Taxpayers with cancelled VAT numbers are entitled to deduct VAT on purchases made while inactive

In brief

The Court of Justice of the European Union (hereinafter "the CJEU") recently published its judgement in case C-69/17 Siemens Gamesa Renewable Energy România SRL (formerly Gamesa Wind România SRL). The judgement confirms that taxable persons with VAT numbers cancelled by the tax authorities are entitled to the VAT deduction for input value added tax on purchases made while inactive.

In detail

Once it had reregistered for VAT purposes, Romanian company Siemens Gamesa (“the Company”) deducted input VAT for purchases made while it was inactive (declared inactive by the tax authorities for failure to submit tax returns).

The Romanian tax authorities considered that the Company did not have a deduction right, since local legislation in force when the purchases took place specifically provided for this restriction.

The CJEU ruled that, as long as substantive requirements are satisfied and the right to deduct input VAT is not invoked fraudulently or abusively, taxpayers are entitled to deduct input VAT for purchases made during the period of inactivity.

The CJEU had previously ruled in another Romanian case, C–101/16 Paper Consult, that the right to deduct input VAT for purchases made from inactive suppliers cannot be rejected and that this approach has to apply retroactively.

[Source: the judgment of The Court of Justice of the European Union in case C-69/17 Siemens Gamesa Renewable Energy România SRL (formerly Gamesa Wind România SRL), published on Curia.europa.eu on 12 September 2018]

The takeaway

Taxable persons with cancelled VAT numbers and cancelled input VAT deduction right for purchases made while inactive may request that the tax authorities refund those amounts, as long as substantive requirements are met and they have not been involved in fiscal fraud.

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