Can overcharged VAT on consumer sales be reclaimed?
The position on this issue was given by the Court of Justice of the European Union (the CJEU) in its ruling of 21 March 2024, ref. C-606/22, which was issued as a consequence of a request for a preliminary ruling submitted by the Supreme Administrative Court.
The case concerns a Polish company providing recreational and fitness services. The Polish taxpayer, through the sale of passes, enabled its customers to enter the club premises and enjoy the infrastructure located there. The sale was documented by the company by cash register receipts and taxed at 23% VAT.
In a general ruling issued on December 2, 2014, ref. no. PT1/033/32/354/LJU/14, the Minister of Finance indicated that for services concerning the admission to such facilities the appropriate rate is 8% VAT.
As a result, the company filed corrections to its VAT returns. The tax authorities of both instances issued decisions in which they held that the taxpayer was not entitled to correct the tax base and output tax reported in the VAT returns, and thus also to apply for a declaration of overpayment due to the fact that these sales were documented with receipts. Thus, the tax authorities were of the opinion that the taxpayer was under an obligation to pay the State Treasury the output tax in the amount corresponding to the amount collected from end consumers. In their opinion, making adjustments would have been possible, had the sales been documented with invoices and had the taxpayer subsequently corrected the original invoices with correcting invoices.
The taxpayer did not agree with this position and decided to file a complaint against the decision of the Director of the Tax Administration Chamber with the Voivodship Administrative Court. After considering the case, the court of first instance agreed with the taxpayer, indicating that even in a situation where the taxpayer documented the sale with receipts, he had the right to make a correction of output tax on the sale. Subsequently, as a result of a cassation appeal filed by the Director of the Tax Administration Chamber, the case was referred to the Supreme Administrative Court (the SAC), which suspended the proceedings and asked the CJEU for a preliminary ruling on the issue.
The CJEU, in the judgment at issue, stated that EU regulations (Council Directive 2006/112) do not refer to a correction of a VAT return in a situation where an incorrect tax rate has been applied. Furthermore, it stressed that a denial of VAT correction on the grounds of the sales being documented with cash register receipts rather than invoices violates the principles of tax neutrality, effectiveness and equal treatment. At the same time, it emphasised that in a situation where the burden of the wrongly collected VAT is transferred entirely to the consumer, the tax authorities are entitled to refuse to reimburse the tax on the grounds that unjust enrichment could occur on the part of the taxpayer.
In summary, the CJEU, in its ruling of 21 March 2024, acknowledged, on the one hand, the possibility of making a correction to a VAT return even where sales were documented with receipts, but, on the other hand, left it to the tax authorities to contest the tax refund. In this situation, it is the SAC, taking into account the CJEU judgment in question, the circumstances of the case and the evidence presented, as well as carrying out an economic analysis, that will have to assess whether or not unjust enrichment could occur in the case in question.
Natalia Lasik, Tax Consultant, ATA Tax Sp. z o.o.
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