P. operates an indoor playground and subjects its services to a VAT rate of 20%. It issued its customers a total of 22,557 receipts – low-value invoices – on which this rate was indicated. The customers were exclusively final consumers who were not entitled to deduct input tax. After P. discovered that the VAT rate for his services was not 20% but 13%, P. corrected his VAT return to recover the overpaid VAT from the Austrian tax authorities. However, the tax authorities refused this correction for two reasons:
- P. Ltd owed the highest rate of VAT under national law because it had not corrected its invoices; and
- The higher VAT burden was borne by P.’s customers so that the requested correction of the VAT return would lead to unjust enrichment of P..
P. then appealed to the Court of Justice of the European Union, which reached the following judgement: The CJEU ruled that P. did not have to pay the wrongly invoiced part of the turnover tax.
According to the judges, a taxable person who has supplied a service and whose invoice shows an amount of VAT calculated based on an incorrect rate does not owe payment of the incorrectly invoiced part of the VAT under Article 203 of the VAT Directive if there is no risk of a tax shortfall because the recipients of this service are exclusively final consumers who are not entitled to deduct input VAT.