The CJEU Upholds Restrictions on the Adjustment of Unduly Charged VAT

The judgment of the Court of Justice of the European Union (CJEU) of 3 June 2026 (Case C-198/25) examines the limits that Member States may impose on the adjustment of unduly charged VAT where the relevant tax period has already been subject to final tax audit proceedings.

The Court concludes that EU law does not preclude national legislation preventing the reopening of a tax period that has already been audited in the absence of new facts or circumstances capable of altering the conclusions reached in the previous proceedings, even where there is no risk of loss of tax revenue, provided that the taxable person has had an effective opportunity to exercise its rights.

The dispute originated from a Hungarian company that had charged VAT on certain warehousing transactions which were subsequently regarded as transactions falling outside the scope of VAT.

Following this interpretation, the company ceased charging VAT on subsequent transactions. However, it failed to fully adjust the VAT relating to a tax period that was later subject to audit proceedings by the tax authorities.

Once the administrative proceedings had been concluded, the company requested a review of the audited tax period in order to recover VAT amounts that it considered to have been unduly charged. In support of its request, it argued that certain corrective invoices had not been included during the audit proceedings and that others had not yet been issued at that time.

The tax authorities rejected the request on the grounds that the conditions laid down by national law for reopening concluded proceedings had not been met. In particular, the relevant legislation required the existence of a new fact or circumstance that the taxpayer neither knew nor could reasonably have known previously while acting in good faith.

The referring court asked the CJEU whether Council Directive 2006/112/EC on the common system of value added tax, together with the principles of fiscal neutrality, effectiveness and proportionality, precludes national legislation that makes the adjustment of unduly charged VAT relating to an already audited tax period conditional upon the existence of a new element capable of altering the conclusions reached during the previous audit.

The question was particularly significant because, according to the facts of the case, there was no risk of loss of tax revenue for the tax authorities.

The Court held that national legislation of this nature is compatible with EU law.

According to the judgment, Member States may establish procedural requirements governing the review of tax periods that have already been audited, provided that such requirements comply with the applicable principles of EU law and do not deprive taxpayers of a genuine opportunity to exercise their rights.

In the case at hand, the CJEU attached particular importance to the fact that the company had been afforded sufficient opportunities to regularise its position throughout the various stages of the proceedings. In particular, the Court noted that the taxable person could have exercised its rights before the commencement of the audit, during the audit itself, and even through the appeal mechanisms available against the administrative decision that brought the proceedings to an end.

The Court also emphasised that several years had elapsed since the company became aware of the VAT treatment of the transactions concerned and that there were no objective circumstances preventing it from taking action within the available time limits.

One of the most significant aspects of the judgment is its clarification of the scope of the principle of fiscal neutrality in the field of VAT.

The CJEU reiterated that fiscal neutrality constitutes one of the fundamental principles of the common VAT system. Nevertheless, this does not mean that rights deriving from that principle may be exercised independently of the procedural rules established by the Member States.

For this reason, the mere absence of any loss of tax revenue is not, in itself, sufficient to require the acceptance of a VAT adjustment request submitted after the conclusion of audit proceedings. Where the taxable person has been afforded an effective and reasonable opportunity to assert its rights, EU law allows national legal systems to impose limits on the subsequent review of situations that have already become final.

The judgment confirms that the principle of VAT neutrality does not exclude the application of national procedural requirements intended to safeguard legal certainty and the stability of administrative decisions.

Accordingly, the CJEU considers it compatible with EU law for national legislation to prevent the reopening of an already audited tax period for the purpose of adjusting unduly charged VAT where no new elements exist to justify such review and the taxpayer has previously been afforded adequate means of exercising its rights.

The ruling is particularly relevant for businesses and taxpayers, as it highlights the importance of identifying and pursuing potential VAT adjustments at the appropriate stages of tax proceedings, thereby avoiding situations in which the finalisation of administrative actions may subsequently limit available avenues of review.

At ILIA ETL GLOBAL, we have a team specialised in tax advisory services and tax litigation and procedural matters, assisting both businesses and private individuals in tax audits, tax adjustments and disputes with the tax authorities.

By our colleague Xavier Vilalta.

To receive specialized advice on this matter, you may contact specialists at ILIA ETL GLOBAL, or alternatively reach out through our contact form.