The European Court’s recent verdict in the Enzo di Maura case may bring changes in connection with tax base correction in cases when the tax subject intends to reduce its taxbase due to non-payment of their customers.
Enzo di Maura wished to reduce his VAT tax base because of his customer’s non-payment, by referring to an Italian regulation. According to the relevant EU Directive, in case of failure of delivery or total or partial non-payment, tax base shall decrease according to the local law of the Member State, however, Member States have the opportunity to deviate from these provisions in case of total or partial non-payment.
The EU Court found that Member States have the opportunity to limit tax base correction in case of total or partial non-payment, however, this right does not allow for complete exclusion of the correction and the opportunity of tax base correction cannot be limited disproportionately, but Member States have the option to require reasonable action from the taxpayer considering the uncertainties in case of non-payment.
The particularity of this decision is that it is in conflict with a previous decision of the Court on a similar subject. In the Almos case, the Court stated that provisions of the relevant EU Directive shall be interpreted as they are not in conflict with national provisions that do not allow for tax base correction in case of non-payment, therefore, if a Member State does not specify non-payment among the reasons that justify a tax base correction, it shall be deemed that the Member State availed with the option stated in the EU Directive to deviate from its provisions. The current Hungarian rules do not allow for a tax base correction at all in case of total or partial non-payment of the customer. We will see if the Enzo di Maura case will have any impact on the Hungarian legislation.