Many companies, especially in intra-Community trade, face the problem of receiving invoices from suppliers with significant delay. When invoices arrive several years late, national tax authorities often refuse the deduction of VAT on the grounds that it should have been exercised in the period in which the transaction itself took place. In its judgment in Case C-521/2024, the Court of Justice of the European Union provides extremely important clarifications for businesses in this area and ultimately rules that businesses are entitled to deduct VAT even if the right has not been exercised within the time limits set by national law, provided certain criteria are met.
Factual background
In 2021, the Hungarian company Aptiv Services Hungary Kft. deducted VAT for the period July–September in relation to intra-Community acquisitions of goods that had actually been carried out years earlier, between 2016 and 2018.
The reason is simple and beyond the company’s control: the suppliers issued and sent the invoices only in 2021. Without invoices, the Hungarian company was objectively unable to exercise its right of deduction in the years when the transactions themselves were carried out.
The Hungarian tax administration refused the deduction. According to the tax authorities, the company should have corrected its earlier VAT returns from 2016–2018 through an adjustment procedure. The problem was that, for 2016 and part of 2017, the time limit for such corrections had already expired. The use of a special VAT refund procedure was also denied.
The company challenged the decision, emphasizing that it had fulfilled all substantive conditions for deduction, that the transactions were genuine, that there was no fraud, and that the delay was due solely to the late receipt of the invoices. The Győr Regional Court (Hungary) considered that the Hungarian rules might be contrary to EU law and referred a question for a preliminary ruling to the Court of Justice of the European Union.
What did the Court of Justice of the European Union decide?
The Court found that Aptiv Services Hungary Kft. received the invoices only in 2021 and that only at that point did it have the possibility to exercise its right to deduct VAT. The company acted in good faith – no fraud or loss to the public budget was established by the tax authorities. At the time of the deduction, the limitation period had not yet expired.
The Court recalled that the right to deduct VAT is a fundamental principle of the common VAT system and an integral part of its mechanism. Its purpose is to relieve the taxable person entirely of the burden of VAT, so that the tax does not become a cost for the business – this is the principle of fiscal neutrality.
The right arises when the tax becomes chargeable, but it can be exercised only once the taxable person holds a proper invoice. In the case of intra-Community acquisitions, the deduction is made in the tax period in which both conditions are met simultaneously: the right arises and the invoice is held.
Member States may introduce procedural rules, but they must not make the exercise of the right practically impossible or excessively difficult.
In the present case, the Hungarian legislation and practice led precisely to such a result – they did not allow deduction in the period in which the invoices were received, while for earlier years the time limit for corrective returns had already expired. The special refund procedure was also denied.
The Court concluded that such national rules infringe the principle of effectiveness (by making the right practically unusable) and the principle of proportionality (by going beyond what is necessary to combat fraud, especially in the absence of bad faith).
Conclusion of the Court
In its judgment, the Court of Justice of the European Union held that national legislation and administrative practice cannot refuse the deduction of VAT on intra-Community acquisitions of goods solely because the taxable person exercises that right in a later tax period – the period in which it actually receives the necessary invoices.
This applies provided that the taxable person acts in good faith, exercises the right within the statutory limitation period, and there is no tax fraud or loss to the public budget.
With this ruling, the Court clearly affirms the primacy of substantive conditions and fiscal neutrality over purely formal and procedural obstacles, which in some cases lead to a complete denial of the right of deduction.
