The new release of the ViDA project and an invoice in a specific format as a substantive condition for input VAT deduction?

ViDA – status of the project

The negotiations on the EU package referred to as ViDA (VAT in the Digital Age) are entering a decisive phase. If it were not for Estonia’s opposition, the project would have been agreed even in May. It is worth pointing out that the disagreement concerned only certain elements of the second pillar (digital platforms), while the key tenets of the first pillar (e-invoicing) seem to have been largely agreed. At the same time, the subsequent compromise version of the draft amendments to Directive 2006/112, published on 8 May this year, highlights how much change has been made compared to the original draft of December 2022. However, due to the final failure to reach a compromise at the end of the Belgian Presidency, there are many indications that it will be further discussed and most probably finally adopted during the Polish Presidency in  the Council in the first half of 2025.  In addition, the Ministry of Finance has announced that it will present for public consultation this autumn

the legislative changes to the KSeF, as well as to invoice format ,

The draft released by the EU Council answers many questions about the interaction of national e-invoicing systems in relation to ViDA. However, it is worth noting that the Preamble to the draft ViDA points to one assumption that has not been commented on more widely so far.

ViDA – it is worth noting the Preamble

The Preamble authorises EU countries to introduce a solution that makes the deduction of input VAT  conditional on the taxpayer receiving an invoice in  a certain format/ standard. This is therefore a surprising return to the old (somewhat forgotten) role of the invoice as a substantive condition for the deduction of VAT, which has been questioned especially recently in CJEU jurisprudence. Moreover, we are talking about the necessity to receive an invoice in a certain form (standard).

It is worth recalling the proposed recital 5c of the Preamble in full: ‘(5c) The effectiveness of national digital reporting systems could be compromised if taxable persons did not comply with the obligation to issue electronic invoices with respect to the transactions subject to a reporting obligation. In light of the digitalisation of transactions and economic exchanges, and of the objectives of this Directive for the digitalisation of VAT including with a view to ensuring a more effective fight against fraud, Member States should be allowed to provide that holding an electronic invoice issued in compliance with the required standard laid down in the VAT Directive becomes a substantive condition to be entitled to deduct or reclaim the VAT due or paid’.

Formalism of deduction versus KSeF

It is worth noting that the current legislation enacted in 2023 introducing a mandatory KSeF does not make the deduction of input tax conditional on the receipt of an invoice in the KSeF. The receipt of an invoice outside the KSeF does not exclude the right to deduct, assuming that the other substantive conditions for deduction are met. This is extremely important in the event that a provider mistakenly recognises that there is no obligation to invoice in KSeF under the mandatory model (once it comes into force – at this point in 2026). Such situations are not difficult to imagine in the case of mistaken identification of the lack of having a fixed establishment  in Poland.

The possibility, announced in the Preamble to the ViDA project, for EU countries to introduce a restriction on the right to deduct may be assessed as strongly surprising, regardless of the fact that the scope of this option may raise further doubts. This implies a return to the concept of the invoice as the substantive premise for the deduction. Further work on the ViDA project and, in this context, the use by EU countries – including the Polish administration – of the possibilities offered by the project should therefore be followed.