WRONGLY INVOICED VAT: New case law decisions
June 22, 2023
It is worth analysing two recent judgments which present two different situations of wrongly invoiced VAT:
• On the one hand, a decision of the Administrative Court of Appeal of Lyon of 2 February 2023 on VAT wrongly invoiced on an activity outside the scope of VAT
• On the other hand, a judgment of the Court of Justice of the EU of 8 December 2022 on the VAT rate error that led to VAT wrongly invoiced
Judgment of the Court of Justice of the EU of 8 December 2022
In this case, an Austrian company wrongly applied the 20% VAT rate for its services, whereas under Austrian law the 13% VAT rate applied.
After realising its error, the Austrian company regularised its VAT returns so that the excess VAT could be credited to it.
The Austrian tax authorities refused to make that adjustment on the following grounds:
• Failure to correct invoices by the Austrian company
• The customers of the Austrian company have borne a higher VAT, so the regularisation would lead to unjust enrichment of the company
The case was referred to the Court of Justice of the European Union.
Based on Article 203 of the VAT Directive : "VAT is payable by any person who mentions this tax on an invoice".
On the basis of this article, the Court considers that a taxable person who has provided a service and who has mentioned on his invoice an amount of VAT calculated on the basis of an incorrect rate, is not liable for the part of the VAT wrongly invoiced if there is no risk of loss of tax revenue (final consumers without the right to deduct).
Thus, the adjustment made by the Austrian company was correct.
Judgment of the Administrative Court of Appeal of Lyon of February 2, 2023
In this case, a company organized lotteries with associations. Following an audit of the accounts, the tax authorities notified the latter of an adjustment with a view to remitting the VAT collected in the context of this activity, even though the company was engaged in an activity outside the scope of VAT.
The company then requested the cancellation of the VAT recovery notice and the related surcharge. The administrative court rejected the request. The company is therefore appealing.
The Court of Appeal only confirmed the decision of the administrative court on the basis of Article 283 of the General Tax Code which stipulates that: "any person who mentions VAT on an invoice is liable for the tax solely by virtue of his invoicing".
Thus, although outside the scope of VAT, the company that invoiced the VAT, it had to pay it to the tax authorities.
What about the deductibility of VAT on purchases previously made in the context of this activity?
It is clear from the decision of the Court of Appeal that the deductible VAT charged on purchases (prizes for lottery winners in this case) are not deductible, because the activity is outside the scope of VAT.
