Important CJEU Update: Courtesy of EY

Important CJEU Update: Recovery of VAT on qualifying bad debt in cases where debtors are no longer VAT registered

Action Required

In case C-127/18, the Court of Justice of the European Union held that a taxable person can claim back VAT on unpaid customer balances which qualify for VAT as bad debts, even if the customer ceases to be VAT registered.

1. Outline of the Case

A-Pack CZ is a Czech company and a taxable person in Czech Republic. One of its customers became insolvent and A-Pack requested from the Czech tax authorities a correction of the VAT amount in respect of a qualifying bad debt.

The tax authorities refused to grant A-Pack CZ an adjustment of the VAT amount paid on the grounds that the Czech VAT Law does not allow a correction of the VAT amount if the debtor has ceased to be a taxable person, which was the case with A-Pack’s customer.

A local Court considered that the condition that the debtor must not have ceased to be a taxable person, may be contrary to the VAT Directive and asked the European Court of Justice (CJEU) for a preliminary ruling.

Click here to read more:ecj-c127.18-v1