C-377/23 – ORDER ABOUT WRONGLY INVOICED 0% VAT

ECJ issues reasoned orders to provide concise resolution on VAT cases that are considered clear-cut or straightforward. They are typically published in the language of the case and in French.

Recently, ECJ issued its Order C-377/23 on the case of DC.

Background

DC is a Portuguese seller of second-hand motor vehicles who mistakenly applied a 0% VAT in the invoices issued to final consumers. The tax administration determined that DC should have charged 23% standard VAT rate on the entire price shown on the sales invoices.

Challenging the approach of the tax audit, DC argued that the due VAT should be calculated as being included in the sales price mentioned on the invoice.

DC contended that the consideration of the tax authorities to charge 23% VAT on top of the sales price is incorrect and maintained that the due VAT should be deemed included in the invoiced amounts. Furthermore, DC asserted that the calculation method of the tax authorities, which would entail increasing the invoiced sale price, violates the principle of fiscal neutrality also due to the lack of mechanism to pass on VAT to final consumers.

Question referred to the court

Is the price/amount indicated on the already issued invoices inclusive of VAT, or should VAT be added?

Key Points of the Case

The sought interpretation can be clearly inferred from the ECJ judgments on cases C-249/12 and C-250/12 (Tulică and Plavoşin) and C-521/19 (Tribunal Económico Administrativo Regional de Galicia) according to which:

• the general rule of Article 73 of the VAT Directive 2006/112 is clear that the taxable amount is the consideration actually received by the taxable person;
• this rule must align with fundamental principle of the directive that the VAT system is intended to impose a burden solely on the final consumer;
• in cases where sales are made without any mention of VAT to final consumers, and consequently, the VAT required by the tax authorities cannot be reclaimed from them, imposing VAT on top of the invoiced amounts would conflict with the principle that VAT must be borne by the final consumer;
• such calculation would furthermore conflict with the rule preventing the tax authorities from collecting VAT in excess of the amount received by the taxable person.

Court’s Conclusion

Following the interpretation of Article 73, Article 78(a) and Article 2(2)(b) of Directive 2006/112, if a taxable person by mistake applies a lower VAT rate on invoices to final consumers, the invoiced price must be considered as including VAT unless national law allows the taxable person to pass on and recover the adjusted VAT rate from final consumers.

Significance

The Order clarifies the treatment in cases of incorrect VAT rates applied on issued invoices. It highlights the importance of accurately determining the VAT in the invoiced amounts and underscores the fundamental principle that VAT burden should ultimately fall on the final consumer.

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