Court of Justice rules that a contract can be regarded as an invoice: is that good or bad news?

The European Court of Justice delivered its judgement on 29 September 2022 in the case of Raiffeisen Leasing (C-235/21).
The conclusion of this case is that a contract can be regarded as an invoice if it contains all the information necessary to determine whether the substantive conditions for the right to deduct VAT have been met. That sounds like great news: you no longer need an invoice to exercise the right to deduct VAT. But this position may also be very tricky. Let’s dive into the facts of the case.


The case concerned two Slovenian companies (RED and Raiffeisen) that entered into a sale-lease-back agreement.

RED sold a piece of land to Raiffeisen subject to VAT. Raiffeisen would then construct a new building and lease it to RED with VAT. A “sale/lease back” agreement was set up (before the sale was concluded).

RED issued an invoice with VAT for the sale of the land, but Raiffeisen has failed to issue an invoice for the "lease back". RED subsequently deducted VAT on the lease payments, because it considered that the agreement could serve as a valid VAT invoice. However, Raiffeisen has not declared or paid any VAT on the lease.

The parties mutually terminated the lease as RED had failed to fulfill its obligations under that agreement. Raiffeisen then sold the land to another buyer for a price that included VAT.

The Slovenian tax authorities rejected RED's VAT deduction under the concluded agreement. Which was bad news for RED, but good news for Raiffeisen, you would think: they can reclaim the VAT that has been paid. But it is precisely where the problem lies: Raiffeisen has not paid any VAT at all on the basis of that agreement. As a result, however, the tax authorities claimed interest on the VAT debt from Raiffeisen for unpaid VAT.

The claim was based on Article 203 of the European VAT Directive. This provision states that VAT is payable by anyone who mentions VAT on an invoice. Since the lease contract stated the value with an explicit indication of a VAT amount, VAT was considered by the authorities to be due from the moment the contract was concluded.

In addition, the deduction of VAT on Raiffeisen’s purchase of the property was also refused. This is because the formalities to tax the sale were not fulfilled. For a taxed sale, a formal option should have been exercised in accordance with local law (Article 45 ZDDV-1).

Raiffeisen challenged the tax authorities' decision, but her appeal was dismissed. Raiffeisen then appealed to the referring court.


The dispute eventually ended up in the European Court of Justice.
The referring court asks the European Court to clarify the conditions under which a written contract may be regarded as an invoice within the meaning of Article 203 of the VAT Directive.


Pursuant to Article 203 of the VAT Directive, VAT must be paid by anyone who mentions this tax on an invoice.

The legislator's aim with this provision was to prevent VAT leaks: if a customer receives an invoice, there is a risk that he will use it to claim VAT deduction. And if the person issuing the invoice cannot be held liable for the payment of VAT (for lack of legal basis), the state would risk losing tax revenue.

The question before the Court is whether the agreement concluded between Raiffeisen and RED can be regarded as an “invoice” within the meaning of VAT legislation.

It is remarkable that the Court does not focus so much on the payment of VAT – which is in fact the subject of this case – but emphasizes the principles of deduction. The Court thus links the payment based on Article 203 of the VAT Directive to the right to deduct VAT. The risk of the VAT leakage can be avoided if the tax authorities have the information necessary to assess whether the material requirements for the right to deduct VAT are met. It does not matter whether the VAT is stated in a document entitled 'invoice' or in another document, such as a contractual agreement.

In order to qualify as an invoice within the meaning of the VAT Directive, a document must therefore firstly indicate the VAT and, secondly, contain the information required by the VAT Directive, so that the tax authorities can determine whether the substantive conditions for the right to deduct VAT has been paid.
It is for the referring court to assess whether the agreement in the present case actually contains the necessary information.

In short, the Court ruled that a written agreement can be regarded as an invoice within the meaning of the VAT Directive if it contains all the necessary information on the basis of which the authorities can verify whether a right to deduct VAT can arise.


In theory, VAT should be neutral. In practice, VAT can quickly become a significant cost item if the transactions are not properly VAT treated, or if VAT formalities are not handled correctly.

On the basis of this ruling by the Court of Justice, things do not get any easier: the buyer can claim VAT deduction on the basis of a contract that contains all invoice entries. But a supplier must make sure that the agreements he concludes are not considered as an invoice! After all, in such a case there is a risk that the tax authorities would claim VAT from him on the basis of Article 203 of the VAT Directive.

That is why sufficient attention must be paid to VAT, especially in real estate transactions where the VAT amounts can assume significant proportions!
This judgment was made in a specific context in which the tax authorities see their claim being confirmed, but this case can also represent an opportunity for any business that is confronted with a rejection of deduction due to the lack of a VAT invoice.