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Right to deduct VAT - a contract is enough

A taxpayer who purchases goods or services without receiving an invoice from the seller may deduct VAT on the basis of an agreement. This was stated by the Provincial Administrative Court in its ruling III SA/Wa 1473/23 of December 8, 2023.
Tomasz Śliwiński
Senior TAX Specialist

Judgment of the Provincial Administrative Court in Warsaw

The dispute follows a request for individual interpretation by an entity in the construction industry. The company, for the purpose of its business activities, purchased several properties, signed a contract with a notary, paid the amount due, but did not receive an invoice from the seller. Given the above, the Company raised doubts as to whether, due to the lack of an invoice, it could deduct the VAT paid.

In the request for interpretation, the Company indicated that the lack of a traditional invoice does not deprive it of the right to deduct VAT, because in this context it is sufficient to have a sales contract. It contains all the elements that are important for a classic invoice and are specified in the VAT Act. According to the Company, in the current situation, depriving the Company of the right to deduct tax would violate the principle of VAT neutrality.

The tax authority deemed the Company's position presented in the application for interpretation as incorrect. The tax office pointed out that sales agreements cannot be treated as VAT invoices, making it impossible to consider them as documents entitling VAT deduction.

In response to the issued individual interpretation, the Company filed a complaint with the Provincial Administrative Court in Warsaw. The court disagreed with the tax authority's stance and revoked the interpretation. As of today, the written justification for the judgment has not been published. However, orally explaining the reasons for the decision, the Provincial Administrative Court in Warsaw indicated that there are no obstacles for the Company to deduct VAT based on the sales agreement executed before a notary public.

The CJEU ruling turned out to be crucial

According to the court, it does not follow from Article 106e(1) of the VAT Act that the document giving rise to the tax deduction must be titled as an invoice within the meaning of the VAT Act, since what is important is its content. The Provincial Administrative Court in Warsaw cited the theses of the CJEU judgment of September 22, 2022, C-235/21, cited by the Company in its complaint, according to which, for a contract to be considered an invoice, the will of the parties to the contract to become an invoice is irrelevant.

According to the CJEU, for a document to be recognized as an invoice within the meaning of Article 203 of Directive 2006/112, it must meet two conditions:

  • It must indicate VAT
  • It must contain the information listed in Section 4 of Chapter 3 covered by Title XI of Directive 2006/112 ("Data to be included on invoices"), which is essential for the tax authority to determine whether the substantive conditions for the right to deduct VAT have been fulfilled

The judgment of the Provincial Administrative Court in Warsaw may certainly please entrepreneurs, but in our opinion it is too early to say that it will cause the tax authorities to change their pro-fiscal position in the near future.

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