Civil contract with tax consequences like a VAT invoice

On September 29, 2022, the Court of Justice of the European Union issued a judgment in Case C-235/21 Raiffeisen Leasing v Republic of Slovenia regarding the recognition of a written agreement as an invoice.

The judgment was rendered in relation to the following factual circumstances

Raiffeisen Leasing entered into a sale and leaseback agreement with RED Company. The leasing agreement was concluded in writing, with specified prices (gross including VAT). Raiffeisen Leasing did not issue a VAT invoice nor paid it, while RED Company claimed the right to deduct VAT based on the agreement itself, stating that the agreement constituted an invoice. The tax authority refused RED Company’s VAT deduction, while Raiffeisen Leasing was obliged by the tax authorities to pay the VAT due under the leasing agreement because the agreement was considered an invoice. Eventually, the case was brought before the Slovenian Supreme Court, which referred a preliminary question to the CJEU. This question concerned the interpretation of Directive 2006/112, specifically Article 203, which states that any person who shows VAT on an invoice is obliged to pay it. In this context, the Slovenian Supreme Court wanted to know whether it could consider the agreement as an invoice to apply the aforementioned provision of the Directive.

Position of the CJEU

The Court held that it is possible to consider an agreement as an invoice if the conditions set out in the Directive are met. The judgment stated that if the substantive conditions for the right to deduct VAT are met, it does not matter on what basis this right is materialized, whether based on an invoice or another document. Fulfillment of substantive conditions is a necessary condition for acquiring the right to deduct VAT, even in the absence of fulfillment of formal conditions. The CJEU emphasized that the taxpayer cannot be denied the right to deduct VAT solely on the basis of the absence of an issued invoice, provided that all substantive conditions have been met. Furthermore, it is worth noting that the Court stated that, regardless of the parties’ intentions, the agreement may be considered an invoice, and as a consequence, the seller will be obliged to pay the VAT. It is noteworthy that although indicating the VAT rate is obligatory, the Court indicated in the judgment that it is sufficient to infer it from the agreement.

Impact of the judgment on the application of tax law in Poland

The CJEU’s judgment will likely significantly impact the perception of agreements and, more dangerously, other documents by tax authorities. On the one hand, this may be advantageous for the buyer, as they will be able to defend their position regarding the right to deduct VAT. On the other hand, it is dangerous for the seller. This danger primarily arises from the possibility of broad interpretative activity by tax authorities regarding the treatment of agreements or other documents as equivalent to VAT invoices, as a consequence of which the seller will be obliged to pay the VAT due indicated on the document.