The Court of Justice of the European Union (CJEU) issued judgments in two value added tax (VAT) cases concerning application of the reverse-charge mechanism in Hungary.
In these VAT cases (Farkas, no. C-564/15, and PORR Építési Kft, no. C-691/17), the taxpayers received invoices that were issued in accordance with the general VAT rules (i.e., the supplier charged VAT on the invoices).The taxpayer receiving the invoices deducted the amount of VAT charged. The tax authority audited the invoices, and took a position that the underlying transactions came under the scope of reverse-charge VAT, and thus denied the deduction of input VAT.
The cases were eventually referred to the CJEU which considered the following questions:
According to the CJEU:
In accordance with the CJEU judgements, in situations when the tax authority makes assessments when correction of the invoices was not possible because of insolvency or liquidation of the supplier, it would be prudent to consider and investigate if there is a possibility for reimbursing the VAT directly from the state treasury.
Read a May 2019 report prepared by the KPMG member firm in Hungary
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