In a decision, the National Tax Tribunal has ruled that it is only to a limited extent that a business can subsequently have a correct invoice prepared if the original sales document did not fulfil the formal requirements of the VAT Order for an invoice to be used in connection with the sale of goods under the rules on second-hand VAT. The consequence of not complying with the formal requirements of the VAT Order is that ordinary VAT must be charged on the supply, which can lead to more VAT being charged than the dealer has earned on the vehicles. It is therefore very important to ensure that the formal requirements are met both at the time of purchase and sale.
In the case in question, the car dealer had declared and accounted for VAT on sales under the second-hand VAT scheme for a number of vehicles that the dealer had purchased without VAT. In the case of the purchase of cars from private individuals, only a contract note had been drawn up, just as in the case of the sale to private individuals, only a contract note existed between the parties.
SKAT had increased the company’s sales VAT, as the formal requirements for settlement vouchers and invoices for applying the rules on second-hand VAT had not been met.
The company had requested SKAT to be authorised to issue accounting documents and invoices that met the formal requirements for invoices for the application of the second-hand VAT rules, as the vehicles had undoubtedly been purchased without VAT and they had been sold by the company without specification of VAT. SKAT did not grant this request.
The National Tax Tribunal concluded that the company was entitled to issue accounting vouchers and invoices in the transactions where there was certainty of sales to private individuals and/or sales of white-plate cars. In its reasoning, the National Tax Tribunal stated that, in the circumstances, the missing invoices did not constitute a risk of loss of tax revenue for the State.
With regard to the sale of vans, the National Tax Tribunal concluded that it was not possible to issue an invoice that complied with the formal requirements for a accounting voucher and invoice if the transaction was with a commercial trader or the car was sold wholesale, even if it could subsequently be documented that the car had actually been sold to a private individual.
In the case of sales of vans, the National Tax Tribunal was of the opinion that there was a risk that the company had calculated and deducted the VAT, despite the fact that the car was registered on parrot plates and had a total weight of less than 3 tons, which is why, similarly to white plate cars, there is no access to VAT deduction.
The National Tax Court did not give any importance to the fact that the company was able to provide documentation that the buyers had not deducted VAT from the purchases. This may seem strange when the National Tax Tribunal emphasised that there was no risk of loss of tax revenue for the State regarding the sale of the white plate cars.
The National Tax Court’s decision can be read in full here
Our assessment
In our opinion, the decision of the National Tax Tribunal is a rather restrictive interpretation of the conditions for the application of the second-hand VAT rules.
The purpose of the second-hand VAT scheme is to avoid double taxation, which is why a dealer should be entitled to issue an invoice that fulfils the formal requirements when no invoice has previously been issued where VAT has been specified and there has undoubtedly not been a deductible VAT in connection with the purchase.
The National Tax Tribunal accepted the possibility of issuing invoices that complied with the formal requirements in relation to sales to private individuals, as there was an old National Tax Tribunal decision tregardign this, but the National Tax Tribunal did not extend its interpretation to apply in every situation where there was no real risk that the Treasury had suffered a loss, which may seem strange.
With the decision of the National Tax Tribunal, it can therefore only be stated that, in our opinion, an unhealthy administrative practice has developed where no account is taken of the facts, nor is a real assessment made of whether the purchaser has had access to a VAT deduction.
Since vans with a total weight of less than 3 tons, which have been registered for either private use or mixed use, do not qualify for VAT deduction, the National Tax Tribunal should, in our opinion, have concluded that in these cases, too, it should be possible to issue an invoice that complied with the formal requirements when no invoice had previously been issued.
Based on the above decision, it can be seen that it is extremely important to be aware of the formal requirements when the rules on second-hand VAT apply. In this specific case, there is no doubt that the rules on second-hand VAT could have been applied if the formal requirements for settlement documents and invoices had been issued correctly when the vehicles were delivered.
Based on the decision of the National Tax Tribunal, we would encourage you to review whether you fulfil all the formal requirements for the application of the second-hand VAT rules. It costs something, but it is even more expensive not to be in control of this. We are happy to assist with a review of this.
For further information, please contact Diana Mønniche on Phone: 20717862 / dme@bachmann-partners.dk or Peter Hansen on Phone: 40 32 35 35 35 / pha@bachmannpartners.dk.