Barlis 06 - Investimentos Imobiliários e Turísticos SA v. Autoridade Tributária e Aduaneira, [2016] EUECJ C-516/14 (European Court of Justice (Fourth Chamber))

Barlis, which operated hotels in Portugal, was denied the deduction of input tax respecting legal services on the basis that the four invoices received by it from the law firm (for example, in one invoice, only stating “Fees for legal services rendered until the present date,” i.e., not describing the period covered) did not satisfy the documentary requirements under the local (Portuguese) VAT law. Although Barlis submitted annexes giving a more detailed description of the legal services, these also were rejected on the basis that they were not documents “equivalent” to invoices.

Article 226 of Directive 2006/112 required the disclosure on invoices of inter alia:

(6) the quantity and nature of the goods supplied or the extent and nature of the services rendered;

(7) the date on which the supply of goods or services was made or completed…in so far as that date can be determined and differs from the date of issue of the invoice;

Article 219 provided that any document or message that amends and refers specifically and unambiguously to the initial invoice shall be treated as an invoice.

On a referral, and after first finding that the invoices themselves did not satisfy the documentary requirements, the Court found (at paras 42, 43, 44, and 45):

The Court has held that the fundamental principle of the neutrality of VAT requires deduction of input VAT to be allowed if the substantive requirements are satisfied, even if the taxable persons have failed to comply with some formal conditions. Consequently, where the tax authorities have the information necessary to establish that the substantive requirements have been satisfied, they cannot, in relation to the right of the taxable person to deduct that tax, impose additional conditions which may have the effect of rendering that right ineffective for practical purpose… .

It follows that the tax authorities cannot refuse the right to deduct VAT on the sole ground that an invoice does not satisfy the conditions required by Article 226(6) and (7) of Directive 2006/112 if they have available all the information to ascertain whether the substantive conditions for that right are satisfied.

…[T]he authorities … must also take account of the additional information provided by the taxable person. That conclusion is confirmed by Article 219 of Directive 2006/112, which treats as an invoice any document or message that amends and refers specifically and unambiguously to the initial invoice.

…[I]t is therefore for the referring tribunal to take into account all the information included in the invoices at issue and in the annexes produced by Barlis in order to ascertain whether the substantive conditions for its right to deduct VAT are satisfied.

A law firm’s invoice paid by a Portuguese registrant which, for example, simply referred to “Fees for legal services rendered until the present date,” did not satisfy the EU Directive respecting the requisite detail to be provided on an invoice. However, the Portuguese registrant then provided the Portuguese authority with other documents (not in invoice form, as technically required) containing the missing particulars. The European Court of Justice found that an input tax deduction should not be denied, stating:

[T]he fundamental principle of the neutrality of VAT requires deduction of input VAT to be allowed if the substantive requirements are satisfied… . It follows that the tax authorities cannot refuse the right to deduct VAT on the sole ground that an invoice does not satisfy the conditions required by…[the] Directive…if they have available all the information to ascertain whether the substantive conditions for that right are satisfied.