Input VAT adjustment for unused stocks

The CJEU details criteria according to which goods written off from a taxpayer’s inventory are subject to input VAT adjustment.

A Bulgarian company acquired capital goods that were ancillary to the provision of its telecommunications services. Some of the goods were written off the company’s inventory as considered unsuitable. Some were resold as waste to third parties while others were destroyed.

After the Bulgarian authorities requested input tax adjustments with respect to those goods, the CJEU confirmed that no adjustments were required when:

• The goods were resold as waste; or
• Destroyed as a result of being unusable provided that that destruction is duly proved or confirmed and that the goods had objectively lost all usefulness in the taxable person’s economic activities.

The CJEU also held that national rules according to which input VAT adjustments are required in such situations are incompatible with the Principal VAT directive.

Key takeaway

Businesses may want to reconsider VAT adjustments (made or to be made) after destroying or reselling unused stock as waste. 

Reference: Judgment of the Court (Ninth Chamber) of 4 May 2023