VAT compliance to avoid accumulating steep interest charges and fines that cannot be negotiated down. [vatupdate.com]
• Coordination with criminal sanctions: The Court’s reasoning signals that parallel tax and criminal penalties are permissible if they serve distinct purposes (compensatory vs punitive). Corporate compliance officers should note that VAT underpayments can trigger both financial penalties and criminal liability, with no automatic offset or mitigation between them. It’s vital to implement controls to prevent intentional underreporting, as being subject to both interest and prosecution is a clear risk. [ECJ VAT C-…law – 91直播]

Member State implementation and reaction: Tax commentators have observed that Lithuania’s approach to default interest and fines is effectively validated by this outcome. A Dutch tax newsletter (Taxlive, Netherlands) noted that AG Rantos’s conclusion—now echoed by the Court—confirms that EU law does not require Member States to introduce discretionary relief in fixed default interest schemes. Thus, no immediate changes to Lithuania’s VAT enforcement regime are needed; other Member States with strict interest regimes can also take comfort that such measures are within EU law bounds. [vatupdate.com]

GC T‑233/25, Mokoryte (General Court, judgment of 22 April 2026) [vatupdate.com], [csurulyalaw.com]

Bullet‑point summary:

• Issue: VAT adjustment of the taxable amount in a contractor–subcontractor chain when the final customer becomes insolvent. Specifically, can a subcontractor who acquires an unpaid invoice (claim) from the main contractor reduce its VAT taxable amount (and reclaim VAT) due to non-payment by the final customer? [vatupdate.com], [vatupdate.com]
• Question: Does Article 90(1) of the VAT Directive (2006/112/EC) – which requires allowing VAT base reduction for non-paid consideration (with optional Member State derogation for non-payment) – permit a subcontractor assignee of a receivable to adjust the VAT taxable amount when the final recipient of the supply defaults, given that the subcontractor did not directly supply the defaulting customer? [vatupdate.com], [csurulyalaw.com]
• Decision: The General Court (GC) answered “no” – the subcontractor cannot adjust/reduce the VAT taxable amount under these circumstances. The right to reduce output VAT for non-payment remains tied to the taxable person who made the original taxed supply (here, the main contractor) and does not transfer with the civil-law assignment of the claim. Because the subcontractor’s own claim against the main contractor was settled via the assignment (considered an economically valuable consideration itself), there was no “unpaid” consideration owed to the subcontractor by the final customer, hence no basis for a VAT reduction by the subcontractor assignee. [csurulyalaw.com], [csurulyalaw.com]

Detailed analysis: In this Romanian case, Mokoryte SRL was a subcontractor in a construction project (a Romanian business center) for which it invoiced and remitted VAT. The general contractor (Modern Bau) later assigned to Mokoryte the remaining receivable from the ultimate client (CBC Development, which had gone bankrupt) in partial payment of Modern’s debt to Mokoryte. Mokoryte then issued cancellation invoices to claim a VAT refund for the unpaid amount (RON 1.7m) but was denied by the tax authority on the grounds that only the original supplier (Modern Bau) could adjust the taxable base. On appeal, the Court confirmed the tax authority’s position. The GC’s reasoning stressed that Article 90(1) links the VAT reduction right to the taxable person who was liable for the VAT on the original supply. Because VAT on the supply to the final client was originally due from the main contractor (Modern Bau), only that contractor could adjust the base when the client defaulted. Transferring the debt (assignment) did not transfer the VAT position or adjustment right to the subcontractor. Furthermore, since Mokoryte’s own claim against Modern Bau was settled via the assignment (which was of economic value), the subcontractor in effect had no outstanding unpaid consideration that would justify a VAT refund. [vatupdate.com] [csurulyalaw.com] [csurulyalaw.com], [csurulyalaw.com]

VAT compliance implications:

• VAT credit notes & bad debts: The subcontractor cannot issue credit notes for VAT recovery in lieu of the main contractor where a client defaults, even if the subcontractor ends up bearing the loss through a claim transfer. Companies involved in multi-tier supply chains (especially construction) should ensure contracts and assignment arrangements reflect which party holds the VAT adjustment rights, and bad-debt relief claims are made by the correct entity.
• Insolvency & factoring: This judgment highlights that assignment of receivables (e.g. in factoring or insolvency scenarios) does not shift the VAT “bad debt” relief away from the original supplier. Businesses and advisors must be cautious when buying debts or restructuring transactions: a third-party acquiring a claim cannot claim VAT refunds for the original unpaid supply.

Member State implementation and reaction: This outcome upholds Romanian tax authorities’ practice of permitting VAT adjustments only to the original supplier, aligning with their interpretation of national law. No law change is needed in Romania as the GC effectively confirmed the existing position. This adds clarity across the EU: if a Member State’s law denies VAT relief for assignees of unpaid debts, it’s consistent with the VAT Directive, reinforcing status quo for similar cases.

General Court (Customs) T‑589/24: No partial exemption from import duties in outward processing [vatupdate.com]

Bullet‑point summary:

• Issue: A German company with an outward processing authorization (to process goods outside the EU) sought **partial exemption from import duties upon re-import. Its application was denied because the goods had been initially exported via a non-authorized customs office (an office not listed in the company’s OPR license). [vatupdate.com]
• Question: Does EU customs law (Community Customs Code and Union Customs Code provisions on Outward Processing Relief, OPR) allow partial import-duty relief if the temporary export wasn’t made through the authorized customs office specified in the OPR permit?
• Decision: The General Court ruled that partial exemption must be denied in such circumstances. The Court held that OPR duty relief requires strict compliance with authorization conditions, including using the designated export offices. A non-authorized exportation (e.g. direct export from an undesignated site) precludes the duty-free re-importation benefit, even if outward processing was otherwise performed abroad. [vatupdate.com]

Detailed analysis: This case, of broader customs–VAT relevance, underscores the formalities tied to special customs regimes. The company (A-GmbH) held a German OPR authorization to export crude vegetable oil to Switzerland for processing. However, it declared the temporary export at a Dutch customs office rather than one of the German offices specified in its permit. German customs authorities refused the partial import duty exemption when the processed oil was re-imported, arguing the firm failed a key OPR condition. The General Court agreed: OPR rules (both the old CCC and current UCC) require that temporary exports occur via authorized offices, otherwise no partial duty relief is available on re-importation. The Court’s interpretation highlights the strict approach to customs procedure compliance for reliefs: deviations from the terms of an authorization (even a different Member State’s export office) can nullify relief eligibility. [vatupdate.com]

VAT compliance implications:

• Customs & VAT planning: Companies using Outward Processing or similar regimes must meticulously follow all customs authorization conditions. If exports are made from non-designated locations, any expected duty or import VAT relief can be lost. Clear internal SOPs and customs compliance checks are necessary to prevent such errors. [vatupdate.com]
• Cross-border operations: The case illustrates how multi-state operations (e.g. exporting from a different EU country) can inadvertently breach permit conditions. Centralize customs compliance and coordinate with relevant national customs authorities to ensure consistent procedures.
• Interplay with VAT: While primarily a customs case, the import duty liability directly affects import VAT costs. Thus, failing OPR conditions means not only customs duties but also additional import VAT, underscoring that customs compliance is also a VAT compliance issue.

Member State implementation and reaction: According to Deloitte (consultant commentary on VATupdate.com), the Belgian customs administration swiftly issued guidance reinforcing that OPR duty relief is contingent on using authorized export offices. This local clarification—emphasizing that exports from unauthorized locations will forfeit the duty exemption—shows Member States aligning their practice with the Court’s strict ruling. Businesses have been advised in Deloitte’s update to review their OPR procedures in light of this case. [vatupdate.com]

3. Advocate General (AG) Opinions

ECJ C‑321/25, Gidzhinov – AG Opinion of 23 April 2026 (Bulgaria)

Bullet‑point summary:

• Facts: A criminal VAT-fraud case involving multiple defendants in Bulgaria, where national limitation periods (statutes of limitation) threatened to bar further prosecution or penalization of serious VAT offences. The Bulgarian court had convicted individuals for VAT-related tax crimes, but questions arose whether certain time-limit rules (e.g. maximum prosecution period or enforcement deadlines) were incompatible with EU law if they effectively let offenders escape sanction.
• Question: Does EU law (particularly the obligation to protect the EU’s financial interests under Article 325 TFEU) require Member States to disapply or modify national limitation rules that prevent effective punishment of serious VAT fraud? In essence, can national criminal time limits that preclude prosecution of VAT evasion (or limit penalties) be considered contrary to EU principles of effectiveness and duty to counter fraud?
• AG View: The Advocate General’s opinion indicates that overly lenient or short limitation rules can conflict with EU law obligations to combat VAT fraud. The AG argues that if national time limits systematically prevent punishment of serious VAT offenses, they undermine EU law’s effectiveness, and national courts may need to set aside such rules. The AG carefully balances this with fundamental rights (principles of legal certainty) but ultimately leans toward requiring effective sanctioning, aligning with earlier ECJ jurisprudence on VAT fraud (e.g. the Taricco line of cases).

Analysis: This AG Opinion, stemming from a Bulgarian referral, touches on the sensitive interplay between national criminal law and EU fiscal duties. It draws on existing ECJ case law that prioritizes effective collection of VAT (as part of EU budget protection) and insists Member States cannot allow systematic impunity for VAT fraud. The opinion appears consistent with past rulings: the ECJ has previously held that if national rules (like short limitation periods) make it practically impossible to sanction VAT fraud, they must be adjusted or disapplied (subject to respect for legal certainty and nullum crimen sine lege). While this stance has been contentious (raising sovereignty and constitutional concerns in some countries), the AG’s reasoning underscores that VAT fraud penalties, including time-bar rules, must not compromise the EU’s financial interests. If the Court follows, we can expect a strict approach to limitation rules, possibly requiring Bulgaria (and others) to extend or revise deadlines for prosecuting large VAT evasion cases.

Compliance relevance:

• Extended enforcement exposure: Businesses and individuals involved in VAT fraud schemes cannot count on short statutory deadlines to escape liability if the ECJ follows the AG. Historic non-compliance may remain actionable for longer periods. Legitimate companies should ensure past tax issues are regularized since prosecutors may be empowered to pursue older cases beyond current national deadlines.
• Monitoring legal reforms: Indirect tax managers should monitor legislative changes in Member States if the Court confirms the AG’s view. Countries might lengthen limitation periods or tighten criminal VAT law. Companies with operations in jurisdictions with historically short time-limits (like Bulgaria, Italy’s past rules, etc.) should be prepared for harsher enforcement environments.
• No immediate action: Since this is an AG Opinion (not final), businesses should wait for the ECJ judgment. However, compliance officers should review internal fraud prevention controls and documentation retention policies, anticipating that authorities could look further back in time for VAT irregularities if national rules change.

General Court T‑397/25, A&P Deco – AG Opinion of 15 April 2026 (Belgium) [vatupdate.com]

Bullet‑point summary:

• Facts: A&P Deco NV, a Belgian company, transferred its entire business (a garden center) to another firm, but retained ownership of the building and leased it tax-exempt to the buyer continuing the same business. A&P had originally deducted VAT on constructing/renovating the building. The Belgian tax administration later adjusted (reduced) that deduction, claiming the subsequent exempt lease triggered a VAT deduction adjustment (change of use) under the VAT Directive’s rules. [vatupdate.com]
• Question: Does EU VAT law (Directive 2006/112/EC, especially Articles 19, 29, 184–190) require a taxable person to adjust previously deducted input VAT on a business asset (building) when that asset, though retained by the transferor, is leased exempt to the transferee of a going concern (i.e. when the asset is functionally part of a transferred business)? Essentially, can a transfer-of-going-concern (TOGC) scenario exempt a transferor from making VAT adjustment on assets subsequently used in exempt supplies?
• AG View: Advocate General Maja Brkan opines that VAT rules do require the transferor to adjust the input VAT on the building in this scenario. She reasons that leasing out the property is an exempt service distinct from the one-off business transfer, and thus not covered by the TOGC non-supply rule. Consequently, the transferor must adjust (repay) a portion of its VAT deduction since the asset’s use shifted to an exempt purpose, preserving the principle of VAT neutrality. [vatupdate.com]

Analysis: The AG’s opinion systematically distinguished between a TOGC (transfer of total assets) and an ongoing leasing arrangement. Under Article 19 of the VAT Directive, a TOGC means the transfer itself isn’t a supply for VAT. However, the AG emphasized that a lease of property is a continuous supply of services, not inherently part of the TOGC. Even if the lease is tied to the business transfer (e.g. to ensure business continuity), it’s still a separate exempt transaction, triggering adjustment rules for the original owner. The opinion stays consistent with earlier case law on adjustment – input VAT may be clawed back if an asset’s actual use shifts to exempt activities, regardless of TOGC intricacies. Should the Court follow this opinion, it would clarify that TOGC provisions cannot be used to circumvent adjustment obligations: transferors remain responsible for adjusting VAT on assets they keep and use in exempt ways. [vatupdate.com]

Compliance relevance:

• TOGC transactions: M&A and corporate restructuring teams must assess VAT consequences of partially retained assets. If a seller keeps property or assets post-transfer and uses them in an exempt manner (like renting property VAT-free), they should budget for input VAT adjustment liabilities pending final Court confirmation of this view.
• Leaseback arrangements: The opinion suggests that sale-and-leaseback or partial transfer arrangements won’t shield the original owner from VAT adjustments. Companies considering such structures should seek advice and potentially opt to tax leases (where possible) to mitigate adjustment costs.
• Pending final judgment: Businesses should monitor the Court’s final ruling. If it aligns with the AG, Member States will likely enforce similar adjustment rules in audits. If a divergence occurs, expect clarification in local guidance. In the interim, maintain comprehensive records of asset use and VAT deduction to be prepared for either outcome.

General Court T‑268/25, Sampension Livsforsikring – AG Opinion of 22 April 2026 [vatupdate.com]

Bullet‑point summary:

• Facts: Sampension Livsforsikring A/S, a customer-owned Danish life insurer (VAT-exempt activities under Art. 135 VAT Directive), previously fully owned a service subsidiary (Administrationsselskab A/S) so both formed a VAT group. In 2016, Sampension sold 3% of the subsidiary to outside pension funds, dropping below 100% ownership; under Danish VAT law (Momsloven §47(4)), this dissolved the VAT group because the 100% ownership condition for grouping was no longer met. Sampension’s 2019 application to re-register a VAT group (with a 94% stake) was rejected by Danish authorities on grounds that the full ownership test wasn’t satisfied and that Article 11 of the VAT Directive (VAT grouping) has no direct effect. [vatupdate.com]
• Question: Does Article 11 of the VAT Directive (single taxable person option), read with its second paragraph, preclude a Member State from requiring 100% ownership as a condition for VAT grouping, especially for entities with exempt or non-economic activities? If yes, can companies like Sampension invoke Article 11 directly to obtain VAT grouping where national law is non-compliant? [vatupdate.com]
• AG View: Advocate General M. Brkan concluded that EU law does not per se forbid such a rule, provided it genuinely aims to prevent undue VAT advantages and is proportionate. The AG reasoned that a 100% ownership requirement is not inherent in the VAT Directive’s notion of “close financial links” and thus cannot be justified as a simple interpretation of Article 11’s first paragraph. However, under the second paragraph of Article 11 (anti-evasion/avoidance measures), a full-ownership rule can be permissible if it specifically targets tax avoidance (e.g. avoiding unrecoverable VAT by grouping exempt entities with taxable ones) and respects proportionality (no broader than necessary) and fiscal neutrality. Because Denmark’s rule could be framed as preventing VAT grouping from generating unintended input tax deductions, the AG opined that Article 11 does not preclude a 100% requirement so long as it is indeed a necessary anti-avoidance measure and does not exceed what is needed for that purpose. (The AG did not advocate that Article 11 grants any direct effect to taxpayers for claiming VAT group status, consistent with earlier case law.) [ey.com] [vatupdate.com]

Analysis: This AG Opinion confronts the long-standing tension in VAT grouping: Member State discretion vs. EU uniformity. Prior ECJ judgments like Larentia + Minerva (C‑108/14) held that Article 11’s grouping option lacks direct effect and that Member States’ “close financial links” criterion requires a uniform EU interpretation, suggesting overly restrictive ownership conditions might be unlawful. By contrast, Commission v Sweden (C‑480/10) and Commission v Finland (C‑74/11) confirmed that Article 11’s second paragraph allows restricting VAT groups to certain sectors (finance/insurance) to prevent tax avoidance. The AG’s approach aligns with this anti-avoidance latitude: she acknowledges that 100% capital ownership is not inherently required by EU law, but can be justified if it prevents misuse of VAT grouping. The opinion extensively analyzes “tax avoidance” in Article 11’s context, rejecting the idea that any reduction of VAT is automatically avoidance, and distinguishing it from outright evasion (illegal conduct) and abuse (requiring intent). Here, the AG views including partly exempt or non-taxable entities in a VAT group as potentially giving unintended VAT advantages (e.g. additional input VAT recovery) that contravene the scheme’s purpose. She firmly rejects arguments about “organizational fiscal neutrality” as an objective of Article 11: the VAT grouping regime was meant to simplify administration and neutralize distortions (like artificial splitting of businesses), not to allow exempt entities to share in VAT deductions they wouldn’t individually have. By clarifying that Member States “have no discretion” to redefine the core concept of close financial links (so a blanket 100% requirement is not directly sanctioned by Article 11), but may impose such a condition under anti-avoidance grounds (if appropriately justified), the AG strikes a middle ground. She effectively invites the national referring court to examine whether Denmark’s rule consistently and systematically targets genuine tax-avoidance scenarios and if a less restrictive measure (e.g. requiring majority control or specific anti-abuse tests) could suffice. Notably, the AG expresses concern that an unconditional 100% rule might overshoot for mixed-activity groups (entities with both taxable and exempt outputs) or outside tightly regulated sectors, potentially exceeding what is necessary. [vatupdate.com] [ey.com]

Compliance relevance:

• Financial & insurance groups: If the ECJ follows the AG’s reasoning, countries with strict VAT group rules (like Denmark) may be able to preserve 100% ownership requirements for grouping in exempt sectors, provided these are demonstrably aimed at preventing tax-base erosion through excess input VAT recovery. Insurance and banking groups across the EU should note that strict ownership/control tests in national VAT laws could be upheld as legitimate anti-avoidance measures. Such groups should continue structuring shared service arrangements carefully, as partial ownership of support subsidiaries could bar VAT grouping and thus limit VAT recovery options.
• Mixed and cross-sector groups: The Opinion highlights a potential spill-over to other industries. Businesses with partly exempt entities (e.g. educational or healthcare divisions, holding companies, shared service centers) often use VAT grouping to mitigate irrecoverable VAT. The AG’s stance suggests that Member States can scrutinize and restrict such arrangements if they are deemed to create unintended tax advantages, especially if closely linked companies aren’t wholly owned. Tax directors should assess existing VAT groups where some entities are not fully owned, as well as future M&A or joint venture plans: a final Court ruling endorsing Denmark’s approach could encourage other Member States to tighten VAT grouping rules (e.g. by raising ownership thresholds or adding anti-abuse tests).
• Watch for proportionality: The AG emphasizes that any anti-avoidance measure must still observe EU principles, notably proportionality and fiscal neutrality. Businesses should therefore also prepare for the possibility that the ECJ might impose conditions on how extreme a grouping restriction can be. There’s an open question whether an absolute 100% rule is always necessary or if less restrictive safeguards could achieve the same anti-avoidance aim. Companies should monitor the final judgment (expected in late 2026/2027) — a ruling that finds Denmark’s rule disproportionate might require those jurisdictions to relax their grouping criteria, unlocking new opportunities for partially-owned subsidiaries to join VAT groups. [ey.com]
• No immediate changes until final judgment: As this is an AG Opinion (not a binding decision), there is no change yet to national laws. However, its guidance is a strong indicator of the likely outcome. VAT managers should start reviewing group structures for potential compliance issues or opportunities: e.g. consider if current or planned group arrangements might be impacted, and begin compiling justifications for the commercial (non-tax) rationale behind those structures to guard against any anti-avoidance challenges.

 

4. ECJ/EGC Cases with Facts and Questions Released

Several VAT cases saw their facts and legal questions published in April 2026, indicating new issues under consideration by the EU courts:

• T‑171/26 (Meori, General Court) – Facts: An Italian health clinic’s massage therapy services were denied VAT exemption because the therapists obtained qualifications after 17 March 1999, due to Italy’s cut-off date rule distinguishing older vs newer diplomas. This rule seemingly causes unequal tax treatment between therapists qualified before vs. after 1999, raising concerns of unjustified discrimination and breach of fiscal neutrality. Question: Does EU law (principles of competition and fiscal neutrality) allow a Member State to grant VAT exemption only to practitioners who qualified before a historical date, thereby taxing identical services provided by equally qualified professionals who qualified later? [vatupdate.com] [vatupdate.com], [vatupdate.com]
• T‑172/26 (bett1.de, General Court) – Facts: A German company (bett1.de GmbH) sent a warning letter to a competitor over alleged misleading advertising and, under national law, recovered legal costs from that competitor (without a prior service contract). German authorities treat the reimbursed costs as consideration for a VAT-taxable service (the act of sending a legal warning). Question: Should the VAT Directive (Articles 2(1)(c) and 24(1)) be interpreted such that sending a statutory warning letter (with no pre-agreed service request) constitutes a “supply of services for consideration”, given that the payment is mandated by law rather than by contract? This question follows the ECJ’s recent Svilosa ruling (2025) which suggested that non-contractual reimbursements are generally outside the scope of VAT. [vatupdate.com] [vatupdate.com], [vatupdate.com]

5. Newly Registered ECJ and General Court VAT Cases (No Details Yet)

The following VAT-related cases were registered in the Court’s docket during April 2026, but have no substantive information publicly available yet (no facts or questions released):

• T-231/26 & T-232/26 ( Agenzia delle Entrate Direzione provinciale Genova)
• C-194/26 (Private Secondary School Evlogi and Hristo Georgievi)

(Note: “C‑” indicates a Court of Justice case (preliminary ruling) and “T‑” indicates a General Court case. The above cases have been identified on VATupdate.com as newly added to the docket with no further information yet.)

6. Practical Takeaways for EU VAT Compliance

Recent case law developments in April 2026 underscore several actions for EU indirect tax teams:

• Review VAT positions & contracts: Scrutinize current VAT treatments in light of new judgments. For instance, if operating multi-tier contracts or using invoice factoring, ensure VAT adjustment rights are correctly assigned to the proper entity (per Mokoryte). If you anticipate VAT relief for bad debts, verify your processes align with these rulings to avoid invalid claims.
• Assess Member State nuances: Identify any local rules (e.g. on VAT grouping, interest & penalties, customs procedures) that might be impacted or validated by these cases. For example, Denmark’s 100% VAT grouping rule or strict penalty regimes should be reevaluated. Companies should monitor national tax authority guidance and potential legislative changes following these cases, especially where AG Opinions suggest current local law may be incompatible with EU law (e.g. in VAT grouping requirements or prosecution time-limits).
• Align internal policies & documentation: Update or reinforce internal VAT manuals and compliance checklists. Ensure invoice issuance, credit note procedures, and bad debt relief documentation follow the correct party entitlement (original supplier vs assignee), as clarified by Mokoryte. Incorporate clear protocols for handling VAT on reimbursed costs or compensations (per bett1.de question), pending final guidance, to avoid misclassification in the interim.
• Customs and VAT coordination: If utilizing special customs regimes (e.g. outward processing), strengthen inter-departmental coordination between VAT and customs teams. The T-589/24 outcome highlights that customs missteps (using the wrong export office) directly cause VAT/duty costs, so treat customs compliance as integral to VAT strategy.
• Monitor divergent implementations: Pay close attention to consultant commentary and VATupdate.com newsletters highlighting differences in Member State implementation. For instance, Belgian customs’ prompt clarification on outward processing indicates authorities may swiftly provide local guidance. Where national reactions differ or lag, businesses must manage compliance risk in each jurisdiction, adjusting their operations or seeking local rulings as needed. [vatupdate.com]
• Interaction with digital reporting (ViDA): While not directly addressed in these cases, the push for real-time digital VAT reporting (e.g. e-invoicing under the upcoming VAT in the Digital Age reforms) will augment tax authorities’ ability to detect VAT underpayments and fraud faster. In practice, companies should leverage these rulings as part of a broader risk management strategy, using improved data analytics and e-invoicing systems to minimize errors or fraudulent activity that could attract punitive interest or extended enforcement.

7. Conclusion

The April 2026 ECJ and General Court VAT jurisprudence reiterates two key trends: stringent enforcement of VAT rules and the nuanced boundaries of national discretion. Final judgments (e.g. Nekilnojamojo turto valdymas, Mokoryte) have reinforced Member States’ powers to apply strict interest and refund limitations, so long as core EU principles are respected. Meanwhile, AG Opinions (e.g. Gidzhinov, A&P Deco) and new case referrals signal areas where EU law may soon demand changes to national practices – from group VAT registration criteria to the treatment of legal cost reimbursements. The practical compliance message is clear: tax leaders must stay vigilant, updating processes and documentation in light of judicial decisions, and closely following national implementation guidance (often shared via consultant newsletters on VATupdate.com) to ensure local operations align with the evolving VAT landscape. In an era inching toward real-time reporting and digital oversight, combining ECJ jurisprudence insights with on-the-ground Member State reactions is essential to maintain robust, future-proof VAT compliance across Europe. [vatupdate.com], [vatupdate.com]

 

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