© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
A14. Effectiveness
Effectiveness and time limits​
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- Customer must have direct right to recover improperly charged VAT where supplier out of time to make claim due to length of time it took to decide whether VAT chargeable
"[26] The referring court notes, in particular, that, as the judgment of 26 November 2018 confirmed that the tax treatment reserved by Greenfiber and Greentech for the transaction at issue was correct, those companies had no valid reason to correct the invoice recording that transaction before the judgment of 23 November 2021 was delivered. Furthermore, Greenfiber could not correct that invoice until after the delivery of the latter judgment. However, on the date of that judgment, the right to correct that invoice was already time-barred, because the limitation period had expired in May 2021.
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[38] If, as in the present case, reimbursement of the VAT has become impossible or excessively difficult, the principles of the neutrality of VAT and effectiveness require the Member States to provide for the instruments necessary to enable the recipient to recover the VAT which has been unduly invoiced and paid, in particular by addressing its application for reimbursement to the tax authorities directly (judgment of 13 October 2022, HUMDA, C‑397/21, EU:C:2022:790, paragraph 22 and the case-law cited). Thus, where the seller can no longer correct the invoice relating to the transaction concerned and it is therefore impossible for the buyer to obtain reimbursement from the seller of the VAT unduly invoiced, the buyer must, according to the case-law recalled above, be able to apply directly to the tax authorities for reimbursement.
[39] It must be stated, however, that, as can be seen from paragraph 45 of the judgment of 11 April 2019, PORR Építési Kft. (C‑691/17, EU:C:2019:327), such an application for reimbursement must be distinguished from a claim for deduction of VAT, such as that at issue in the main proceedings.
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[42] In the light of the foregoing considerations, the answer to the question referred is that Articles 168 and 203 of the VAT Directive, as well as the principles of the neutrality of VAT and effectiveness, must be interpreted as not precluding a piece of national legislation or a national administrative practice which does not allow a taxable person to obtain the deduction of the input VAT on a transaction which, following a tax audit, has been reclassified by the tax authorities as a transaction not subject to VAT, even though it appears impossible or excessively difficult for that taxable person to obtain, from the seller, reimbursement of the VAT thus unduly paid. However, those principles require that, in such a situation, that taxable person be able to apply directly to the tax authorities for reimbursement."(Greentech C-640/23 - as noted, lower court held VAT was due)
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- Principle of effectiveness where tax authority changes view of supply taxability
​"[58] Finally, the Portuguese Government observes that, if CTT had the right to alter the deduction method for VAT, the adjustment requested was in any event out of time. According to the Portuguese Government, while Article 98(2) of the VAT Code lays down, for the right to alter or adjust deductions, a general time limit of four years from the date on which the right to deduction or to the payment of the overpaid tax arose, that time limit does not apply where the final proportion has been fixed pursuant to Article 175(3) of the VAT Directive.
[59] In this respect, it should be borne in mind that, pursuant to the principle of legal certainty, a limitation period the expiry of which has the effect of penalising a taxable person who has not been sufficiently diligent and has failed to claim deduction of input tax, by making him forfeit his right to deduct, cannot be regarded as incompatible with the regime established by the VAT Directive, in so far as, first, that period applies in the same way to analogous rights in tax matters founded on domestic law and to those founded on EU law (principle of equivalence) and, second, that it does not in practice render impossible or excessively difficult the exercise of the right to deduct (principle of effectiveness) (judgment of 26 April 2018, Zabrus Siret, C‑81/17, EU:C:2018:283, paragraph 38).
[60]In the present case, although it is not apparent from the information provided by the referring court that the national legislation at issue in the main proceedings lays down in respect of VAT a different scheme from that laid down in respect of other tax matters under national law, the principle of effectiveness, on the other hand, precludes such legislation if it is liable, in circumstances such as those at issue in the main proceedings, to deny a taxable person the opportunity to correct his VAT returns once the final proportion has been fixed, even though the four-year limitation period laid down by that legislation has not yet expired. In such circumstances, the exercise of the right to adjust VAT, deductions, referred to in paragraph 51 above, will be impossible in practice or, at the very least, excessively difficult (see, by analogy, judgment of 26 April 2018, Zabrus Siret, C‑81/17, EU:C:2018:283, paragraphs 40 and 41).
[61] In that regard, it should also be borne in mind that the national courts are bound to interpret, where possible, national law in a manner consistent with EU law, and that, although the obligation to interpret national law in a manner consistent with EU law cannot serve as the basis for an interpretation of national law contra legem, national courts must alter their case-law or decision-making practice, where necessary, if it is based on an interpretation of national law that is incompatible with the objectives of a directive (see, to that effect, judgment of 8 May 2019, Związek Gmin Zagłębia Miedziowego, C‑566/17, EU:C:2019:390, paragraphs 48 and 49)." (CTT - Correios de Portugal C-661/18)
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