Global

Details

  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 2/12/2014

Romania - VAT deduction based on “incorrect” invoice 

February 12:  The Court of Justice of the European Union (CJEU) issued a judgment in a case concerning whether a Romanian company could claim a value added tax (VAT) deduction using information from an “incorrect” invoice received from its Romanian supplier, although the taxpayer company was to have applied the reverse-charge mechanism. SC Fatorie SRL,C-424/12 (6 February 2014)

Summary

The taxpayer paid the amount of VAT to its supplier, and then deducted this amount. On audit, the Romanian VAT authorities determined that the taxpayer was not entitled to deduct the VAT that had been incorrectly invoiced by the supplier. The taxpayer was informed that it must remit the amount of VAT plus late-payment penalties.


Meanwhile, the supplier had declared bankruptcy and had failed to remit the output VAT collected.


The questions presented to the CJEU included:


  • Whether the taxpayer could be denied its right for a VAT deduction when the invoice had been incorrectly issued by its supplier (because the supplier had failed to apply the reverse-charge mechanism) and the VAT indicated in the invoice had been paid to the supplier?

The CJEU decided in favor of the Romanian tax authorities, finding that the right to deduct input VAT cannot be exercised by a taxable person if that tax is not actually due—even when the correction of the related invoice is impossible due to the insolvency of the supplier.


Read a February 2014 report [PDF 531 KB] (English and Romanian) prepared by the KPMG member firm in Romania: Indirect Tax Newsflash




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