No right to deduct input VAT without holding an invoice


In brief

The Court of Justice of the EU (the “Court”) recently issued the Advocate General’s opinion in case C-664/16 Lucrețiu Hadrian Vădan v. National Agency for Fiscal Administration. The opinion states that input VAT cannot be deducted without holding an invoice.

In detail

Romanian individual Lucrețiu Hadrian Vădan sold new buildings and building land between 2006 and 2009. In June 2006, he exceeded the RON 200,000 VAT exemption threshold for small businesses. In 2011, the Romanian tax authorities considered that Vadan had qualified as a taxable person as of August 2006 and, as a result, registered him for VAT purposes by default, imposing additional tax liabilities consisting of output VAT for those supplies of goods. However, Vadan was not allowed to deduct the input VAT related to the acquisitions of goods and services performed in connection with the economic activity performed, on the grounds that he had not kept any accounting evidence of the purchases made or the related invoices, in order to be able to assess the amount of deductible VAT.

The General Advocate concluded that, in the absence of accounting records and purchase invoices, input VAT cannot be deducted based on reports issued by experts appointed by the referring court, in order to evaluate the value of the acquisitions performed, as a significant period of time had elapsed between the date of the acquisitions and the moment when Vadan exercised his VAT deduction right.

[Source: Case C‑664/16 Lucreţiu Hadrian Vădan v Agenţia Naţională de Administrare Fiscală — Direcţia Generală de Soluţionare a Contestaţiilor Direcţia Generală Regională a Finanţelor Publice Braşov — Administraţia Judeţeană a Finanţelor Publice Alba (Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Articles 167, 168, 178, 179 and 273 — Principle of VAT neutrality — Right to deduct input tax — Substantive requirements — Formal requirements — Absence of invoices), published on on 30 May 2018]

The takeaway

The conclusion holds that, for acquisitions for which the value is unknown (i.e. not registered in accounting records and for which there are no invoices), taxable persons are not allowed to use expert reports to determine the price of goods / services acquired in order to deduct input VAT.

If the Court follows the General Advocate’s conclusion, it is important to note that such a decision could be extended to all situations where the VAT to be deducted cannot be determined.

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