Overstated VAT and Simplified Invoices: The CJEU’s Ruling in C-794/23

This case addresses a recurring VAT problem in mass-market B2C situations: what happens when a taxable person applies and shows an incorrectly high VAT rate on simplified invoices, and later seeks to correct the VAT return without being able to correct each individual receipt? The Court of Justice was asked to interpret Article 203 of the VAT Directive, which makes VAT payable by anyone who enters a VAT on an invoice, and Article 238, which allows simplified invoicing. At the core lies the link between Article 203 and its purpose: preventing a risk of loss of tax revenue through wrongful deduction of VAT. The Court was also asked what the concept of “final consumers who do not have a right to deduct input VAT” means, and whether, in simplified invoicing contexts where customers are not individually identified, tax authorities may estimate which receipts still carry a revenue-loss risk.

Facts and circumstances

P GmbH is an Austrian company operating an indoor playground. In 2019, it charged admission fees and applied VAT at the standard rate of 20% to those fees. Given the low value of each transaction, P issued till receipts under the Austrian rules for simplified invoices. P declared VAT at 20% in its 2019 VAT return but later submitted a correction, arguing that the admissions should have been taxed at the reduced rate of 13%. 

The tax authority refused to accept this correction. It stressed that P had displayed VAT at 20% on its receipts and that it was impossible in practice to amend those simplified invoices or issue credit notes to customers for the difference. It also argued that allowing correction after customers had borne 20% VAT would unjustly enrich P. 

P challenged that refusal. It claimed its services were supplied “almost exclusively” to individuals without any right to deduct input VAT. On that basis, P argued there was no risk of loss of tax revenue, and therefore Article 203 should not apply and invoice correction should not be required. 

This dispute followed an earlier preliminary ruling in a related case (C-378/21). There, the Court held that Article 203 does not make a taxable person liable for the wrongly invoiced part of VAT where the recipients are exclusively final consumers with no deduction right, because in that situation no revenue-loss risk exists. After that ruling, the Austrian Federal Finance Court reduced P’s VAT for 2019, but it still assumed a small residual risk: because it could not exclude that some customers might have been taxable persons who (wrongly or rightly) deducted the VAT, it estimated that 0.5% of invoices carried a risk of loss and kept liability for that portion. The tax authority appealed, arguing that such estimation and splitting departed from the earlier judgment.

Legal framework

The Court focuses on EU VAT law.

Article 203 of the VAT Directive provides that VAT is payable by any person who enters VAT on an invoice. The Court recalls its established case law that this rule applies even where the VAT was charged without a real taxable transaction, because the key aim is to prevent loss of revenue arising from wrongful deduction. Accordingly, Article 203 applies only to the extent that VAT was incorrectly invoiced, and only where there is a risk that the recipient could deduct it. 

Article 238 allows Member States to authorize simplified invoices for low-value transactions or where full invoicing is difficult. The relevance of Article 238 here is practical: simplified receipts in mass-market settings often do not identify recipients, making it hard to verify who could deduct VAT and whether Article 203 liability remains. 

The Court also notes the national Austrian provisions only to explain context: Austria requires simplified receipts for invoices up to EUR 400, and national rules impose liability for VAT incorrectly stated unless corrected towards the recipient. Austrian law also prevents refunds where they would cause unjust enrichment.

Positions of the parties and the legal issue

The tax authority’s position was that P should remain liable for all VAT shown at 20% because the invoices had not been corrected in time and a residual risk of revenue loss could not be ruled out. It rejected the idea that liability could be reduced through an estimate dividing receipts between final consumers and taxable persons. 

P argued that its customers were almost entirely private individuals and that this eliminated any genuine risk of loss of revenue. In its view, Article 203 should not bite in such circumstances, meaning it should be able to adjust the VAT return even though it could not correct each receipt. 

The Austrian Supreme Administrative Court therefore asked three questions. In simplified terms:

1. Is a taxable person still liable under Article 203 for incorrectly invoiced VAT on receipts issued to a non-taxable person, even if it also supplies similar services to taxable persons?

2. Does “final consumer without a deduction right” cover only non-taxable persons, or also taxable persons using the service privately and thus without deduction right?

3. In simplified invoicing situations under Article 238, may authorities or courts use estimates to identify which invoices still carry a revenue-loss risk and therefore trigger Article 203?

The Court’s analysis

Article 203 and invoices to non-taxable persons

The Court first reiterates the function of Article 203. VAT entered on an invoice is payable by the issuer because that entry may allow the recipient to deduct VAT, creating a possible loss of tax revenue. Therefore, Article 203 only applies where such a risk exists, and the existence of risk must be assessed invoice by invoice, depending on who received that invoice. 

From this the Court draws a key consequence: if the recipient of the specific invoice is a non-taxable person, that recipient cannot deduct VAT and no revenue-loss risk arises. In that situation, Article 203 does not make the issuer liable for the wrongly invoiced part, even if the issuer also supplies similar services to taxable persons in other transactions. Liability depends on the recipient of each concrete invoice, not on the trader’s overall customer mix. 

Meaning of “final consumers without a deduction right”

The Court then interprets the concept used in its earlier case law. It emphasizes that revenue-loss risk is not completely removed as long as an invoice showing VAT could still be used by a taxable person to attempt a deduction. Even if that taxable person used the service for private purposes or in a way that gives no deduction right, the tax authorities may not be able to detect that in time, and complex situations can mask the lack of deductibility. For that reason, the Court treats the concept strictly. 

It therefore holds that “final consumers who do not have a right to deduct input VAT” refers only to non-taxable persons. Taxable persons are excluded from this category, even if in a particular situation they would not have the right to deduct. 

Use of estimates under simplified invoicing

Finally, the Court addresses the practical problem of simplified receipts in mass-market trade where recipients are not identified. EU law does not itself prescribe the criteria or burden of proof for determining which invoices still carry an Article 203 risk. That is a matter of national procedural autonomy, limited by the principles of effectiveness and equivalence. The national rules must not make it practically impossible to obtain correction or refund when no risk of loss exists. 

Because risk must be assessed on each invoice, the Court explains that authorities may need to identify which receipts were likely issued to taxable persons. In doing so, they must consider all relevant circumstances, such as the nature of the service, how it is supplied and invoiced, and any statistical information on customers. The Court highlights that the fact that taxable-person customers are rare can be significant. 

Crucially, the Court rules that EU law does not preclude the use of an estimate to establish the proportion of invoices involving taxable persons, provided the estimate respects fiscal neutrality and proportionality. Neutrality requires that a trader is not left bearing VAT that should be refunded where there is no revenue-loss risk. Proportionality requires that the data used be correct, reliable, and up-to-date, and that the estimate creates only a rebuttable presumption which the taxpayer can challenge with contrary evidence. The taxpayer must also have a genuine opportunity to contest the estimate, and the standard of proof cannot be excessively high.

Conclusion

The Court confirms that Article 203 is triggered only where an invoice creates a risk of revenue loss through possible deduction. Therefore, for invoices issued to non-taxable persons, no deduction is possible and the issuer is not liable for the incorrectly invoiced VAT, even if it also sells to taxable persons. The Court also narrows the concept of “final consumers without a right to deduct input VAT” to non-taxable persons only; taxable persons are never included, even when they have no deduction right in a given situation.

Because simplified receipts do not identify customers, national authorities may use estimates to determine which invoices likely went to taxable persons and thus still pose a deduction risk. Such estimates are allowed only if they are reliable, proportionate, neutral, and rebuttable, giving the trader a real chance to contest them.

In short, traders may correct overcharged VAT on simplified B2C receipts where no real deduction risk exists, while Member States may isolate the exceptional risk-bearing invoices through proportionate estimation.

Sources: Case C‑794/23 - Tax Office, Austria v P GmbH, EU VAT Directive