In its judgment of 18 March 2021 (Case No C-895/19), the Court of Justice of the European Union ruled on the incompatibility with EU law of Polish regulations making the exercise of the right to deduct VAT on Intra-Community Acquisition of Goods in the same settlement period in which output VAT on Intra-Community Acquisition of Goods arose conditional on the display of output VAT on Intra-Community Acquisition of Goods in a tax return submitted within 3 months, counting from the end of the month in which the tax point arose with respect to the acquired goods.
The consequence of the CJEU ruling is the possibility for taxpayers to apply for a refund of interest paid on Intra-Community Acquisition of Goods. Due to the fact that the questioned regulations also refer to importation of services, it seems that the CJEU judgment also gives a chance to obtain a refund of interest paid on importation of services. Taxpayers have 30 days from the publication of the CJEU judgment, i.e. from 18 March 2021, to apply for an acknowledgement and a refund of overpayment.
What was at the heart of the dispute?
As of 1 January 2017 there were introduced provisions to the Polish VAT Act stipulating that if a taxpayer reported output VAT on Intra-Community Acquisition of Goods or import of services after the expiry of 3 calendar months counting from the end of the month in which the tax liability for these transactions arose, the taxpayer could not recognise input VAT and output VAT in the same month (i.e. the transaction ceased to be neutral from a VAT perspective).
In such a situation, the taxpayer:
- declared the output VAT in the month in which the tax obligation arose,
- declared the input VAT in the tax return for the current period.
As a result, after correcting the past period, the taxpayer often had to pay additional VAT (which he could deduct only in the current tax return), as well as interest for late payment (which was already a real economic burden for the taxpayer).
Regulations in question were widely criticised for being in conflict with the fundamental principle of the VAT system, i.e. the principle of fiscal neutrality. Ultimately, the issue of their compliance with EU law was evaluated by the CJEU as a result of the Voivodeship Administrative Court in Gliwice sending a preliminary question to the CJEU.
What has the CJEU ruled?
In the opinion of the CJEU, national legislation which systematically prohibits the exercise of the right to deduct VAT relating to a Intra-Community Acquisition of Goods in the same period in which the same amount of VAT should have been accounted for, without providing for account to be taken of all the relevant circumstances, in particular the good faith of the taxpayer, goes beyond what is necessary, first, to ensure the correct collection of VAT and, second, to prevent tax evasion.
What are the implications of the CJEU judgment?
The CJEU ruling gives a chance to recover interest paid on both Intra-Community Acquisitions of Goods and importation of services. Therefore, we encourage you to:
- analyse your settlements for Intra-Community Acquisitions of Goods and importation of services made after 2017,
- estimate the amount of interest paid on Intra-Community Acquisitions of Goods and importation of services due to the unfavourable VAT rules challenged by the CJEU,
- in case the amounts of interest are significant – adjust the accounts and claim the interest refund.
What support can we offer?
At your request, we can support you in:
- preparation of the calculation of interest amounts to be refunded,
- preparation of corrections to VAT returns/ JPK_VAT files/ JPK_V7M files for past periods,
- drafting a request for an acknowledgment and a refund of overpayment.