Input VAT deduction denied where defective invoices were not supported by additional evidence

Summary

The ’s-Hertogenbosch Court of Appeal has ruled that a company failed to establish its entitlement to deduct VAT charged on invoices issued by another company. The invoices contained formal deficiencies, while the customer did not provide sufficient additional evidence identifying and substantiating the services allegedly supplied. [taxlive.nl]
The judgment underlines that an invoice deficiency does not necessarily operate in isolation. Businesses may need to demonstrate, through contracts, correspondence, deliverables, payment records and other supporting documentation, that an actual taxable supply was made to them and that the substantive conditions for VAT recovery were satisfied.
Finance and tax teams should ensure that invoice-validation controls are supported by effective record retention. Where an invoice contains an incomplete or unclear description, obtaining a corrected invoice from the supplier remains the preferred approach. Reliance on reconstructed evidence during a tax audit can materially increase controversy and deduction risk.

Article

The ’s-Hertogenbosch Court of Appeal has denied a company’s deduction of input VAT on invoices received from another company. According to the published case summary, the invoices contained formal deficiencies and the claimant failed to provide adequate additional evidence concerning the services allegedly performed for it. The company therefore did not make its entitlement to VAT deduction sufficiently plausible. [taxlive.nl]

The ruling is commercially relevant because it illustrates the interaction between the formal invoice requirements and the substantive conditions governing input VAT recovery. A business claiming a deduction must be able to establish that taxable goods or services were actually supplied to it, that the VAT relates to its economic activities and, where required, that it holds an invoice containing the prescribed information.

A defective invoice may create particular difficulties where the description of the supply is too general to determine what was provided, when it was provided or how it relates to the customer’s business. In such circumstances, the tax authorities and courts may examine evidence beyond the invoice. Relevant documentation can include engagement letters, contracts, purchase orders, timesheets, project reports, email correspondence, proof of payment and evidence showing how the work was used by the recipient.

The judgment indicates that additional evidence must do more than merely show that an amount was paid. It should establish a credible and sufficiently specific connection between the supplier, the services described, the recipient and the recipient’s taxable business activity. If the supporting records do not clarify the nature or performance of the services, they may not cure the evidential weakness created by an inadequate invoice.

Businesses should consequently avoid treating invoice compliance as a purely administrative exercise. Accounts-payable controls should identify missing supplier details, unclear service descriptions, incorrect dates, absent VAT information and inconsistencies between invoices and underlying contracts. Material deficiencies should be referred to the supplier promptly, with a corrected invoice requested before VAT is claimed where possible.

This is particularly important for consultancy, management, intercompany and project-based services, where generic descriptions may make it difficult to demonstrate the substance of the transaction several years later. A complete audit file should therefore be retained alongside the invoice.

The published summary does not disclose the case number, the precise invoice defects or the nature of the services. The judgment should therefore not be read as establishing that every formal invoice error automatically prevents deduction. Its practical message is that taxpayers must be able to substantiate the underlying supply and should not assume that incomplete invoices can always be remedied through general or retrospective explanations.

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