Incorrect VAT ID: General Court confirms double tax risk

In its decision of February 25, 2026, the General Court of the European Union (GC), ruled (case no. T-638/24) that the deemed taxation of intra-Community acquisitions and the denial of input VAT deduction due to incorrect VAT disclosure can apply in parallel – even if the purchaser used a VAT identification number from the Member State of dispatch. The ruling highlights the substantial financial risks companies involved in cross-border EU trade face when VAT formalities are handled incorrectly, and provides important clarification on how these two provisions should be distinguished.

The following section outlines the facts of the case, the court’s decision, and the practical implications for businesses.

Facts

D GmbH ordered goods from 2011 to 2015 from a supplier based in Austria and had them transported to another EU Member State. In the course of the acquisition transaction, it provided the supplier with its Austrian VAT identification number. The supplier invoiced the supply including Austrian VAT, which D GmbH claimed as input VAT.

The tax authorities denied the input VAT deduction, arguing that the VAT shown on the invoice was owed pursuant to Article 203 of the VAT Directive (MwStSystRL) (corresponding to Art. 14c of the German VAT Act (UStG)), since it had been incorrectly invoiced. The VAT exemption for the intra-Community supply made by the Austrian supplier was not called into question.

At the same time, acquisition tax was assessed pursuant to Article 41 of the VAT Directive (corresponding to Art. 3d sentence 2 UStG in Germany), because D GmbH had used its Austrian VAT identification number and had not declared the intra-Community acquisition in the Member State of destination.

Under these circumstances, the Austrian Administrative Court essentially asks the General Court whether the levy of acquisition VAT in the Member State of dispatch is permissible if the tax-exempt intra-Community supply was simultaneously invoiced with local VAT of that EU Member State.

Decision of the General Court

The General Court clarifies that the tax liability under Article 203 of the VAT Directive and the taxation of intra-Community acquisitions under Article 41 of the VAT Directive pursue different objectives and are, in principle, applicable side by side.

For the application of the tax liability pursuant to Article 203 of the VAT Directive, the decisive factor is solely that VAT was incorrectly shown on the invoice, which was the case in the present VAT-exempt intra-Community supply. Accordingly, the VAT shown on the invoice cannot be deducted as input VAT at the level of the purchaser. With regard to the application of the deemed acquisition taxation, it is furthermore irrelevant whether the VAT identification number used was issued by the Member State of dispatch or by another Member State. The Court of Justice of the European Union had already ruled accordingly on July 7, 2022 in the case Dyrektor Izby Skarbowej w W., C-696/20.

However, due to the differences in the factual circumstances, the present case – unlike the ECJ judgment of July 7, 2022, Dyrektor Izby Skarbowej w W., C-696/20, in which the underlying supply was not tax-exempt – does not constitute double taxation when the restriction of the input VAT deduction is applied simultaneously with acquisition taxation. Since, in the present case, the VAT exemption of the underlying intra-Community supplies was not challenged, the parties involved have the possibility to render the transaction VAT-neutral by making the necessary corrections or subsequent declarations. Therefore, the “double taxation” resulting from the denial of the input VAT deduction combined with the simultaneous deemed acquisition taxation is considered appropriate.

Practical consequences

Once again, the EU courts have clarified that failure to declare the actual intra-Community acquisition in the Member State of destination may result in a deemed acquisition taxation even if the VAT identification number of the Member State of dispatch is used. Accordingly, in such cases, the purchaser must, at least temporarily, pay VAT in the Member State of dispatch. In this respect, it can also be inferred from the ruling that there are no excessive hurdles to assuming that the VAT identification number has been used. 

Although the acquisition tax is eliminated once the transaction is properly declared in the Member State of destination, significant cash-flow risks remain. In addition, it is not always guaranteed that a subsequent VAT registration will actually succeed, which means that there is a risk of permanent taxation.

Since the judgment concerns periods prior to the introduction of the “Quick Fixes” in 2020, it is not necessarily possible to apply it to the current legal framework regarding input VAT deduction in connection with incoming invoices. Since January 1, 2020, the use of a valid VAT identification number of the purchaser that is not assigned to the Member State of dispatch has been a legal requirement for the VAT exemption of intra-Community supplies. Where such a VAT identification number is not available, the VAT exemption cannot apply, and therefore the VAT shown on the supplier’s invoice would generally not be considered incorrectly stated. In such a case, VAT could therefore be deductible, unlike in the case addressed by the judgment.

Nevertheless, the judgment may also gain relevance for periods from 2020 onwards. This is particularly the case if the General Court decides in the pending case T-689/25 that the use of a valid VAT identification number of the purchaser that is not assigned to the Member State of dispatch does not constitute a substantive requirement for the VAT exemption of intra-Community supplies. Case T-689/25 concerns the question whether the communication of a valid foreign VAT identification number constitutes a substantive requirement for the VAT exemption of intra-Community supplies and what consequences arise if such a number is missing or communicated only at a later stage. If the substantive importance of the purchaser's VAT identification number is denied, the situation may also become more difficult with regard to VAT deduction on incoming invoices, similar to the present case.

For companies, this means that acquisition scenarios involving cross-border transport in two- or multi-party transactions must continue to be carefully reviewed from a VAT perspective. In particular, it must be ensured that acquisition VAT is properly declared in the Member State of destination and that, where a VAT-exempt intra-Community supply exists, the supplier does not charge local VAT in the Member State of dispatch. In addition to purchases in Germany, this also applies in particular to purchasing arrangements in other EU Member States in which the company is registered for VAT purposes and operates under the local VAT identification number.