ECJ: Concretisation of tax liability by virtue of accounting
With its eagerly awaited ruling of 1 August 2025, the ECJ clarifies its statements on tax liability based on invoicing made in its ruling of 8 December 2022 in the case of P GmbH (C-378/21) and further elaborates on these following a request for a preliminary ruling from the VwGH in the case of Finanzamt Österreich v P GmbH (C-794/23).
The ECJ judgement now before us concerns the same underlying proceedings as those of 8 December 2022 in the P GmbH case (C-378/21). We already provided information on this in our Tax News of 20 December 2022.
The case
P is a limited liability company under Austrian law that operated an indoor playground. In 2019, it applied the VAT rate of 20 % to the entrance fees for this playground and issued cash register receipts to its customers upon payment of the entrance fees, whereby it proceeded in accordance with the regulations on simplified accounting provided for in Section 11 para 6 UStG 1994 due to the small amounts involved. P reported the corresponding tax in its VAT return for 2019, but subsequently corrected this as the admission fees were to be subject to the reduced VAT rate of 13 %.
In its judgement of 8 December 2022, the ECJ concluded that a taxable person who has provided a service and shown an excessively high VAT amount on their invoice is not liable for the incorrectly invoiced portion by virtue of invoicing if this does not result in a risk to tax revenue. In its judgement, the ECJ assumed that the service in question (indoor playground) was provided exclusively to “final consumers who are not entitled to deduct input VAT” and therefore the tax revenue was not jeopardised.
Request for a preliminary ruling
After the decision made by the BFG in the subsequent proceedings (27.01.2023, RV/7100930/2021) was contested by the tax office with an official appeal, the VwGH asked the ECJ to clarify the following questions in a ruling dated 14.12.2023:
- Is there no tax liability by virtue of invoicing if the taxable person has also provided similar services to other taxable persons, i.e. has not acted exclusively towards final consumers (non-entrepreneurs)?
- Is a “final consumer who is not entitled to deduct input tax” only to be understood as a non-taxable person or also as a taxable person who only uses the specific supply for private purposes (or for other purposes which do not entitle him to deduct input tax) and is therefore not entitled to deduct input tax?
- In the case of simplified invoicing (low-value invoices in accordance with Art. 238 of the VAT Directive), what criteria should be used to assess for which invoices – possibly in the context of an estimate – the taxable person is not liable for the wrongly invoiced amount because there is no risk to the tax revenue?
Judgement of the ECJ of 01.08.2025
According to the view now expressed by the ECJ (01.08.2025, C-794/23 P GmbH), Art 203 of the VAT Directive (implemented in Austria in particular in Section 11 (12) UStG) is to be interpreted as meaning that a taxable person who has made a supply and has shown a VAT amount in his invoice that was calculated on the basis of an incorrect VAT rate does not owe the part of the VAT wrongly invoiced to a non-taxable person, even if he has also made similar supplies to other taxable persons. The question of whether there is a risk to tax revenue must be assessed on the basis of a specific invoice and cannot depend on whether the supplies in question are made by the taxable person concerned not only to non-business customers but also to other taxable persons. In order to assess whether such a risk exists, it is therefore necessary to check whether the recipient of a particular invoice is actually liable for VAT and can therefore claim the right to deduct input VAT.
With regard to the term “final consumers who are not entitled to deduct input VAT”, the ECJ specifies that this only includes non-taxable persons, but not taxable persons who are not entitled to deduct input VAT in a particular situation.
With regard to the business customers to be identified, the ECJ also clarifies that the VAT Directive does not preclude that, in the case of simplified invoicing (in this case, small-value invoices in the form of cash register receipts), the proportion of invoices for which a taxable person who has wrongly invoiced VAT is determined by estimation, owes this tax by virtue of invoicing, provided that all relevant circumstances are taken into account in such an estimate and the taxable person has the opportunity to challenge the results obtained using this method, taking into account the principles of fiscal neutrality and proportionality as well as the rights of the defence.
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