A private limited company claimed substantial amounts of input VAT as a deduction for the years 2014 to 2017 inclusive. An audit revealed that it was unable to produce invoices for a large proportion of those deductions. The private limited company refers to its ledger entries, but the tax inspector issues additional tax assessments totalling over €64,000.
Substantial tax relief, few invoices
The private limited company claimed nearly €70,000 in input VAT for 2014, spread across the four quarters. In the years that followed, the amounts fluctuated significantly: from just €51 in the third quarter of 2015 to over €13,000 in the second quarter of 2016. However, during the audit, the private limited company was only able to produce invoices for management fees. These invoices support only a small proportion of the claimed deduction. For the remainder, the private limited company only has general ledger entries.
Was the 2014 additional tax assessment issued on time?
The company argues that it did not receive the 2014 additional tax assessment until early January 2020, whilst the time limit for issuing the assessment expired on 31 December 2019. It disputes that the inspector posted the assessment in good time. However, the tax inspector has produced a dispatch report showing that the additional tax assessment was handed over to PostNL on 24 December 2019. The court therefore considers it plausible that the assessment was sent in good time to the correct address. The 2014 additional tax assessment was therefore issued within the time limit. The fact that the private limited company did not receive the assessment until January 2020 does not alter this.
The burden of proof lies with the business owner
The court then assesses the deduction of input VAT. It is not in dispute between the parties that the private limited company is entitled to deduct the VAT on the invoices for the management fees. The dispute centres on the items for which there are no invoices. The private limited company itself states that it can only substantiate the deduction for these items with ledger entries. The court rules that this is insufficient.
An invoice is required for deduction
A trader may only deduct the VAT charged to him by other traders if that VAT is stated on an invoice drawn up in the prescribed manner. Without an invoice, therefore, there is no right to deduct VAT, however convincing the ledger entries may be. The additional tax assessments have been correctly imposed. The administrative fines, however, are set aside, as both parties agree on this point.