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Poland – EUCJ bad debts relief

By November 27, 2020July 10th, 2021No Comments

On 15 October 2020, the Court of Justice of the European Union (hereinafter referred to as: “CJEU”) passed a significant ruling in…

On 15 October 2020, the Court of Justice of the European Union (hereinafter referred to as: “CJEU”) passed a significant ruling in the Polish case C-335/19 E. sp. z o.o. sp. k., indicating an incompatibility of certain Polish VAT regulations in the scope of ​​the so-called the bad debt relief provisions in the EU VAT Directive.

In the judgment the CJEU stated that the Polish provisions which make the reduction of the taxable amount for the purpose of VAT subject to the conditions that,

  • on the day of delivery of the goods or the provision of services and on the day preceding that day on which the submitted correction of the VAT return seeking that reduction is filed, the debtor was registered as a VAT taxpayer and was not in the course of bankruptcy or liquidation proceedings, and
  • the creditor on the day preceding the date on which was submitted the correction of the VAT return was still registered as a VAT taxpayer

– are contrary to the EU VAT Directive.

At the same time, the CJEU emphasized that, first of all, the article 90 (1) of the EU VAT Directive fulfils the conditions necessary for it to have direct effect. Secondly, the principle of the primacy of EU law means that any national court hearing a case within its jurisdiction has, as an organ of an EU Member State, the obligation to disapply any provision of national law which is contrary to a provision of EU law with direct effect in the case pending before it.

As a rule, the incorrect implementation of the VAT Directive’s provisions into the national law results that a taxpayer has the right to refer to the provisions of the EU VAT Directive directly (this does not apply to the tax authorities of EU Member States). 

However, this judgment raises taxpayers’ doubts as to the application of the bad debt relief in practice, in particular with regard to the position of tax authorities on the judgment.

As a result, the judgment gives the taxpayers more opportunities than before to apply for bad debt relief and thus reclaim the VAT, in particular in the event of a failure by debtors to pay their debts, when they are in bankruptcy or liquidation.


If you want to find out more, please contact one of our ASB tax experts:

Łukasz Woźniak, VAT Compliance Manager, [email protected]

Anna Szafraniec, CEE VAT Compliance Director, [email protected]