The CJEU condemns the Slovak Republic for refusing to deduct late VAT payment
On March 21. 2018 the Court of Justice of the European Union decided in a preliminary ruling on the compatibility of Article 45, par. 1 of the Slovak Bill number 511/1992 on the administration of taxes and other charges, and amendment of the organisation of regional tax authorities with the Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (VAT).
The case was brought to its attention by the company Volkswagen AG which, between 2004 and 2010, bought moulds for the manufacture of car lights from Slovak and German suppliers, who are members of the same company group Hella.
Hella suppliers committed a mistake by not including VAT in the relevant invoices. The suppliers realised their mistake in 2010 and only then delivered the correct invoices which include the VAT due by Volkswagen. In 2011, Volkswagen applied to the Slovak VAT administration for a refund of the VAT charged on the supplied goods.
The VAT administration, including the appellate authority, dismissed the application for the VAT paid on the supplied goods during the period from 2004 to 2006 due to the expiry of the limitation period of five years provided for by Article 45(1) of Slovak Law number 511/1992. According to the tax administration, the entitlement to a refund of VAT arose on the date of delivery of the goods.
Volkswagen AG demanded the annulment of the latter decision before the Krajský súd v Bratislave (Regional Court, Bratislava, Slovak Republic), who also dismissed the action. Volkswagen AG then appealed the decision before the Supreme Court of the Slovak Republic (Najvyšší súd Slovenskej republiky) for violation of EU law and case-law of the CJEU. According to Volkswagen, the right to refund VAT arises when goods have been supplied and when the VAT has been applied by the supplier through the issuing of an invoice.
The CJEU reminded that the right to deduct VAT is subject to compliance with both substantive and formal conditions (articles 168(a) and 178(a) of Directive 2006/112). One of those formal conditions regards the rules governing the exercise of the right to deduct and says that the taxable person must hold an invoice (article 178(A) of Directive 2006/112). Volkswagen AG requested the VAT deduction after the adjustment of the situation by its suppliers, in other words after its suppliers sent Volkswagen AG the correct invoices and after the substantive and formal conditions allowing for the right to deduct VAT were met. Volkswagen AG was furthermore diligent and did not try to commit an abuse or fraudulent collusion with the group of companies Hella. The right to deduct arose from the reception of the invoices.
The Court concluded for those reasons that EU law had been violated by the Slovak VAT regulation and therefore ruled that “a limitation period which began from the date of supply of the goods and which, for certain periods, expired before this adjustment, cannot validly deny Volkswagen the right to a refund of VAT”.
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