Insights
TAX & BUSINESS
Invoice correction for supplies to end consumers
In the case of a small‑value invoice, an estimate can be used to determine the proportion of invoices for which the entrepreneur, who has incorrectly shown VAT on his invoices, owes this tax by virtue of issuing the invoice.
When invoices are issued with VAT, errors can occur that are generally correctable by an appropriate amendment of the invoice. Problems arise, however, when the invoice recipient is unknown and therefore the corrected invoice cannot be sent to them. A repayment of the over‑charged VAT from the tax office to the entrepreneur fails in this case because the invoice recipient could still deduct the excessive input tax. The Court of Justice of the European Union (CJEU, EuGH) has now taken a decision on the extent to which VAT can be determined by estimation as a tax liability arising from invoicing.
Pragmatic outcome of the CJEU
The CJEU clarified that an entrepreneur does not owe the portion of VAT that he has incorrectly invoiced to a non‑taxable person (= end consumer), even if he has provided similar services to other taxable persons (= entrepreneurs). However, a tax liability arising from invoicing does arise for erroneous invoices issued to other entrepreneurs.
If, because of the issuance of small‑value invoices, neither the identity of the taxable customers nor their number is known, the CJEU reached the following pragmatic conclusion: In the case of simplified invoicing (small‑value invoice), an estimate can be used to determine the proportion of invoices for which the entrepreneur, who has incorrectly shown VAT on his invoices, owes this tax by virtue of issuing the invoice.
Note
The CJEU judgment provides certain practical relief. For the VAT liability arising from an erroneous invoice, the decisive factor is whether there is a concrete risk to the tax revenue because the invoice recipient could deduct the input tax. If the invoice is addressed solely to end consumers, this is not the case and no VAT liability arises by virtue of invoicing. Where the invoice recipients are unknown in the case of simplified invoicing, the proportion of business invoice recipients – and therefore the amount of the tax liability arising from invoicing – can be estimated.
Pragmatic outcome of the CJEU
The CJEU clarified that an entrepreneur does not owe the portion of VAT that he has incorrectly invoiced to a non‑taxable person (= end consumer), even if he has provided similar services to other taxable persons (= entrepreneurs). However, a tax liability arising from invoicing does arise for erroneous invoices issued to other entrepreneurs.
If, because of the issuance of small‑value invoices, neither the identity of the taxable customers nor their number is known, the CJEU reached the following pragmatic conclusion: In the case of simplified invoicing (small‑value invoice), an estimate can be used to determine the proportion of invoices for which the entrepreneur, who has incorrectly shown VAT on his invoices, owes this tax by virtue of issuing the invoice.
Note
The CJEU judgment provides certain practical relief. For the VAT liability arising from an erroneous invoice, the decisive factor is whether there is a concrete risk to the tax revenue because the invoice recipient could deduct the input tax. If the invoice is addressed solely to end consumers, this is not the case and no VAT liability arises by virtue of invoicing. Where the invoice recipients are unknown in the case of simplified invoicing, the proportion of business invoice recipients – and therefore the amount of the tax liability arising from invoicing – can be estimated.