The Decision of the European Court of Justice in Case C-101/16 Paper Consult has been published, clarifying the VAT deduction right in connection to acquisitions of goods and services from suppliers whose VAT number is inactive.
The Decision of the European Court of Justice in Case C-101/16 Paper Consult was recently published on the CJEU website. The Decision establishes a different approach to that applied by the Romanian tax authorities regarding the VAT deduction right in connection to acquisitions performed from suppliers with inactive VAT numbers.
The VAT legislation valid until 1 January 2017 stated that beneficiaries acquiring goods and / or services from taxable persons established in Romania whose VAT number is inactive cannot benefit from the VAT deduction right in connection to such acquisitions.
As of 1 January 2017, the VAT legislation allows taxable persons the VAT deduction right in connection to acquisitions performed from suppliers during the period when their VAT number was inactive, based on the corrected invoices issued by the supplier after re-registration. The measure does not apply retroactively and only applies to suppliers which re-register for VAT purposes as of 1 January 2017.
Thus, in the opinion of the Court, as long as no fiscal fraud has been proven in a transaction, a taxable person should not be denied the VAT deduction right in connection to an invoice issued by a supplier declared inactive from a VAT perspective, even if the declaration of inactivity is public and easily accessible.
An important argument of the Court in this respect is that the supplier, even if inactive from a VAT perspective, paid to the state budget the VAT amounts related to the contract concluded with the client, so refusal of the beneficiary’s VAT deduction right in connection to the contract would represent an infringement of the VAT neutrality principle.
The CJEU also mentions that, since this decision is meant to clarify what concerns the VAT legislation in force, such interpretation must apply retroactively.
Companies in Romania which have had their VAT deduction right denied for acquisitions performed from inactive suppliers may request that the tax authorities refund those amounts, as long as the principle of VAT neutrality has been respected and they have not been involved in fiscal fraud or tax revenue losses.