CJEU – Recent Developments in Value Added Tax 2020

S. 2421. Introduction

VAT is so many things. For instance, for scientists it is a legal principle, for business it is an operational thing, and for policy makers it is a budget instrument. The trick is to find a fair and realistic balance between all these interests. Especially where it regards a main element of the system: the input VAT deduction. Let us take a look at the balancing act performed by the CJEU on this subject.

2. Revision of input VAT

The year 2020 produced three interesting cases on the revision of input VAT. The outcome in the first one, HF, may not be surprising: where only exempt output is realized, no input VAT deduction is possible and earlier deductions based on other expectations should be revised. But the case is food for thought on mismatches between input and output, for which the VAT Directive holds no regulations or guidance.

The case of HF seems to regard a situation where the exempt income does not make up for the (depreciation) costs involved. On the one hand, the VAT Directive requires for input VAT deduction that costs are included in the price of later transactions. However, if there is no turnover because of circumstances beyond influence by the entreprene...