There has been some news in the field of VAT, which requires an extraordinary newsletter; it’s going to be a longer one of a kind, but that’s important news. VAT number on invoice for EU sales a new decision from the European Court of Justice assesses the formal requirement to state the VAT number on the invoice in connection with a VAT-exempt EU sale between two VAT-registered companies in the EU.

The Specific Cases

In the specific case, the obligation to state the buyer’s VAT number on the invoice was not fulfilled. The European Court of Justice concluded that the failure to state the VAT number should not prevent a VAT exemption from being granted for the supply. The decision is an expression that the formal rules cannot override the substantive rules. The decision does not mean that you can refrain from stating the buyer’s VAT number on the invoice for an EU sale. These formal rules must continue to be observed in order to avoid any administrative fines for errors in formalities.  As you calculate sales tax  you need to be specific about these matters.

It was, of course, a precondition that the supplier had acted in good faith and had not contributed to, been aware of or should have been aware that the transaction was part of a tax fraud.

Danish practice has been much more restrictive, as the formal errors have been given decisive importance. It must therefore be expected that SKAT will take a number of decisions up for reassessment against the companies that have been unlawfully charged VAT on EU trades due to lack of formalities.

Sale at 0 rate of used cars – documentation

This case from the City Court concerned whether the defendant’s sale of 18 used cars met the conditions for being covered by the VAT exemption in section 34 (1) of the VAT Act. 1, No. 1.

  • The court found that for none of the 18 cars in question in the case has it been sufficiently documented that they were made by Denmark in connection with the sales in question in the case, therefore the conditions for being VAT-exempt EU sales are not met. In that regard, the Court highlighted a number of facts which involved certain ambiguities; including that the defendant had not checked the buyer’s VAT number.
  • The decision once again shows the importance of documentation for completed transactions, which we also highlighted in an extraordinary newsletter of 2 June 2016.

Joint registrations and obligations in connection with EU trade

Companies that are part of a joint registration have more underlying VAT numbers than the formally settling VAT number. Furthermore, there are several company names and addresses underlying the settling VAT number. This can of course present challenges when foreign companies have to validate the VAT number in Denmark, as there may be a discrepancy in relation to the registration in the VIES database.