CJEU: supply recipient must correct a tax deduction even though the supplier did not correct the tax

The Court of Justice of the EU (CJEU) has answered the prejudicial questions concerning a Romanian company that corrected a previously claimed VAT deduction for just a part of the supplies received. In this respect, the CJEU held that national tax authorities have to impose on the taxpayers the duty to correct an initial VAT deduction if it is higher or lower than the one they were entitled to, even if they do not have a separate tax document supporting such a correction.

World Comm Trading, a Romanian distributor of mobile phones, concluded a contract with Nokia Corporation on supplying mobile phones: they were supplied locally within Romania, or acquired from other European Union member states and delivered to Romania. On a quarterly basis, a volume discount was provided, for both local and intra-community supplies. Nokia, however, only issued a tax document for the discount in the tax exemption regime applicable to intra-community supplies. Based on this document, World Comm Trading only corrected their claimed deduction for intra-community supplies.

The Romanian tax administrator issued orders to pay tax in the amount of the difference between the original entitlement to deduction on received local supplies, and the entitlement to deduction reduced by the proportionate amount of the discount attributable to local supplies. 

The Romanian Court of Justice then referred the following prejudicial questions to the CJEU:
Does a company have to correct their entitlement to deduction even if they do not have a separate invoice for the proportionate part of the discount constituting the basis for such correction?
If so, would the answer change if the supplier has ceased its economic activity and can no longer correct the tax base?

The CJEU held that the previously claimed deduction has to be corrected to equal the deduction to which the taxpayer would have been entitled if the change had been reflected at the beginning. This means that the taxpayer must correct the deduction even though they do not have a separate corrective tax document, just an overall one, which nonetheless shows that the discount also concerns local supplies.

In the CJEU’s opinion, the duty to correct the initial deduction remains even after the supplier has ceased their economic activity and therefore can no longer claim refund of the part of VAT they had paid. Whether or not the tax base has been corrected has no effect on the duty to correct the deduction for the respective supplies.  World Comm Trading therefore had the duty to correct the deduction claimed on received local supplies.

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