ECJ rulings reinforce VAT neutrality and limits of formalism
The Court of Justice of the European Union (ECJ) issued three important VAT rulings on 12 March 2026 that clarify how far Member States may restrict input VAT deductions and how procedural failures should be treated. The judgments reaffirm key EU VAT principles, particularly neutrality, proportionality and the primacy of material over purely formal requirements.
1. Entertainment expenses: deduction restrictions allowed
In Case C-515/24, Randstad España SLU, the ECJ examined whether Spain could deny VAT deductions on entertainment and client hospitality expenses, such as tickets to sporting events provided to customers for promotional purposes.
The Court confirmed that national legislation excluding such expenses from deduction can be compatible with the EU VAT Directive. Spain relied on the “standstill clause” (Article 176), which allows Member States to retain certain historic restrictions on deduction that existed when they joined the EU.
The ECJ ruled that Spain’s rules are valid provided they do not materially expand earlier exclusions. This effectively confirms the compatibility of Spain’s long-standing restrictions on VAT recovery for representation and hospitality expenses.
2. Late invoices cannot block legitimate deduction
In Case C-521/24, Aptiv Services Hungary Kft. the Court considered a situation where a business carried out intra-Community acquisitions but received the supporting invoices several years later. When the invoices were eventually received, the company claimed the VAT deduction in that later period.
Tax authorities rejected the deduction, arguing that it should have been claimed in the original reporting periods. The ECJ disagreed, holding that VAT deduction cannot be denied where the taxpayer acts in good faith, receives the invoices later, and claims the deduction within the applicable limitation period.
The Court emphasised that procedural rules must not make the exercise of the right to deduct “excessively difficult” where the substantive conditions are satisfied.
3. Technical failures cannot cancel VAT refund claims
The third judgment, Case C-527/24, concerned cross-border VAT refund claims submitted electronically between EU tax authorities. A company submitted its claim on time, but a technical error prevented the tax authority from opening the file.
The ECJ ruled that such a claim cannot be treated as non-existent simply because of technical transmission issues outside the taxpayer’s control. Authorities must act diligently, inform the applicant of the issue and allow corrections.
Implications for businesses – reinforced consistency
These rulings reinforce a consistent ECJ theme: VAT rights cannot be undermined by excessive formalism or administrative shortcomings. For businesses operating across multiple EU jurisdictions, this is particularly relevant for intra-Community transactions, VAT refund procedures and documentation timing.
As digital reporting and e-invoicing regimes expand across the EU, ensuring reliable transaction data and documentation remains critical. Systems that accurately capture VAT determination and supporting evidence at the transaction level will help businesses defend deduction and refund claims when procedural challenges arise.
