The European Court of Justice (ECJ) considered in a judgment C‑606/22 from March 21, 2024, whether a tax administrator can refuse a taxpayer’s request to correct the tax base in the VAT refund if a higher VAT rate was originally incorrectly applied due to the fact that a full-fledged invoice was not issued during the supply of goods or the provision of services, but only documents from an electronic cash register were provided.

The Polish tax authority did not accept the additional reduction of the output VAT rate

The judgment concerns the Polish company B. sp. z o.o. (hereinafter “B.”), which provided services related to leisure activities and improving physical fitness, specifically through the sale of subscriptions allowing access to the premises of a sports club and the use of the facilities available there. In 2016, B. decided to apply a reduced VAT rate of 8 % (instead of 23 %) to its services in accordance with the new Polish tax doctrine.

In 2016, B. submitted additional VAT returns for the relevant tax periods of 2012, 2013, and 2014. Subsequently, the Polish tax authority refused to admit the overpayment reported as a result of the submitted additional VAT refund in favor of B. The local tax administrator justified this decision, that the taxable person does not have the right to correct its VAT evidence nor VAT refund, as the sale of tickets and subscriptions was not documented by full-fledged invoices and corrective documents were not issued in accordance with Polish legislation. B. could not issue and deliver the corrective invoices, as during sale of the services no full-fledged invoices were issued, but only the documents from the cash register were provided to the customers.

Polish legislation allowed the correction of the tax base only if, before the deadline for submission of the VAT refund, the recipient of the goods or services received a corrective invoice and the supplier had confirmation that the corrective invoice was delivered to the recipient. Subsequently, the corrective invoice can be reported in the tax period during which the supplier received this confirmation.

Decision

The correct consideration of the ECJ was firstly whether, according to the VAT Directive, B. is entitled to refund of the of VAT, when it by mistake applied, however in accordance with the guidelines provided by the tax authority, an incorrect VAT rate.

The Court then discusses the principle of the VAT neutrality, according to which the VAT is intended to burden only the final consumer and according to case law, the price agreed between the supplier and the customer includes VAT, regardless of whether a full invoice was issued or not.

The ECJ further states, that applying a higher tax rate compared to competitors can affect the competitiveness of the company B., either through a direct increase in the price of the services provided or by reducing profit margins. This is also contrary to the principle of the tax neutrality.

According to this judgment, the local tax authorities must adjust their legislations to allow the correction of the tax base even in cases where the full-fledged invoice was not issued, but only documents from the cash register were provided.

Correction of the documents issued by the cash register in Slovakia

Act No. 289/2008 Coll. on the use of electronic cash registers allows the correction of a recorded item in the e-kasa client cash register, referencing the original document. The taxpayer then makes a correction of the tax base in accordance with the VAT Act by submission of an additional tax return.

Marián Ťakuš

Tax Consultant | Accace Slovakia

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