EU: Providing evidence in case of a VAT audit

A company established in Switzerland (the applicant) sold goods shipped from Slovenia to Croatia. The transaction was zero rated on the basis that the goods were shipped form one EU Member State to another.

During a VAT audit, the company failed to provide the required documentation, evidencing that the goods were shipped outside of Slovenia. The Slovenian tax authorities therefore issued a tax assessment and reclaimed the VAT due on those sales. The applicant eventually managed to provide evidence of the shipment, but it was rejected by the tax authorities on the basis that it was provided too late.

The CJEU held in favour of the tax authorities and confirmed that the national legislation of a Member State may, in the context of an administrative procedure that resulted into a tax assessment, prohibit the production and gathering of substantive evidence after the tax inspection stage and before the decision according to which that assessment was issued. This is provided that the principles of equivalence and effectiveness have been complied with.

Key takeaway

This CJEU judgment is clearly not in favour of taxpayers subject to a VAT audit. It remains however to be seen what the real impact of that case can be at the level of Member States, in light of their domestic rules.