Advocate-General opinions

The Advocate General begins her opinion in Wilo Salmson France SAS (C-80/20) by saying that the Court has the opportunity in this case to answer one of the most important questions of VAT law in practice, namely whether a business’ right of deduction of input tax depends upon possession of an invoice and when the time limit for reclaim input tax begins to run.

The taxpayer submitted a refund application in Romania in 2012. The invoice issued in 2012 did not meet the Romanian statutory requirements and the refund application was consequently refused. The invoice was then cancelled and reissued in 2015. A new refund application was submitted in 2015 and, in order the ascertain whether the refund application was submitted in time, the Romanian Court asked the CJEU when the right of deduction arose (at the time of supply or time of receipt of an invoice) and whether the cancellation of an invoice could have any effect on the time limit for exercising the right of deduction.

The Advocate General drew a distinction between a right of deduction in principle (which she opined arose once VAT became chargeable following the supply) and the right of deduction in a given amount (which she opined arose on receipt of an invoice). According to the Advocate General, the time at which the invoice is held determines the correct period for exercising the right of deduction (ie the time limit for exercising the right of deduction is determined based on when both the right in principle and the right in a given amount have arisen).

The Advocate General opined that formal shortcomings in an invoice do not preclude the right of deduction and can be corrected retroactively. Provided an invoice has the five bare essentials of the name of the supplier, the recipient of the supply, the goods or services supplied, the price and the VAT, the ‘‘spirit and purpose‘‘ of the invoice are fulfilled and the right of deduction arises. The right of deduction does not fall away if some of the other requirements specified in the Principal VAT Directive are not met provided that they are corrected later. Cancellation of the invoice by the supplier (whether by mutual agreement or unilaterally) cannot affect the right of deduction of the recipient of the supply.

It was up to the referring court to determine whether the invoice issued in 2012 met the five basic requirements for a valid invoice (in which case the taxpayer should have contested Romania’s decision to reject its first claim, and its second claim would be time-barred) or whether a valid invoice was only issued in 2015 (in which case that would have been the first occasion on which the taxpayer was entitled to reclaim the VAT, and its second claim would have been in time).

DLA Piper comment: The Advocate General reiterates the importance of an invoice including its material elements – references of the supplier, the recipient of the supply, the goods or services supplied, the price and the VAT - in order for a taxpayer to effectuate its right to deduct input VAT. Additionally, the Advocate General mentions that invoices can be valid even if not all formal requirements are included (further confirming established EU case law). Still, in order for taxpayers to safeguard their right to deduct input VAT, it is important that they include the material conditions in any (quasi)invoice they issue, in order to ensure their right to deduct input VAT.