ECJ passes a positive judgment on VAT settlement of intra-Community acquisition of goods and import of services

The European Court of Justice held that regulations restricting ICA neutrality were inconsistent with the VAT Directive.

On 18 March 2021 the European Court of Justice (“ECJ”) passed a judgment in case C‑895/19, in response to a question referred for a preliminary ruling by the Administrative Court of Gliwice [Wojewódzki Sąd Administracyjny w Gliwicach]. The case at hand concerned compliance with the EU laws of the Polish regulations which make neutrality of intra-Community acquisition of goods subject to entry of the tax due on those transactions in the tax declaration no later than within 3 months of the end of the month in which the tax liability arose.

The regulation subject to the ECJ’s review (Art. 86(10)(b)(2)(b) has been in force since 1 January 2017. The regulation (and Art. 86(10)(i)) provides that in a situation where the taxpayer delays entry of intra-Community acquisition of goods in the country in the relevant tax return, the transaction is no longer tax-neutral. This means that the taxpayer has to pay the tax retrospectively (in the month in which the tax liability arose), but the input VAT can only be deducted in the current return. This necessitates payment of interest on the tax arrears.

Compliance of the regulations with the EU laws was called in doubt by the Province Administrative Court of Gliwice. The court was in doubt as to whether restraining the right to deduct input VAT on the basis of secondary formal requirements, without analysing other circumstances of the case, especially the taxpayer’s good faith, was lawful.

In the judgment, the ECJ held that the doubts raised by the Court of Gliwice were reasonable and stated that the EU law does not permit implementation of regulations which condition the right to deduct the input tax on entering the output VAT in the tax return filed within three months following the end of the month in which the tax liability arose in relation to the goods acquired.

In the judgment, the ECJ emphasizes that the measures applied by the Polish legislator are non-proportional and may not be justified by the need to prevent tax fraud.

Although the judgment applies literally to intra-Community acquisition of goods only, we are of the opinion that the conclusions to be drawn from it should also be taken into account when determining tax consequences of other transactions the neutrality of which was restrained. Comments regarding intra-Community acquisition of goods apply to the same extent to imports of services, supply of goods where the taxpayer is the buyer and non-transactional movement of goods.

In practice, the judgment issued by the ECJ may help considerably simplify settlements, and even open the way for a number of taxpayers to recover unduly paid interest on tax arrears arising out of VAT payable in the past, where the input VAT was shown on a current basis.

If you are interested in more information or wish to analyse the impact of the judgment on your business, you are welcome to contact us.


Aleksandra Kalinowska Partner, Warsaw

T: +48 22 690 08 70
M: +48 724 440 693

Elżbieta Lis Partner, Katowice

T: +48 32 731 68 58
M: +48 664 948 038