Recently published was the ruling of the Court of Justice of the European Union, Case C-69/17 Siemens Gamesa Renewable Energy România SRL, in which it was confirmed that taxable persons with VAT numbers declared inactive by the tax authorities are still entitled to deduct VAT for purchases made during the period of inactivity.

The case

Once reactivated for VAT purposes, Romanian company Siemens Gamesa (“the Company”) deducted input VAT for purchases made during the period of tax inactivity. The Romanian tax authorities held that the Company was not entitled to deduct for purchases made during the period of inactivity, as the local tax legislation in force at the time of the transactions explicitly provided for this exclusion.

The judgment

The Court ruled that as long as the substantive requirements are met and the right to deduct input VAT is not fraudulently or abusively invoked, taxpayers have the right to deduct input VAT for purchases made even during the period of tax inactivity.

Similar case

The same European Court had previously stated in another case also pertaining to Romanian legislation, C-101/16 Paper Consult, that the right to deduct input VAT for purchases made by inactive suppliers cannot be rejected and that this approach must be applied retroactively.

Conclusion

Taxable persons with cancelled VAT numbers and the right to deduct VAT excluded by the Local Tax Authorities for purchases made during the period of “tax inactivity” may apply for the refund of VAT credits accrued during the period of inactivity, provided the substantive requirements are met and they have not been involved in tax fraud.