Removal of the taxpayer from the VAT register and the right to deduct VAT
The changing provisions of the VAT Act add more and more new circumstances as part of the deletion by the tax authority of the taxpayer in certain cases. It is worth verifying new situations, the occurrence of which will result in the removal of the taxpayer from the VAT register.
New premises on the removal of the taxpayer from the VAT register
As early as 2017, the range of premises allowing the head of the tax office to conclude that the taxpayer ceased to conduct business, and thus ceased to perform activities subject to VAT, was expanded. This basis gives tax authorities new opportunities to remove the taxpayer ex officio, i.e. without notifying him, from the register of VAT taxpayers.
It is worth recalling that pursuant to Art. 96 sec. 9 of the VAT Act, the head of the tax office may remove a taxpayer from the VAT register without notifying about this fact (ex officio) in a situation where:
- the taxpayer does not exist or
- the data provided in the registration application turns out to be false or
- the taxpayer or his representative does not appear at the request of the tax authority or the tax inspection authority or
- despite the documented attempts made, it is not possible to contact the taxpayer or his representative.
There are many different cases where, for example, companies change their registered office address without updating it. Other companies, already using the new address, do not receive letters coming to the old address and coming from the tax authority. Still others have so many addresses that they are unable to control the timely receipt of mail. There are also cases where some entrepreneurs are very often abroad and there is simply no one to collect incoming mail at a given time.
Further reasons for removing the taxpayer from the VAT register
The legislator decided that the grounds justifying the initiation of the action of removing the taxpayer ex officio by the head of the tax office from the register of active VAT payers will also be situations in which:
- submitted for 6 consecutive months or 2 consecutive quarters of VAT, in which he did not show the sale or purchase of goods or services with the amounts of tax to be deducted, unless the failure to show the sale or purchase of goods or services with the amounts of tax to be deducted resulted, in accordance with the taxpayer's explanations, from the specificity business activity conducted,
- being obliged to submit a VAT declaration, he did not submit such declarations for 6 consecutive months or 2 consecutive quarters, unless, as a result of a call by the head of the tax office competent for the taxpayer, the taxpayer proves that he conducts taxable business activity and submits the missing declarations immediately or
- issued invoices or corrective invoices documenting activities that were not performed, unless the issuing of the invoice or correcting invoice was the result of a mistake or was done without the taxpayer's knowledge or
- suspended the pursuit of economic activity under the provisions on freedom of economic activity for a period of at least 6 consecutive months, unless:
- during the period of suspension of economic activity, it will perform taxable activities and will notify the competent head of the tax office, indicating the period in which it will perform these activities before:
- suspension of business activity or
- commencement of such activities during the suspension of business activity or
The CJEU is toning down the stricter fiscal sentiment regarding the restriction of the right to deduct VAT of entities removed from the VAT register
On the occasion of the judgment of the CJEU of 19 October 2017 in the case with reference number C-101/16, (in which a Romanian company asked the Court in connection with the refusal to deduct VAT on an invoice issued by an entity inactive in the VAT register as at the date of issue) - the Court recalled that the taxpayer's right to deduct VAT for the purchase by the goods or services which he is required to pay together with the remaining debt is a fundamental principle of the Community VAT system. He also emphasized many times that the right to deduct is not subject to limitations and constitutes an integral foundation for the functioning of the VAT mechanism. The possibility of deducting VAT by a taxpayer is a kind of release from the burden of VAT that is payable in the course of conducting business activity.
The Court also noted that in order to exercise the right to deduct, the material conditions must be met, namely:
- the entity must be a VAT payer,
- the purchased goods or services must be intended for activities subject to VAT
- where the acquired goods or services are supplied by another taxpayer who is at an earlier stage of the transaction.
The second type of requirements are formal requirements, which include the need for the taxpayer to have an invoice, i.e. a proof of purchase of goods or services, issued in accordance with Art. 220-236 and 238-240 of Directive 2006/112.
The Tribunal points out that, according to the established case law, the right to deduct VAT should be granted to the taxpayer if he complied with the material requirements, even if he omitted the formal requirements. Obviously, the measures taken by the tax administration cannot be used in advance to limit the right to deduct VAT on a regular basis. Tax authorities cannot require the taxpayer to thoroughly analyze its supplier, as they are obliged to carry out control activities. It is also contrary to EU law that the tax authorities require the taxpayer to take any steps to check each contractor as to whether a given transaction is not included, for example, in a carousel.
Directive 2006/112 will constitute an obstacle to national regulations denying the taxpayer the right to deduct VAT due to the recognition by the tax authority of the taxpayer's counterparty as inactive (the recognition as inactive has been published), where the seller, who provided services or sold goods to the taxpayer, issued an invoice, and the taxpayer has paid the resulting VAT, if the tax authorities permanently and definitively apply the practice of refusing to exercise the right to deduct VAT and do not allow the taxpayer to submit evidence of failure to commit a tax offense.