Recently, the General Court, part of the Court of Justice of the European Union, being the Chamber giving preliminary rulings (General Court), issued an important ruling regarding the timing of input VAT deduction.

The key question in this case was whether input VAT on an invoice relating to supplies performed in, for example, the first quarter (Q1), but only received in the second quarter (Q2) with an invoice date falling in Q2, may nevertheless be deducted in Q1. This ruling can be relevant for businesses, as it may allow VAT on certain invoices to be reclaimed earlier, thereby creating a potential cash flow advantage.

As a general rule, the invoice date determines the period in which input VAT may be deducted. If the invoice date falls outside the relevant VAT period, the deduction is normally deferred to the next VAT return. However, this ruling confirms an important exception. Invoices received shortly after the end of a period may, under certain circumstances, still be included in the preceding period.

Two conditions must be met:

• The invoiced supply must have taken place in the earlier period (e.g., Q1).
• The invoice must have been received before the VAT return for that period (Q1) is filed.

In practice, this means that an invoice received at the beginning of Q2 for supplies made in Q1 may still be included in the Q1 VAT return, provided the invoice was received before the Q1 return is submitted.

There remains a possibility that the General Court’s ruling could be reviewed and overturned by the Court of Justice of the European Union itself if there is considered to be a “serious risk that the unity or consistency of EU law may be undermined.” At this stage, it is uncertain whether such a review will take place. For the time being, the General Court’s ruling is leading and can be followed. 

Therefore, we advise monitoring VAT invoices received shortly after the end of the filing period to check whether substantial input VAT can be deducted, and if so to consider taking this into account.  
Please do not hesitate to contact us if you have any questions or if you would like to discuss the potential implications for your specific situation. 

Regarding tax advice or questions about this blog, please contact Peter van Dijk (vandijk@dayonelegal.nl)