Case: Czech conditions for claiming bad debt relief criticised

European Court of Justice (First Chamber),

J.-C. Bonichot (Rapporteur), President of the Chamber, C. Toader, A. Rosas, L. Bay Larsen and M. Safjan, Judges,

Judgement delivered 8 May 2019

Directive 2006/112/EC — Articles 90 and 273 — Total or partial non-payment, by the debtor, of a sum due to the taxable person in respect of a transaction subject to VAT — Taxable amount — Reduction — Principles of fiscal neutrality and proportionality

A-PACK CZ s. r. o. v Odvolací finanční ředitelství


A-Pack is a Czech business which in 2011 claimed a repayment of VAT it has accounted for on supplies for which the customer did not pay. Since the invoices were issued the customer had entered insolvency procedures.

Under Czech VAT legislation a supplier is entitled to reclaim VAT accounted for on bad debts but only if the debtor is still a taxable person. A-Pack’s claim for a refund of VAT was refused because, as a consequence of becoming insolvent, its customer was no longer a taxable person. A-Pack argued that refusing its claim for a refund was contrary to Article 90 of the Principle VAT Directive which states that in cases of total or partial non-payment ‘the taxable amount shall be reduced accordingly’.

The ECJ agreed with A-Pack. Although member states are entitled to set conditions for suppliers to claim bad debt relief (to use the relevant UK term), the conditions applied by the Czech VAT law went beyond was needed to ‘ensure the correct collection of VAT and to prevent evasion’ (Article 273 of the Principle VAT Directive).


This case will have little impact in the UK as it relates to a specific Czech provision which is not mirrored in UK VAT law.

For commentary on bad debt relief see In-depth commentary at ¶18-900.

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