What does “full address” actually mean? According to the German Federal Fiscal Court, it must be an address at which an “economic activity” takes place. VAT deduction is therefore not possible if …
What does “full address” actually mean? According to the German Federal Fiscal Court, it must be an address at which an “economic activity” takes place. VAT deduction is therefore not possible if an invoice only provides an accommodation address or a PO Box address. The EUCJ’s recent judgment, in a Polish case, appears to indicate that it does not set similarly strict requirements. The Fifth and Eleventh Senates of the German Federal Fiscal Court have thus now referred their interpretation to the EUCJ.
1. Background
On 6 April 2016, the two VAT senates of the German Federal Fiscal Court (the Fifth and the Eleventh Senates) submitted to the EUCJ almost identical references for a preliminary ruling (V R 25/15 and XI R 20/14). These relate to VAT deduction from invoices only identifying the supplier’s accommodation address or a PO Box address. In the view of the German Federal Fiscal Court, a supplier must engage in an actual economic activity at the invoice’s address, and it recently confirmed and tightened this interpretation. This poses difficulties for businesses whose invoices state PO box addresses (see Newsletter 23/2015). A recent ruling by the EUCJ in the case PPUH Stehcemp has raised doubts, on the part of the German Federal Fiscal Court, as to its interpretation of the law (EUCJ ruling of 22 October 2015, C 277/14). There is reason to be optimistic that the EUCJ will in fact contradict the German Federal Fiscal Court’s strict interpretation.
2. German Federal Fiscal Court questions
The questions submitted are as follows:
- Does “full address” require an address at which an economic activity is being carried out?
- May a VAT deduction be refused merely because all formal conditions have not been met?
- Is it permissible, under European law, to refer taxpayers, acting in good faith, to seek VAT refunds by means of the ‘equitable’ procedure?
3. Facts
In both cases, the claimant operated a car dealership and purchased vehicles from other car dealers. The point at issue was whether the supplier address provided on the invoices was sufficient. In the case before the Fifth Senate, it was unclear what activities the supplier was engaged in at the given address. In the case before the Eleventh Senate, the supplier address was a postal address only; the actual business was operated at a different address.
4. Arguments of the German Federal Fiscal Court
The German Federal Fiscal Court considered three questions: the formal conditions for the invoice address, the good faith of the invoice recipient and the VAT deduction for the invoice recipient in the equitable procedure.
The German Federal Fiscal Court maintains that the address stated in the invoice must be the one at which the taxable person conducts their economic activities, this being the only way in which the tax authorities can simply and easily check compliance with invoice conditions. However, the German Federal Fiscal Court does concede that the EUCJ accepted the registered office as the invoice address in its judgment in PPUH Stehcemp.
The German Federal Fiscal Court has concerns about allowing VAT deduction in cases that do not meet all formal invoice conditions. In its view, there is a danger of statutory requirements “losing all meaning”. Taxable persons must, affirms the court, at the very least be obliged to take all reasonable measures to check the accuracy of the details on the invoice. It remains unclear whether this is also required when there is no question of fraud.
Currently, ‘equitable’ processes are the only means open to entrepreneurs who acted in good faith but who find themselves having to bring claims for the refund of VAT from invoices with errors. The German Federal Fiscal Court sees this as reconcilable with European law, as the Member States are, in principle, able to regulate the form of proceedings themselves. However, requiring the entrepreneur to have recourse to a two-stage procedure could be contrary to the principle of effectiveness.
5. Implications for the practice
The Fifth Senate appears simply to be seeking confirmation of its (strict) interpretation from the EUCJ. The question submitted by the Eleventh Senate, however, is more open. There is no clear and definitive indication of how the EUCJ will rule, as the Court is particularly reticent on matters of procedure.
Many businesses (and public authorities) in Germany use PO box addresses and, as a result, the aforementioned judgment by the German Federal Financial Court has created huge difficulties for these businesses. It would therefore be helpful were the EUCJ at least to reject the strict interpretation of “full address”. There are indeed grounds for hope: the EUCJ does not usually place strict demands on compliance with formal conditions. However, this only applies where there is no question of fraud. If turnover is connected to fraud, the EUCJ applies formal conditions extremely strictly. In the cases in question here, however, there is no suggestion of VAT fraud. There is, therefore, an expectation that the EUCJ will find for the claimants.
Those who have had VAT deductions rejected by the tax authorities as a result of the relevant invoices stating accommodation or PO box addresses are therefore advised to contest the decision (by appeal or complaint). They should also apply to have proceedings suspended until the EUCJ judgment is handed down.
Matthias Luther
Küffner Maunz Langer Zugmaier
