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The ruling passed by CJEU extends application of tax relief to bad debt in VAT

On 15 October 2020 the Court of Justice of the European Union issued a ruling in the case of the Polish company E. sp. z o.o.sp.k. against the Minister of Finance (reference symbol C-335/19) concerning the conformity of the Polish legal provisions within the scope of tax relief for bad debt in VAT with the EU regulations. 

In its ruling the Court stated that the Polish legal provisions which make the lowering of the VAT base conditional on a debtor being registered as a VAT payer at the date of products delivery or service rendition and, also, on the day proceeding the date of submitting a tax return aiming at using this lowering or on a debtor not being in the course of bankruptcy proceedings or in the course of liquidation, whereas a creditor being still registered as a VAT payer on the day proceeding the date of submitting a tax return correction, are in contradiction with the EU VAT Directive.  

The ruling creates a possibility of reclaiming VAT, in particular when debtors have not settled their due payments as they are in the state of insolvency or liquidation. 

Author team leader DPG Tax marek grabowski
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