A report may not be sufficient for VAT deduction purposes
C-624/23. – „SEM Remont” EOOD | The VAT deduction may not be practiced upon a report submitted during the tax administration procedure. Member States may exclude the possibility of correcting an invoice if that invoice does not state VAT charged and the VAT payment liability was established during a tax inspection.
In the background case, SEM Remont, a Bulgarian business ordered dredging works in the Port of Varna from a Russian-established company which was not identified for VAT purposes in Bulgaria that time. On 31 October and 15 November 2020, the Russian company invoiced the works in a value of more than EUR 1.9 million without charging Bulgarian VAT and did not indicate a Bulgarian VAT ID in the invoices either. The Russian company only initiated the Bulgarian VAT registration on 26 November 2020. The registration decision was issued on 11 December 2020.
The Bulgarian tax authority carried out a tax inspection at the newly registered Russian company and established that they are liable to Bulgarian VAT on account of the dredging works, and they should have registered for VAT purposes in Bulgaria. The tax authority therefore requested that the company calculates the VAT on the taxable transactions and provide a report in line with the local procedural rules. In this report, the Russian company indicated itself to be the supplier and recipient of the underlying works at the same time. SEM Remont granted loan to the Russian company to settle the payable VAT, and deducted the VAT in its VAT return, by reference to the report.
The Bulgarian tax authority refused the VAT deduction on the ground that SEM Remont had not been holding a VAT invoice and the VAT liability had been established during a tax inspection which precludes the correction of the invoice. The case was brought before the ECJ by the Administrative Court of Varna.
In its judgement, the ECJ pointed out that although in case C‑235/21. Raiffeisen Leasing, the court held that a contract may be regarded as an invoice if contains all the information necessary for the tax authorities to be able to establish whether the substantive conditions for the right to deduct VAT are satisfied, that case may not be referred here because the report was sent to the tax authority and not to the recipient of the services and the VAT was not charged to SEM Remont. The Russian company nevertheless indicated himself as the recipient of the services, which also prevents the VAT deduction at the level of SEM Remont. The ECJ also confirmed that Member States may preclude the possibility of correcting an invoice if that invoice does not state any VAT charged and the VAT payment liability was established during a tax inspection.
