Claiming input VAT before receiving invoice: landmark EU General Court judgment does not (yet) change Czech practice
The EU General Court’s judgment has attracted much attention, as it opened a key question: can a taxpayer claim the right to deduct VAT already for the period in which the tax liability arose even if the invoice was received only later – yet still before the VAT return for the original period is filed? In response, the Czech financial administration has already warned taxpayers that, while the judgment is important, it does not change Czech practice. At least for now.
In case T 689/24 (I. S. A.), the EU General Court examined a situation where:
- the tax liability arose in a given taxable period (upon the supply of goods or services)
- the invoice was issued and delivered only after the end of that period, but
- the invoice was available to the taxpayer before filing their VAT return for that period.
According to the General Court, the right to deduct arises at the moment the tax liability arises, i.e., upon the supply of goods or the provision of services. Holding an invoice is a formal requirement, not a substantive condition for the right to arise. National legislation must therefore not prevent deduction in the period in which the right arose, as this would be contrary to the principles of fiscal neutrality and proportionality (we discussed the judgment in more detail in this article).
Under Section 73 of the Czech VAT Act, the exercise of the right to deduct is linked not only to the VAT becoming chargeable on the input but also to holding a tax document (invoice). In its communication, the financial administration reminds taxpayers that:
- The right to deduct may be claimed at the earliest in the period in which the taxpayer received the tax document (invoice).
- If the taxpayer receives the invoice only in the following taxable period, they shall claim the deduction only in that following period (or in one of the subsequent periods, within the statutory time limit).
Czech law therefore links the possibility to claim a VAT deduction to the moment the invoice is received, rather than purely to the moment the VAT liability arises.
In its latest communication on the judgment, the financial administration takes a cautious approach and is waiting for the review proceedings currently pending to be completed: the EU General Court’s judgment shall only become effective once those proceedings have ended.
At the same time, the financial administration points to the Court of Justice of the EU judgment in case C 521/24 (Aptiv Services Hungary), which confirmed that the right to deduct shall be exercised in the period in which all conditions are met – conditions which include holding the invoice.
The financial administration therefore notes that the existing domestic rules shall continue to be followed in full, even though they are in direct contradiction with the General Court’s conclusions.
Until the review proceedings before the CJEU are completed, or until Czech legislation is amended, the following recommendations apply to taxpayers:
- Mind the moment the invoice is received – this continues to determine the period in which the deduction may be claimed.
- Claiming the VAT deduction retroactively (i.e., for the period in which the supply took place where the invoice arrived only after the end of that period) is currently not practicable.