Landmark judgment of the General Court of the European Union on the Right to Deduct VAT

April 15, 2026

In a recent judgment (case no. T‑689/24) in the case I. S.A. v. Director of the National Tax Information of 11 February 2026, the General Court of the European Union ruled that “Polish provisions (Article 86(10b)(1) of the VAT Act) are incompatible with the VAT Directive and with the principles of neutrality and proportionality. The incompatibility concerns the fact that the moment of exercising the right to deduct VAT is made conditional on the date of physical receipt of the invoice, whereas the Directive requires only that the invoice be held at the time the VAT return is filed.”

The right to deduct VAT and the date of receipt of the invoice

Under the Polish VAT Act currently in force (Article 86(10b)(1)), a taxable person may deduct input VAT at the earliest in the settlement period in which the invoice (or another document entitling them to the deduction) is received. The claimant company challenged the compatibility of these provisions with EU law, arguing that rigid adherence to the date of receipt of the document artificially delays the VAT refund by an entire month in cases where the invoice has already been received by the time the VAT return is filed (i.e. by the 25th day of the following month). For example, if a company purchased goods in February but received the invoice only at the beginning of March, the Polish tax authorities prohibited including this expense in the VAT return for February, arguing that the deduction could be made no earlier than in March.

Inconsistency in Polish VAT regulations

The Supreme Administrative Court, referring the case to the Court of Justice of the European Union (order of 2 October 2024, case no. I FSK 169/21), expressed doubts as to the compatibility of the Polish VAT provisions with EU law as regards the moment when the right to deduct input VAT arises—namely, whether Polish law infringes the principle of neutrality by making the right to deduct conditional upon receipt of the invoice rather than on the moment the transaction is carried out.

CJEU: VAT deduction without a requirement for an invoice date

The General Court of the European Union shared the doubts raised by the Supreme Administrative Court, indicating that Article 86(10b)(1) of the VAT Act is incompatible with the VAT Directive and the principles of neutrality and proportionality insofar as it makes the moment of deducting VAT dependent on the date of physical receipt of the invoice, whereas the Directive requires only that the invoice be in the taxpayer’s possession at the time the VAT return is submitted.

Accelerated VAT deduction

This judgment means that taxpayers may now recover input VAT more quickly—by deducting it in the settlement for the month in which the purchase was made, provided that the invoice reaches them by the 25th day of the following month (before the VAT return is filed). As a result, taxpayers’ financial liquidity should improve thanks to the elimination of the need to “shift” the deduction to the subsequent accounting period.

Tags vat, VAT deduction