Bulgaria: No adjustment of input VAT deductions for scrapped or destroyed goods (CJEU judgment)
A CJEU judgment concerning an adjustment of input VAT deductions when goods are scrapped or destroyed
No adjustment of input VAT deductions for scrapped or destroyed goods
The Court of Justice of the European Union (CJEU) held (case file C-127/22) that no adjustment of input value added tax (VAT) deductions is made when goods are scrapped or destroyed.
A Bulgarian telecommunications company acquired various goods for which input VAT deductions were made, but the goods were subsequently scrapped because the taxable person considered them unsuitable for use or sale for various reasons, including wear and tear, defects, or obsolescence.
The tax authority adjusted the input VAT initially deducted upon their acquisition in accordance with Art. 79 of the Bulgarian VAT Act, and thereafter the company submitted a claim for reimbursement of the sums paid in connection with the above adjustments on the grounds that Art. 79 of the Bulgarian VAT Act is incompatible with the applicable EU rules (Art. 185 of Directive 2006/112/EC). The tax authority rejected the company’s claim, and the company appealed to the Bulgarian Supreme Administrative Court, which referred the issue to the CJEU.
The CJEU concluded that Directive 2006/112/EC does not require adjustment of input VAT when goods are scrapped (whether the scrapped goods are followed by a taxable supply of the goods in the form of waste or followed by a voluntary destruction/disposal of the goods) and precludes national law which provides for such an adjustment.
Read a May 2023 report prepared by the KPMG member firm in Bulgaria
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.