Taxation by assessment does not automatically eliminate the right to deduct input VAT

Summary

• In decision No. 25PA01742, the Paris Administrative Court of Appeal accepted that a taxpayer assessed automatically after failing to submit VAT returns could still establish an entitlement to deduct VAT on professional hotel, restaurant and fuel expenditure. [legifrance.gouv.fr]
• The claimant produced compliant invoices, bank statements showing that he was the person liable for and paying the expenses, and professional diaries linking the expenditure to his activities as a commercial agent. The evidence was accepted even though key documents were first produced on appeal.
• The case underlines the distinction between non-compliance with filing obligations and the substantive conditions for deduction. Taxpayers must still prove the business connection, possession of valid invoices and their status as recipient, while specific statutory restrictions on cars, fuel, accommodation or entertainment remain relevant.

Article

The Paris Administrative Court of Appeal ruled on 30 June 2026 that a taxpayer subjected to automatic assessment for failure to file VAT returns could nonetheless demonstrate a right to deduct input VAT.

The taxpayer worked as a commercial agent, carrying out product promotion, advice, negotiation and contract-conclusion services. The tax authority assessed VAT for 2018 and 2019 because the required returns had not been filed within the legal deadlines.

The taxpayer sought deduction of VAT on hotel accommodation, restaurant expenditure and fuel. In support of the claim, he produced invoices containing the mandatory information, bank records showing payment and professional diaries connecting the locations and dates of the expenses with business appointments and travel.

The Court considered this evidence sufficient for certain amounts and granted partial relief. The deduction accepted reportedly amounted to EUR 2,672.87. The judgment confirms that automatic assessment does not operate as an absolute substantive bar to VAT deduction. The taxpayer, however, bears a significant evidential burden because the tax authority’s assessment is presumed correct within the procedural framework applicable to assessments made in the absence of returns. [doctrine.fr], [kohenavocats.com]

The decision should not be interpreted as allowing all travel and subsistence VAT to be recovered. French VAT legislation contains specific exclusions and limitations, notably in relation to accommodation supplied for management or employees, passenger vehicles and certain fuel costs. Each invoice and expense category must therefore be tested against both the general business-use requirement and any specific exclusion.

The practical lesson is that late or missing returns should be regularised promptly without abandoning potentially valid deduction claims. Businesses should preserve original invoices, payment evidence, travel records and documentation identifying the customer, project or commercial purpose. Expense policies should also distinguish costs subject to a statutory VAT restriction from those potentially recoverable under the normal rules.

Source Links

• Read decision No. 25PA01742 on Légifrance [legifrance.gouv.fr]
• View the case record and outcome [doctrine.fr]

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