1. Invoice correction in JPA countries
JPA Tax Club London
22th June 2017
Invoice correction in JPA countries
Dr. iur. Klaus Fiebich Tel.:

2. Contents Summary ECJ, 15.09.2016 – C-518/14 – Senatex Considerations
Input VAT deduction as fundamental principle
Principle of neutrality
Substantive conditions vs. formal conditions
Open questions
Comparison invoice correction in JPA countries
Discussion

3. ECJ, Senatex – Considerations I
Right to deduct input VAT…
…immediately is a fundamental principle
…must be exercised in respect of the period during which the right has arisen and the taxable person is in possession of an invoice (even if this invoice is not – yet – fully correct)
Invoice correction with retroactive effect (ex tunc)
No VAT deduction without an invoice (compare ECJ, – C-152/02 – Terra Baubedarf-Handel)
Interest for late payment is contrary to the principle of neutrality
Member states have power to lay down penalties for failure to comply with formal conditions for the exercise of the right of deduct VAT.
Member states can adopt measures to ensure the correct collection of VAT and to prevent evasion.
E.g.: Financial penalty proportionate to seriousness of the offence

4. ECJ, Senatex – Considerations II
No formalism
Right to deduct arises when substantive conditions are met, even if the taxable persons have failed to comply with some formal conditions.
Substantive condition
The person concerned must be a taxable person within the meaning of the VAT directive.
The goods or services relied on to give entitlement to the right of deduction must be used by the taxable person for the purposes of his own taxed output transactions and those goods or services must be supplied by another taxable person as inputs.
Formal condition
Proper invoice (e.g.: VAT number of the supplier)

5. ECJ, Senatex – Open questions
No comment on the question as to when an invoice needs to be corrected.
Cancellation + invoicing a new invoice = Correction?
Possible problem
Argumentation of fiscal authority same situation as Terra Baubedarf-Handel (no invoice = no VAT deduction)

6. Comparison JPA countries I
YES NO 1
Does an invoice correction in your country have retroactive effects (ex tunc)?
AT BE CH
CN DE
IE IT JP PL UZ PT SI

7. Comparison JPA countries II
JPA country
comments ad question 1 DE
There has to be an invoice that can be corrected, i.e. there has to be some minimum content in the initial invoice PT
Invoice correction itself is not possible, since invoices are all issued by certified softwares, which give a specific registry number to each invoice, and they can't be changed, especially after the 20th of the following month, when we send the SAFT file with all the invoices of the previous month, to the Tax Authority. We can only annul it, or issue a credit note, and issue a new invoice, with the current date, so with no retroactive effects. Plus, article 19 of the VAT Code says VAT deduction is only possible with an invoice with the "legal form", which includes all mandatory elements, namely the VAT number of the client. So, in a similar case to the one of Senatex, the Portuguese Tax Authority would not accept the deduction of VAT in the years when the incomplete invoices were issued, but only now, when the corrected invoices would be issued. SI
invoice correction has only an effect in the current financial year - ex nunc

8. Comparison JPA countries III
YES NO 3
Is there are a difference between a) correction or b) cancellation plus (re)issuing of a correct invoice?
DE? IE
IT PT
AT BE CH
CN JP PL SI UZ

9. Comparison JPA countries IV
JPA country
comments ad question 3 DE
This is currently not clear. In our opinion there is a high risk that cancellation plus reissuance will not be retroactive. PT
A correction to the original invoice is not possible. We can annul the initial invoice and issue a new one. Or we can issue a credit note referring the inicial invoice, and then issue a new, correct and complete, invoice. IE
Correction is effective from original invoice date. Incorrect price or incorrect rate of VAT requires issue of credit note and new invoice and is effective from later date. IT
With (re)issuing the right to deduct VAT arises in the new date of issue.

10. Comparison JPA countries V2
If yes (ad question 1), is there any restriction, by when the invoice has to be corrected?
- till the end of the calendar year of the original issuing
- till the filing of annual tax returns JP
- identified by tax within 180 days CN
- before (legal finality of) the first assessment
- in the course of a tax audit
AT BE
IE IT UZ
- before the commencement/last hearing of the objection procedure DE PL
- before the final assessment (e.g. after changes out of a tax audit)
- till the end of the prescriptive period CH

11. Comparison JPA countries VI
JPA country
comments ad question 2 AT
argumentum e contrario: should be also possible before the audit, but up to now not implemented in VAT-guidelines BE
To avoid fines, the correction needs to be done before the announcement of the tax audit. CH
Either with the correction of errors in the rectifying statement (annual reconciliation) or before the five-year period (prescriptive period) from the end of the calendar year after the origination oft the claim. CN
No matter the invoice is corrected or re-issued, the tax identification should be finished within 180 days, then the input VAT can be deducted.
If the issued invoice need to be corrected in the current month, the procedures are relative simply. If the invoice is corrected beyond the current month, the deduction of VAT aslo can be allowed, however the procedures would be more complicated. IE
No specific time limit for correction, normally occurs prior to or during the course of a Revenue audit or inspection. IT
penalty from 500 to euro

12. Comparison JPA countries VII
JPA country
comments ad question 2 PL
General provisions:
3. (…) adjusting the tax return (…) not later than within 5 years (…)
Practice regarding to correcting invoice that does not modify the amount of input:
If a taxable person receives a correcting invoice that does not modify the amount of input VAT (eg. correcting invoice under which NIP tax number, address, etc, were changed) it should only be attached to the original invoice. This type of correcting invoice does not affect on the VAT settlement and has retroactive effects. The VAT rules do not specify when the taxpayer may issue a correction invoice. In practice, a correction invoice can be issued at any time, but the right to correct a declaration (VAT return): 1) is suspended for the duration of tax proceedings or tax audit - within the scope of those proceedings or audit; 2) may still be exercised after the end of: a) tax audit, b) tax proceedings - with respect to the part of the declaration that is not covered by a decision determining the amount of tax liability.

13. Comparison JPA countries VIII
JPA country
comments ad question 2 UZ
If the invoice of input goods is corrected, this correction will influence to the VAT of the period where correction happens. Such changes have to be made throughout one year period (for the previous period should not be made any corrections). As the same time, such corrections will effect to the goods which have a warranty. However, all changes in the invoice should be made in a warranty period.

14. Discussion
Is the current legal situation in your country in conformity with this ECJ jurisdiction?

15. Sources ECJ, 15.09.2016 – C-518/14 – Senatex:
ECJ, – C-152/02 – Terra Baubedarf-Handel:
VAT Newsletter 27/2016, Dr. Stefan Maunz

16. Thank you for your attention!
This presentation was created solely for training purposes. We take no responsibility for any action done or missed out of this presentation. The explanations given are naturally of a general kind and can only give a survey over the legal situation and knowledge at that point of time. This is not meant to replace a professional consulting.