EU VAT deductions ruling from ECJ – Bulgaria

Thu 13th Dec 2012

The European Court of Justice has recently ruled on a Bulgarian VAT question regarding the deductibility of VAT for supplies.

The case concerned the input VAT claimed by a Bulgarian company for supplies of wheat it received.  The Bulgarian tax authorities believed there were irregularities on the supplies, and that the company was attempting to over claim for purchase VAT, and so reduce its VAT abilities.  Whilst the company was able to demonstrate proper payment against a purchase invoice, it was unable to produce proof of receipt of the goods.  The Bulgarian tax authorities therefore believed that the company could not make the VAT deduction.

The ECJ has now ruled that the payment is VAT deductible as long as the company did not know (or take reasonable steps to find out) that there was a VAT fraud being carried out.

This therefore helps reduce the risks of cash flow losses for chain supply frauds for company which are victims.