The German Supreme Tax Court (Bundesfinanzhof, BFH) has joined the European Court of Justice’s (ECJ) position in terms of the retroactive correction of invoices and has accordingly changed its jurisdiction. At least an invoice correction with a correction document has retroactive effect to the date of initial issuing of the invoice. An invoice may be corrected with retroactive effect until the last hearing before a first instance tax court.
The claimant had deducted input VAT from invoices issued by a lawyer where, on the lawyer’s stationery and with the subject matter “advisory contract”, it was merely stated that “advisor fees” were billed. Other invoices issued by a business consultancy were made out for “general economic advisory”. None of these invoices referred to other documents that might have contained detailed information about the object of the services. The tax office did not accept the input VAT deduction due to lack of sufficient information about the nature of the services rendered. It was not before court action was taken that the invoices were corrected. The first instance tax court rejected the legal action because the correction of the invoices would not have been possible with retroactive effect at any rate, if the invoice correction took place after the issuance of the decision about the objection raised against the assessment notification.
However, the BFH decided in favour of the claimant. If an invoice was corrected in line with section 31(5) of the German VAT Ordinance (Umsatzsteuer-Durchführungsverordnung, UStDV) – ie, with a correction document showing the missing or correct invoice requirements -, the correction would have retroactive effect for the point in time at which the invoice was initially issued. Apart from that, invoices would remain a substantial requirement for the input VAT deduction, since the EU legal systematics would differentiate between the origin of the right to deduct and the exercise of that right. The exercise of the said right to deduct input VAT required the possession of an invoice.
Therefore, the input VAT deduction requires, in the first place, the receipt of a document deserving the name of an “invoice” that may be subject to a correction. According to the BFH, such a document would be in place at least if that document shows details about the invoice issuer, the recipient of the supply, the description of the supplied goods and services, the consideration and the separately shown VAT amount. However, that information would be required not to be vague, incomplete, nor evidently wrong to an extent that it would be equivalent to missing information. In the case on hand, the insufficient descriptions of the supply were in line with these requirements.
The correction, further to the BFH, may be performed until the last hearing of the first instance tax court takes place, which was why the deadline for the correction was not considered to have elapsed in the case on hand.
As already mentioned, a billing document is considered an “invoice” in legal terms, and its date of issuance may serve as the anchor date for retroactive correction, “if at least” certain invoicing requirements are shown in sufficient quality. Although the BFH has thus chosen an open-ended wording, it cannot be excluded that the above-mentioned requirements will, in general, actually be considered as minimum requirements. This would, for instance, be disadvantageous if an invoice is to be corrected which initially did not show any VAT, eg, if the underlying supply was wrongly considered to be VAT-exempt. In such a case, the input VAT deduction might not be possible for the date of initial invoice receipt.
Supreme Tax Court decision V R 26/15 dated October 20th, 2016 available at http://www.bundesfinanzhof.de/ (in German only).
If you have any questions or need further information please do not hesitate to contact Frank Gehring, Partner Indirect Tax Team Germany on +49 211 981 2771 or on firstname.lastname@example.org
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