C-146/19 SCT, C-292/19 PORR Építési Kft. and C-756/19 Ramada Storax SA
Recently ECJ published three decisions that relate to the interpretation of Article 90 of the VAT Directive. This article concerns the reduction of the VAT paid by the creditor to the tax authority in case the receivable remained unpaid.
In the SCT case, the Slovenian SCT company made a correction of output VAT from receivables to the bankrupt debtors. It, however, did not register the receivables in the bankruptcy proceedings. SCT asserted that it would not get any payment of the receivable anyway. Slovenian act on insolvency considers those (unregistered) receivables as extinguished. Slovenian tax administrator refused the correction.
ECJ, however, ruled, that Article 90 cannot be interpreted as preventing VAT correction in case the receivable had not been registered in the insolvency proceedings.
In the Porr Építési Kft. the ECJ ruled that Article 90 must be interpreted the way that the taxable person is entitled to reduce its output VAT if it can demonstrate that the receivable is definitely irrecoverable.
In the Ramada case, ECJ ruled that a Member State cannot impose on the taxable persons claiming a reduction in the output tax on bad debts additional material conditions beyond the scope of the Directive and cannot prevent VAT reduction if bankruptcy proceedings are initiated in other country.
Those rulings are a positive message for the taxable persons and make reduction of the VAT easier preventing rigid local legislation that requires further criteria for the VAT correction (as registration of the receivable to insolvency proceedings, the debtor still being registered for VAT) to be fulfilled.