Invoices are subject to strict VAT requirements. A summary of these requirements can be found in our memo The invoice for VAT purposes.
VAT invoice
A VAT invoice addressed to the business owner, which meets all the requirements, is the formal requirement in order to be able to deduct the VAT shown on that invoice as input tax. In addition, for this deduction to be allowed, a number of material conditions must be met:
- the service must have been provided to the trader;
- and are used in the course of that entrepreneur’s business;
- for transactions subject to VAT.
VAT invoice containing errors
If the VAT invoice contains errors, the tax authorities may refuse to allow the VAT to be deducted. In a decision However, the State Secretary for Finance has ruled that minor defects do not preclude the deduction of VAT. Unfortunately, the State Secretary does not specify what he means by “minor flaws“.
This decision may not go far enough. In two judgments handed down in September 2016, the Court of Justice in Luxembourg ruled that the deduction of VAT may not be refused on formal grounds (such as a defective VAT invoice) where supplementary documentation demonstrates that the substantive conditions for deduction have been met.
In the judgment Senatex The issue concerned the failure to state the VAT registration number of the trader providing the service.
In the judgment Barlis 06 The Portuguese tax authorities considered that the description “legal services …” was not sufficient to allow VAT deduction.
In both cases, the Court ruled that VAT deduction may not be refused solely on the grounds that the invoice does not meet the formal requirements, provided that the tax authorities have all the information necessary to verify whether the substantive requirements have been met.
Naturally, these judgements may be directly relied upon.
Simple invoice
If the invoice amount (including VAT) does not exceed € 100 the deduction of VAT may be based on a simplified invoice. This concerns the formal requirements for the deduction of VAT.
In the case of a simplified invoice, the substantive requirements must be met in full. This means that the trader claiming the deduction must be able to demonstrate that the supply was made to them, and that the supply is used in the course of their business for transactions subject to VAT.
In the case of petrol receipts (which usually do not include the customer’s name and address details), this proof can be provided by making the payment using a debit or credit card issued in the company’s name.
The simplified invoice must not be used for:
- cross-border distance sales;
- intra-Community supplies at the 0% rate.