In a most recent judgment following a Polish request for a preliminary ruling, the General Court of the EU confirmed the incompatibility of the local input VAT regulations with EU Law and held that the right to deduct input VAT arises with the supply and the chargeability of the tax, and must not depend on the immediate possession of an invoice provided that the taxable person did receive the invoice before submitting the VAT return. Any national “forced deferral” violates the principle of fiscal neutrality.
In a most recent circular, the Federal Ministry of Finance (MoF) has commented on the input VAT deduction from services obtained by an entrepreneur prior to the switch from the standard taxation to taxation under the small business regime in Section 19 of the German Value Added Tax Act.
The supply of electricity to tenants is an independent main service and distinct from the otherwise tax-free rental, and the VAT from the purchase of the photovoltaic systems is deductible for the landlord as input VAT.
In an interesting Hungarian case, albeit with a somewhat predictable outcome, the ECJ was called to decide on the deduction of input VAT in cases where the value of the service provided is ostensibly disproportionate to the benefit which the service generates for the recipient in matters of sales revenue or increase in sales revenue. The ECJ held that, in general, such circumstances have no effect on the right to deduct input tax.
Both VAT senates of the Supreme Tax Court have held that a VAT-free purchase by a trader giving a German VAT ID No. for goods delivered elsewhere is taxable without a corresponding input tax deduction.
The ECJ has held that a conflict of definition leading to cross-border car leasing being taxable in neither country does not preclude the right to deduct input tax.
