ECJ C-167/26 (RX) – AG Opinion – VAT deduction timing: Invoice receipt key, General Court’s error reviewed

Prior Newstem: ECJ C-167/26 – ECJ will review EGC Case T-689/24 RX – VAT deduction and invoice timing – VATupdate

On Spetember 10, 2026, the ECJ issued the AG Opinion in the case C-167/26 (RX).

Context: Review – Reference for a preliminary ruling – Taxation – Common system of value added tax (VAT) – Right to deduct input tax – Articles 167, 168(a), 178(a) and 179 of Directive 2006/112/EC – Issuing of the invoice showing the VAT during the tax period following that in respect of which the right of deduction is exercised – Principles of fiscal neutrality and proportionality – Effect on the unity and consistency of EU law

Summary

Facts: A Polish company, I. S.A., receives purchase invoices in the tax period after the goods were supplied but before the tax return deadline for the supply period. The General Court (GC) ruled that I. S.A. could deduct input VAT in the period of supply, despite not having the invoice then.
Issues: The core issue is determining the correct tax period for exercising the right to deduct input tax when the invoice is received in a subsequent period. This touches on the interpretation of VAT Directive Articles 167, 168(a), 178(a), and 179, and principles of fiscal neutrality and proportionality.
Advocate General Kokott’s Opinion (G opinion): The General Court’s judgment is flawed and departs from established Court of Justice (CJEU) case-law (e.g., Terra Baubedarf-Handel and Aptiv Services Hungary). The right to deduct input tax arises when the tax becomes chargeable but can only be exercised when both substantive conditions (supply of goods/services) and formal conditions (holding a valid invoice) are met.
Argumentation: The GC incorrectly distinguished its case from previous CJEU rulings and misapplied the principle that formal requirements can sometimes be overlooked. The AG argues that the right to deduct should be exercised in the period when both the supply occurred and the invoice was received, which ensures practical application, legal certainty, and adherence to VAT neutrality (as payment and deduction align).
Conclusion/Recommendation: The AG proposes that the CJEU should find the General Court’s judgment affects the unity and consistency of EU law. The CJEU should then provide a new answer stating that the right to deduct input tax must be exercised in the period when both the supply occurred and the taxable person possessed the invoice, and that national legislation preventing deduction in an earlier period (before invoice receipt) is not precluded by EU law.

AG Opinion

(1) The judgment of the General Court of the European Union of 11 February 2026, Dyrektor Krajowej Informacji Skarbowej (T‑689/24, EU:T:2026:113), affects the unity and consistency of EU law.

(2) Articles 167, 168(a), 178(a) and the first subparagraph of Article 179 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (VAT), as amended by Council Directive 2010/45/EU of 13 July 2010, and the principle of VAT neutrality and the principle of proportionality

must be interpreted as meaning that:

(a) the right to deduct input tax must be exercised in respect of the period during which the two conditions required are satisfied for the first time, namely that the goods have been delivered or the services performed and that the taxable person is in possession of the relevant invoice;

(b) those provisions and principles do not preclude national legislation under which a taxable person may not assert his or her right to deduct input tax in a return submitted for a period in which he or she satisfied the substantive conditions for exercising that right if, during that period, he or she had not yet received the corresponding invoice, even though he or she did receive the invoice before submitting the return.

Source

Curia

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I. Executive Summary

This briefing summarizes Advocate General (AG) Kokott’s Opinion delivered on September 10, 2026, in Case C‑167/26 RX, concerning the timing of the right to deduct input Value Added Tax (VAT). The Opinion addresses a significant divergence between a General Court (GC) preliminary ruling and the established case-law of the Court of Justice of the European Union (CJEU) regarding when a taxable person can exercise their right to deduct input VAT, particularly when an invoice is received in a tax period after the taxable transaction occurred but before the tax return is submitted for the transaction period.

AG Kokott concludes that the General Court erred in law by departing from the CJEU’s consistent jurisprudence, most notably the “Terra Baubedarf-Handel” judgment. This error, according to the AG, affects the unity and consistency of EU law, especially concerning the fundamental principles of VAT neutrality and proportionality. The AG proposes that the CJEU set aside the General Court’s ruling and provide a new answer reaffirming that the right to deduct input VAT arises only when both the substantive conditions (supply of goods/services) and the formal condition (possession of a valid invoice) are met.

The secondary source, VATupdate.com, is identified as a valuable resource for staying current with such complex EU VAT legal developments.

II. Background: The Dispute and Legal Framework

The case originated from a request by I. S.A., a Polish company, for a tax ruling regarding its ability to deduct input VAT. I. S.A. receives invoices for goods (gas and electricity) in the tax period following the supply of those goods, but before the deadline for submitting the tax return for the supply period. Under Polish law (Article 86(10b)(1) of the Law on VAT), the right to deduct input tax arises no earlier than when the taxable person receives the invoice.

A. Legal Question Referred:

The referring Polish court questioned whether Articles 167, 168(a), and 178(a) of the VAT Directive (2006/112/EC) and the principles of fiscal neutrality, effectiveness, and proportionality preclude national legislation (like Poland’s) which prevents a taxable person from asserting their right to deduct input tax in the period the substantive conditions were met, if the invoice was not yet received during that period, even if received before the return was submitted.

B. Relevant EU Legal Framework (VAT Directive 2006/112/EC):

Article 63: VAT becomes chargeable when goods/services are supplied.
Article 167: “A right of deduction shall arise at the time the deductible tax becomes chargeable.”
Article 168(a): Entitles taxable persons to deduct VAT on supplies to them.
Article 178(a): Requires a taxable person to “hold an invoice” to exercise the right of deduction.
Article 179: “The taxable person shall make the deduction by subtracting from the total amount of VAT due for a given tax period the total amount of VAT in respect of which, during the same period, the right of deduction has arisen and is exercised in accordance with Article 178.”
Article 273: Member States may impose obligations necessary to ensure correct collection and prevent evasion, provided they respect equal treatment and do not create border formalities.

III. The Divergence in Case-Law

The core of the review proceedings lies in the differing interpretations of the timing for exercising the right to deduct input VAT by the General Court and the established case-law of the CJEU.

A. General Court’s Position (Judgment under Review):

The General Court, in its judgment of February 11, 2026, held that national legislation, such as the Polish law, was precluded. It argued:

The right to deduct arises independently of holding an invoice, as the invoice is merely a “formal condition for the exercise of that right.”
“The origin of the right of deduction could be made subject only to the substantive conditions laid down in the VAT Directive.”
To prevent taxable persons from “temporarily bear[ing] the burden of VAT… in breach of the principles of VAT neutrality and proportionality,” the deduction should coincide with the period the right arose (i.e., when the transaction took place), even if the invoice was received later but before the return.

B. CJEU’s Established Case-Law (as reaffirmed by AG Kokott):

AG Kokott asserts that the General Court’s ruling “departed from the relevant and settled case-law of the Court,” particularly the judgment in Terra Baubedarf-Handel (C‑152/02) and consistently confirmed in subsequent cases like Senatex (C‑518/14), A. (Exercise of the right of deduction) (C‑895/19), and Aptiv Services Hungary (C‑521/24).

The CJEU’s consistent interpretation is:

“the right to deduct input tax must be made in respect of the tax period in which the two conditions required are satisfied, namely that the goods have been delivered or the services performed and that the taxable person is in possession of the relevant invoice (or an equivalent document).” (para 43, citing Terra Baubedarf-Handel)
This approach ensures “the effective collection and supervision of VAT” and aligns with the practical reality that “payment for the taxable transaction and therefore payment of the deductible input VAT is not normally made until the invoice has been received.” (para 44)
Therefore, if the invoice is received in a period subsequent to the taxable transaction, “it is in respect of that subsequent period that the right to deduct input tax must be exercised.” (para 47)

C. Advocate General Kokott’s Critique of the General Court’s Reasoning:

AG Kokott identifies several flaws in the General Court’s reasoning:

Misinterpretation of Terra Baubedarf-Handel: The General Court incorrectly distinguished the facts of Terra Baubedarf-Handel, claiming the applicant there did not hold an invoice at the time of exercise. AG Kokott clarifies that in Terra Baubedarf-Handel, the invoice was received in a subsequent period, making the facts “entirely comparable” to the present case.
Unconvincing Distinction between Substantive and Formal Conditions: While acknowledging both types of conditions, AG Kokott states it is “unconvincing, not to say contradictory, to accept that the right to deduct input tax depends on both substantive and formal conditions, whilst ultimately stating that only the fulfilment of the substantive conditions is truly decisive.” (para 55). The CJEU’s case-law considers both fulfilled for the first time to determine the deduction period.
Misapplication of VAT Neutrality and Proportionality: AG Kokott argues that the CJEU’s rule actually supports VAT neutrality by aligning the deduction with the actual payment of input VAT, which typically occurs upon invoice receipt. The General Court’s solution, conversely, would create “inconsistency between the two relevant events, namely the payment of input VAT and its deduction.” (para 65)
Misreading of Senatex: The General Court attempted to use the “Senatex” judgment (regarding retroactive effect of invoice corrections) to support its view. AG Kokott contends that “that rule in Senatex… actually supports the opposite conclusion,” reinforcing that deduction occurs when an invoice is first held, even if initially imperfect. (para 61)

IV. Practical Arguments and Impact on EU Law

AG Kokott emphasizes the “important considerations of a practical nature and relating to legal certainty” that support the CJEU’s established rule. The CJEU’s solution is “easy to apply” and ensures consistency. In contrast, the General Court’s approach would be “significantly more complex and… likely to create a real risk of inconsistency” and “excessively complicated” administration, potentially requiring “continually to correct or supplement that return as and when he or she receives late invoices.” (paras 64-66)

The AG concludes that the General Court’s error is not minor but has a direct “Effect on the unity or consistency of EU law.” This is because:

It creates a “clear divergence” from established CJEU case-law on a core aspect of the common system of VAT.
The “right to deduct input tax… goes to the very heart of the common system of VAT” and is a “keystone” of VAT neutrality. (para 83)
Such a divergence leads to “legal uncertainty and cause confusion in the minds of litigants and practitioners.” (para 84)

V. Advocate General Kokott’s Proposed Conclusion

Given the significant error of law and its impact on EU law’s unity and consistency, AG Kokott proposes that the CJEU:

Declare that the General Court’s judgment of February 11, 2026, “affects the unity and consistency of EU law.”
Provide a new answer to the preliminary ruling question, interpreting Articles 167, 168(a), 178(a), and 179 of the VAT Directive, along with the principles of VAT neutrality and proportionality, as meaning:

“(a) the right to deduct input tax must be exercised in respect of the period during which the two conditions required are satisfied for the first time, namely that the goods have been delivered or the services performed and that the taxable person is in possession of the relevant invoice;”
“(b) those provisions and principles do not preclude national legislation under which a taxable person may not assert his or her right to deduct input tax in a return submitted for a period in which he or she satisfied the substantive conditions for exercising that right if, during that period, he or she had not yet received the corresponding invoice, even though he or she did receive the invoice before submitting the return.”