ECJ specifies its statement on tax liability arising from invoice for services to end consumers

With the ruling dated 1 August 2025 on the Austrian case Finanzamt Österreich (C-794/23) the ECJ specified the principles set out in the decision dated 8 December 2022 (C-378/21, P GmbH) on VAT liability for VAT which was incorrectly invoiced.

Underlying case and previous procedure

The decision relates to the same case as the ruling from the ECJ dated 8 December 2022 (C-378/21, P GmbH). For details, we refer to our newsletter from 2022.

In summary, P GmbH operates an indoor playground and incorrectly issued numerous simplified invoices with 20% VAT instead of 13%. The European Court of Justice (ECJ) clarified in 2022 that, under the premise that the recipients of the services are exclusively non-taxable persons not entitled to deduct input VAT, no VAT liability arises for the VAT incorrectly invoiced due to the lack of risk of loss of tax revenue. The ECJ now had follow-up questions to address:

• • Is the taxable person also not liable for the VAT incorrectly invoiced, if the taxable person also supplied similar services to other taxable persons?
  • Is a ‘final consumers who do not have a right to deduct input VAT’ not only a non-taxable person, but also taxable persons who, in a given situation, do not have a right to deduct input VAT?
  • Can the proportion of other taxable persons to whom VAT was incorrectly invoiced be estimated in case of simplified invoices?

ECJ decision

• • The risk of loss of tax revenue is assessed based on each specific invoice. It is irrelevant whether similar services are also provided to other taxable persons.
  • The term ‘final consumers who do not have a right to deduct input VAT’ is to be interpreted narrowly and includes only non-taxable persons. If another taxable person uses the service for private purposes or for other purposes not entitling to input VAT deduction, the risk of loss of tax revenue cannot be excluded – thus, a VAT liability generally arises for VAT incorrectly issued to another taxable person.
  • For simplified invoices, the proportion of other taxable persons to whom VAT was incorrectly invoiced can be estimated. All relevant circumstances must be considered, such as the nature of the service, the conditions of provision and invoicing, as well as available statistical information. The data used must be precise, reliable and up to date.

Implications in practice

The decision is positive for affected taxable persons and allows for a pragmatic approach regarding VAT incorrectly invoiced in simplified invoices in the context of mass market commerce.

When taxable persons incorrectly invoice VAT to final consumers, they are not liable for it according to section 11 para. 12 UStG (Austrian Value Added Tax Act). The ECJ has clearly stated that for simplified invoices issued to both taxable persons and non-taxable persons, the proportion attributed to taxable persons can be estimated. It may be advisable to consider disclosing this estimate to the tax authorities.

To avoid a VAT liability arising from VAT incorrectly invoiced for the estimated “taxable person proportion”, a correction of the invoice would theoretically be necessary. However, in practice, this is often not feasible in case of simplified invoices as the recipients are not known.

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