Denmark ruling undermines basic right to VAT deduction

Thu 7th Mar 2013

The Danish tax courts has issued a surprising ruling on the rights of companies to deduct VAT on invoices.

A seller was providing domestic supplies to a local buyer.  Whilst the seller was providing standard VAT returns, it later emerged that there was a VAT fraud.  The seller was not in fact Danish VAT registered, and was holding onto the VAT charged to the seller.

The Danish tax authorities pointed out that the seller’s invoices appeared compliant, but had not Danish VAT number – a basic EU VAT compliance requirement.  This could have been spotted by the buyer, and indicated that there was a problem.  The tax office  therefore ruled that the buyer could not claim back the seller’s VAT charge through their VAT return.  The Danish Tax Tribunal has now backed this ruling.

Whilst it is a basic intra-EU trade requirement to check the seller’s VAT number, it is not clear that a similar basic obligation is in operation on domestic supplies.  There may be an appeal against this ruling.

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