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(VAT) ECJ DECISION: VARNA HOLIDEIS’ EOOD (CASE C-364/17)

Summary of the Facts

Varna Holides, a company established in Varna (Bulgaria) purchased in the December 2004, a building for use as a hotel.

In February 2015 the Supreme Court of Bulgaria stated that the sale of the building was null and void.

Thus, the Supreme Court ordered Varna Holideis to return the property to the seller to reimburse the price of that sale. The National revenue Agency issued a tax adjustment notice for February 2015 to adjust VAT deducted by Varna Holidies on the VAT charged on the purchase of that building in the course of 2004.

In the judgment heard before the referring court, Varna Holideis argued that Bulgarian law provides for adjustment of VAT in the case of rescission, but not in the event of cancellation.

Following which, that court considered that there has been no supply within the meaning of the VAT Directive and, thus, that VAT was never owed and it is opportune to refuse the right to deduct VAT, instead of making an adjustment.

Questions referred to the ECJ

(1) Are Articles 90(1) and 185(1) of Directive 2006/112 to be interpreted as requiring the deduction claimed for input tax on a supply also to be adjusted in a case, such as that in the dispute in the main proceedings, where the legal transaction in respect of which the right to deduct input tax was exercised has been declared null and void by a judgment having legal force or should one, in light of the definition in Article 14(1) of Directive 2006/112, proceed on the basis that there is no supply and the tax claim did not arise in the first place?

(2) Is Article 185(1) and (2) of Directive 2006/112 to be interpreted as meaning that, in the absence of a national provision for the adjustment of deduction claimed in respect of input tax, and in the event of a court decision declaring a legal transaction null and void, the adjustment may be made by direct application of Article 90(1) of the [VAT] directive?’

Conclusions by the ECJ


The Court has no jurisdiction to answer the questions referred by the Administrativen sad — Varna (Administrative Court, Varna, Bulgaria).

The ECJ has already held that the mere existence of an element after the date of accession of the Member State in question to the Union, which relates to circumstances preceding that date and which stem from those circumstances, is not sufficient to confer jurisdiction on the Court to answer the questions referred on the interpretation of a directive.

For more information kindly contact:

Franco Falzon
(Managing Partner)
E: franco@ffinternational.com.mt


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