EU – General Court: Major Decision on the Input Tax Deduction Principles

The European General Court issued a preliminary ruling, T-689/24, on February 11, 2026, in response to a request from the Supreme Administrative Court of Poland, which had referred the case to the General Court on questions related to the subject of input tax deduction for VAT. 

Domestic Case – Short Intro

The Supreme Administrative Court had before it a case concerning the applicability of EU VAT rules and regulations on input tax deductions. The domestic company inquired with the tax authority whether it was entitled to deduct input tax for the reporting period in which the eligible transactions were carried out, provided that it had received the connected invoices no later than the date the respective return was filed. 

The tax authority and the respective domestic court, which were deciding on the matter, concluded that the right to deduct input tax arises only upon receipt of the invoice, provided that other conditions are met. The Supreme Administrative Court had its doubts, so it referred the case tothe EU General Court for a preliminary ruling. 

EU VAT Rules 

General reasoning stemming from the EU VAT Directive states that the input tax deduction is possible only when the service is performed and the invoice has been received. 

European General Court 

Reasoning and Decision

Taking into consideration that the right to deduct input tax is generally possible in the situation when the taxable person receives the invoice. Following this logic, if the buyer cannot deduct input tax on the preliminary tax return, even though it receives invoices before submitting the return, it actually temporarily bears the VAT burden. 

Practically, it means that the buyer isn’t exempt from the VAT liability, which violates the principle of VAT neutrality, proportionate and immediate right for input tax deduction. Based on these provisions, the right to deduct input tax could be claimed in the preliminary reporting period in which the underlying transaction took place, provided that the invoice recipient has the invoice before filing the return. 

Decision 

The EU General Court overturned principles regarding the time frame within which the respective buyer can claim an input tax credit. This decision can have a major impact on tax authorities(outside Poland), and respective EU businesses when it comes to defining the appropriate time for claiming input tax credit. 

If you see that this preliminary ruling could bring some benefits to your businesses, do reach out to our team of tax advisors for a tailored review.