Opinion of the Advocate General — ECLI:EU:C:2020:424
Date: 2020-06-04
Language of the case: Polish
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Poland

Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
24 April 2019 
Referring court: 
Naczelny Sąd Administracyjny (Poland) 
Date of the decision to refer: 
6 December 2018 
Applicant: 
E. Sp. z o.o. Sp. k., having its seat in S.  
Defendant: 
Minister Finansów  
  
Subject matter of the case in the main proceedings 
Refusal to allow adjustment of the VAT taxable amount in respect of supplies of 
services in the event of partial or total non-payment due to the specific tax status 
of the debtor and the creditor; ‘bad debt relief’ 
Subject matter and legal basis of the request 
Interpretation of Article 90(2) of Directive 2006/112/EC, having regard to the 
principles of fiscal neutrality and proportionality; Article 267 TFEU 
Questions referred 
(1) Do the provisions of Council Directive 2006/112/EC of 28 November 2006 
on the common system of value added tax (OJ 2006 L 347, p. 1) — and in 
particular Article 90(2) thereof — having regard to the principles of fiscal 
neutrality and proportionality, permit the introduction into national law of a 
restriction on the ability to reduce the taxable amount in the event of partial or 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-335/19 
 
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total non-payment by reason of the specific tax status of the debtor and the 
creditor? 
(2) In particular, does EU law not preclude the introduction of a rule in national 
legislation which provides for the option of taking advantage of ‘bad debt relief’ 
only on condition that on the date on which the service or goods are supplied and 
on the day preceding the date on which the tax return adjustment is filed in order 
to benefit from this relief: 
- the debtor is not subject to insolvency or liquidation proceedings? 
- the creditor and debtor are both registered as active VAT taxpayers? 
Applicable provisions of EU law 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax: Articles 90 and 273. 
Applicable provisions of national law 
Ustawa z dnia 11 marca 2004 r. o podatku od towarów i usług (Law of 11 March 
2004 on the Tax on Goods and Services; ‘the Law on VAT’), Journal of Laws 
[Dz. U.] of 2011, No 177, item 1054, as amended: 
Article 89a, in the wording applicable to the case under examination: 
‘1. A taxable person may adjust the taxable amount and the amount of output 
tax arising from the supply of goods or services within the territory of Poland with 
respect to accounts receivable which are deemed probably unrecoverable. The 
adjustment shall also apply to the taxable amount and the amount of tax 
attributable to the part of the accounts receivable which are deemed probably 
unrecoverable. 
1a. Accounts receivable shall be deemed probably unrecoverable where the 
accounts receivable have not been settled or disposed of in any manner within 150 
days of the payment date stipulated in the agreement or invoice. 
2. The provision of paragraph 1 shall apply where the following conditions are 
met: 
(1) the supply of goods or services has been made for the benefit of a taxable 
person referred to in Article 15(1) who is registered as an active VAT 
taxpayer and is not subject to insolvency or liquidation proceedings; 
[…] 
E. 
 
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(3) on the day preceding the date of filing the tax return in which the adjustment 
referred to in paragraph 1 is made: 
(a) the creditor and debtor are both registered as active VAT taxpayers; 
(b) the debtor is not subject to insolvency or liquidation proceedings; 
[…] 
(5) less than two years have elapsed since the end of the year in which the 
invoice documenting the accounts receivable was raised; 
3. The adjustment referred to in paragraph 1 may be made in the settlement for 
the period in which the accounts receivable are deemed probably unrecoverable 
provided that the accounts receivable have not been settled or disposed of in any 
manner by the date on which the creditor files the tax return for that period. 
4. Where, following the filing of the tax return in which the adjustment 
referred to in paragraph 1 is made, the amount due is settled or disposed of in any 
manner, the creditor shall increase the taxable amount and the amount of output 
tax in the settlement for the period in which the amount due is settled or disposed 
of. Where the amount due is settled in part, the taxable amount and the amount of 
output tax shall be increased in proportion to the amount settled. 
5. When filing the tax return in which the adjustment referred to in paragraph 1 
is made, the creditor shall notify its competent tax office of that adjustment, 
stating the amounts of the adjustment and the details of the debtor. 
[…] 
7. The provisions of paragraphs 1 to 5 shall not apply if the creditor and debtor 
are linked by a relationship of a kind referred to in Article 32(2) to (4). 
8. The minister responsible for public finances shall determine, by way of a 
regulation, the template for the notification referred to in paragraph 5 […]’ 
Article 89b. 
‘1. In the event of non-payment of the amount due arising from the invoice 
which documents the supply of goods or services in the territory of Poland within 
150 days of the payment date stipulated in the agreement or invoice, the debtor 
shall adjust the deducted amount of tax resulting from that invoice in the 
settlement for the period in which 150 days elapsed from the payment date 
stipulated in the agreement or invoice. 
1a. The provision of paragraph 1 shall not apply if the debtor has paid the 
amount due at the latest on the last day of the settlement period in which 150 days 
elapsed from the payment date of that amount due. 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-335/19 
 
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[…] 
2. In the event of partial payment of the amount due within 150 days of the 
payment date stipulated in the agreement or invoice, the adjustment shall apply to 
the input tax attributable to the unpaid part of the amount due. Paragraph 1a shall 
apply mutatis mutandis. 
[…] 
4. Where the amount due is settled following the adjustment referred to in 
paragraph 1, the taxable person shall have the right to increase the amount of input 
tax in the return for the period in which the amount due is settled by the amount of 
tax referred to in paragraph 1. Where the amount due is settled in part, the input 
tax may be increased in proportion to the amount settled. 
[…] 
6. Where it is found that a taxable person has breached the obligation specified 
in paragraph 1, the head of the tax office or the fiscal control authority shall 
determine an additional tax liability of 30% of the amount of the tax arising from 
unpaid invoices which has not been adjusted in accordance with paragraph 1. No 
additional tax liability shall be determined in respect of natural persons who, in 
connection with the same act, are liable for a petty fiscal offence or for a fiscal 
offence’. 
Ustawa z dnia 28 lutego 2003 r. — Prawo upadłościowe i naprawcze (Law of 
28 February 2003 on Insolvency and Restructuring; ‘the Law on Insolvency and 
Bankruptcy’), consolidated text: Journal of Laws [Dz. U.] of 2015, item 233, as 
amended: 
Article 342, in the wording applicable to the case under examination: 
‘1. The amounts due that are to be satisfied from the insolvency estate shall fall 
into the following categories: 
(1) category one — the costs of the insolvency proceedings […]; 
(2) category two — claims arising from employment relationships arising prior 
to the declaration of insolvency […]; 
(3) category three — taxes and other public levies and other claims arising from 
social security contributions, including interest and the costs of enforcement; 
(4) category four — other receivables, if they are not satisfied under category 
five, together with interest for the last year before the date of insolvency, 
including contractual damages, the costs of court proceedings and the costs 
of enforcement; 
E. 
 
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(5) category five — interest which is not included in any of the above categories 
in the order in which claims on principal are satisfied as well as court and 
administrative penalties and claims arising from donations and legacies. 
2. Claims acquired by way of assignment or endorsement after insolvency shall 
be satisfied within the framework of category three if they are not satisfied within 
the framework of category four. This shall not apply in regard to claims arising as 
a result of a receiver’s or trustee’s acts or the insolvent party’s acts performed 
with the consent of the court supervisor. 
3. […]’. 
Presentation of the facts and procedure and the main arguments of the 
parties 
1 In its application for an individual tax ruling submitted to the Minister for 
Finances, E. sp. z o.o. (‘the company’) stated that, as a registered active VAT 
taxpayer, it engages in the supply of paid tax advice services including, inter alia, 
to entities registered as active VAT taxpayers. The recipients of those services are 
not linked to the company. The company recognises the remuneration for the 
services supplied as the taxable amount. For the purpose of taxing the services 
supplied in the territory of Poland, the company applies the basic rate of value 
added tax (VAT). In the cases stipulated in the Law on VAT, it also applies a 
reverse charge (Article 28b of the Law on VAT). 
2 The company issued a VAT invoice to a counterparty for tax advice services 
supplied which were subject to taxation in the territory of Poland. Up until the 
date of submitting the application, the company had not received payment for the 
VAT invoice in question. More than two years had not elapsed from the date on 
which the invoice had been issued. The accounts receivable had not been settled 
or disposed of in any manner. In addition, the company indicated that, at the date 
on which the service had been supplied, the counterparty (debtor) was registered 
as an active VAT taxpayer, was not subject to insolvency proceedings and was not 
in liquidation. It is still registered as an active VAT taxpayer and is currently in 
liquidation. 
3 The company accordingly asked the Minister for Finances whether the taxable 
amount and the output tax arising from the supply of services in the territory of 
Poland could be adjusted in the circumstances described where the liability has 
not been fully settled and the debtor is in liquidation in the settlement period in 
which 150 days have elapsed since the payment date. 
4 In the individual tax ruling issued on 12 January 2015, the Minister for Finances 
held that the rule in Article 90 of Directive 2006/112/EC is optional for the 
Member States. The introduction in Article 89a of the Law on VAT of the 
creditor’s right to adjust the taxable amount and the output tax arising from 
accounts receivable that are deemed probably unrecoverable does not infringe 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-335/19 
 
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Article 90 of Directive 2006/112. Therefore, where one of the basic conditions 
stipulated in the legal norm introduced into the Polish legal order, which allows 
the exercise of the right arising from Article 90 of that directive, has not been met, 
the taxable person has no grounds to derive his right to ‘bad debt relief’ directly 
from EU law. 
5 The company challenged the individual tax ruling before the Wojewódzki Sąd 
Administracyjny w Szczecinie (Regional Administrative Court, Szczecin, Poland), 
which dismissed the action. In that court’s opinion, only the cumulative fulfilment 
of all the conditions stipulated in Article 89a(2) of the Law on VAT confers the 
right to adjust output VAT, which was not the position in the case under 
consideration. 
6 The company brought an appeal in cassation against that judgment. The Naczelny 
Sąd Administracyjny (Supreme Administrative Court) joined the case with three 
others for the purpose of a joint ruling. In all these cases, the company applied for 
an individual tax ruling and the essence of the problem relates to the compatibility 
with EU law of the conditions for the application of bad debt relief in the possible 
circumstances to which Article 89a of the Law on VAT applies. 
Brief statement of and reasons for the reference 
7 The referring court has doubts concerning the extent to which the Member States 
are free to determine the conditions for the application of the rule laid down in 
Article 90 of Directive 2006/112 in their national legislation. In particular, the 
court is uncertain whether the conditions laid down in Article 89 of the Law on 
VAT should not be limited solely to those which make it possible to establish that 
the accounts receivable stated in the VAT return as taxable turnover and output 
tax have not been settled, with the exception of those conditions which concern 
the tax status of the creditor and debtor. In Article 89a of the Law on VAT, in 
addition to determining which accounts receivable are deemed not settled, the 
conditions set forth in paragraph 2 are introduced. 
8 Article 90 of Directive 2006/112 does not specify either the conditions or the 
obligations which the Member States may impose, and in the case-law of the 
Naczelny Sąd Administracyjny (Supreme Administrative Court) to date this has 
been interpreted as meaning that those provisions give the Member States a 
margin of discretion, inter alia, as to the formalities to be complied with by 
taxable persons vis-à-vis the tax authorities in order for the taxable amount to be 
reduced. Therefore, it has been accepted in the national case-law that bad debt 
relief falls within the Member States’ margin of discretion. 
9 The referring court considers that the case-law of the Court of Justice to date does 
not provide an unambiguous answer as to the permissibility of introducing such 
restrictions in national law. 
E. 
 
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10 The case-law of the Court of Justice to date appears to indicate that it is in favour 
of a restrictive interpretation of the restrictions on the application of ‘bad debt 
relief’ that Member States may introduce in their national legislation. 
11 In particular, in its judgment of 15 May 2014, Almos Agrárkülkereskedelmi Kft, 
C-337/13, EU:C:2014:328, in paragraph 39, the Court held that ‘the formalities to 
be complied with by taxable persons to exercise, vis-à-vis the tax authorities, the 
right to reduce the taxable amount for VAT must be limited to those which make 
it possible to provide proof that, after the transaction has been concluded, part or 
all of the consideration will definitely not be received’. 
12 However, in paragraph 36 of that judgment, the Court pointed out that ‘as regards 
the question of the formalities to which the exercise of that right to a reduction of 
the taxable amount may be subject, it must be noted that, under Article 273 of the 
VAT Directive, Member States may impose the obligations which they deem 
necessary to ensure the correct collection of VAT and to prevent evasion, 
provided, inter alia, that that option is not relied upon in order to impose 
additional invoicing obligations over and above those laid down in Chapter 3 of 
that directive’. 
13 Nor are the present court’s doubts resolved by the judgment of the Court of Justice 
of 23 November 2017, Enzo Di Maura, C-246/16, EU:C:2017:887, operative part, 
in which the Court held that Article 11.C(1), second subparagraph, of the Sixth 
Council Directive must be interpreted as meaning that a Member State may not 
make the reduction of the VAT taxable amount subject to the condition that 
insolvency proceedings have been unsuccessful when such proceedings may last 
longer than ten years. 
14 The foregoing may suggest that the length of insolvency proceedings was crucial 
for assessing the compatibility of national legislation with EU law. However, in 
the grounds of its judgment [in Case C-246/16, Enzo Di Maura], the Court stated 
that, ‘although it is relevant that the Member States may counteract the inherent 
uncertainty of the definitive non-payment of an invoice, recalled in paragraph 16 
of the present judgment, such a power of derogation cannot extend beyond that 
uncertainty, and in particular cannot extend to whether a reduction of the taxable 
amount may not be carried out in situations of non-payment’ (paragraph 22). As 
the Court further observed, ‘to accept that it is possible for Member States to 
exclude any reduction of the VAT taxable amount would run counter to the 
principle of the neutrality of VAT, which means, inter alia, that the trader, as tax 
collector on behalf of the State, is entirely to be relieved of the burden of tax due 
or paid in the course of his economic activities, themselves subject to VAT’ 
(paragraph 23). 
15 Invoking the principle of proportionality, the Court stated that ‘that uncertainty is 
plainly taken into account by depriving the taxable person of his right to reduce 
the taxable amount for as long as the debt is not definitely unrecoverable, as 
provided for, in essence, by the national legislation at issue in the main 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-335/19 
 
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proceedings. However […] the same objective could also be pursued by granting 
the reduction when the taxable person demonstrates a reasonable probability that 
the debt will not be honoured, even if the taxable base is re-evaluated upwards in 
the event that payment nonetheless occurs’ (paragraph 27). 
16 At the same time, the Court found that ‘it would thus be for the national 
authorities to determine, with due regard to the principle of proportionality and 
subject to review by the courts, the evidence for a probable extended period of 
non-payment to be provided by the taxable person, according to the specific 
features of the applicable national law’ (paragraph 27). 
17 The case-law of the Court of Justice to date appears to indicate that the conditions 
for using the bad debt relief provided for in national legislation may address only 
the issue of counteracting the uncertainty of the definitive non-payment of an 
invoice. 
18 In view of the foregoing, the referring court has doubts as to whether such 
additional conditions as provided for in Article 89a(2) of the Law on VAT are 
permissible, or whether a sufficient condition for making the adjustment is the 
probable unrecoverability of the accounts receivable which the taxable person 
may demonstrate by showing that the accounts receivable have not been settled or 
disposed of in any manner within 150 days of the payment date stipulated in the 
agreement or invoice. 
19 In particular, the referring court expects the Court of Justice to indicate whether 
the conditions laid down in Article 89a(2) of the Law on VAT remain outside the 
margin of discretion granted to the Member States or whether, having regard to 
the principle of proportionality, the national court should assess those conditions 
on a case-by-case basis, which would mean, in particular, that account should be 
taken of the length of the insolvency or liquidation proceedings. 
20 To consider that EU law precludes the application by a Member State of the 
condition laid down in Article 89a(2) of the Law on VAT would expressly 
undermine the coherence of the Polish legal system, since in Article 89b of the 
Law on VAT the Polish legislature decided to exercise the power provided for in 
Article 185(2) of Directive 2006/112. 
21 In order to respect the principles of neutrality and proportionality, the use of ‘bad 
debt relief’ by the taxable person/creditor and the adjustment of output tax entails 
an obligation imposed on the taxable person/debtor to adjust the input tax. In this 
manner, VAT neutrality, which is a structural feature of this tax, is ensured. 
Where the creditor takes advantage of ‘bad debt relief’, the tax which is subject to 
adjustment ceases to exist. Thus, in fact, the input tax which could be deducted 
ceases to exist as well. Therefore, the consequence of the creditor’s right to adjust 
output VAT where the accounts receivable are unrecoverable is the obligation, 
arising from Article 89b(1) of the Law on VAT, for the taxable person/debtor to 
decrease the amount of input tax deductible or, where no such amount is present, 
E. 
 
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to increase the amount of output tax by the amount of tax arising from unpaid 
invoices by filing an adjusted tax return for the period in which the tax was 
deducted. Since the provisions of Article 89a of the Law on VAT concern the 
taxable person’s/creditor’s right and lay down the conditions for the exercise of 
this right, while Article 89b(1) of that law concerns the simultaneous obligation 
on the part of a taxable person/debtor who has not paid, when requested to do so 
by the creditor, the accounts receivable meeting the requirements of Article 89a(1) 
and (1a) of the Law on VAT, to make an appropriate adjustment to the input tax 
deductible or to increase commensurately the amount of output tax for the period 
in which the taxable person deducted the input tax, those two rules must be fully 
correlated and concern the same legal situation, as the assessment as to whether 
the creditor has correctly exercised his right to adjust output tax dictates the 
assessment of the debtor’s situation given the direct relationship between the 
rights of one taxable person and the obligations of the other taxable person. 
22 In the view of the referring court, an adjustment made by a creditor vis-à-vis an 
insolvent debtor interferes in an unacceptable manner with insolvency 
proceedings by changing the order in which creditors’ claims are satisfied as laid 
down in Article 342 of the Law on Insolvency and Bankruptcy, since such an 
adjustment satisfies — at the Treasury’s expense — one of the debtor’s creditors 
in whose place another creditor of the insolvent party’s estate appears, namely the 
Treasury. This results in the shifting of the VAT liability from category four (the 
gross value of the creditor’s invoice arising from business, and, in general, civil-
law relationships) to category three (taxes). In national case-law it is recognised 
that the provisions of the Law on Insolvency and Bankruptcy, including, in 
particular, Article 342, constitute a lex specialis in relation to fiscal laws and 
preclude the claims of individual creditors from being satisfied other than in the 
order established by that provision. 
23 The restrictions introduced in national law in Article 89a(2)(1) and, respectively, 
in Article 89b(1b) of the Law on VAT reflect this principle and breach thereof 
would undermine the coherence of the present system of national law as expressed 
in Article 342 of the Law on Insolvency and Bankruptcy. 
24 In this context, however, the dilemma arises as to whether these restrictions are in 
conflict with Article 90(2) of Directive 2006/112, having regard to the principles 
of fiscal neutrality and proportionality, and if, in the Court’s view, they do 
infringe those norms, whether the national court should rule in a manner contrary 
to the norm laid down in Article 342 of the Law on Insolvency and Bankruptcy. 
25 The foregoing doubts also arise in relation to the other conditions for the 
application of bad debt relief which are laid down in Article 89a of the Law on 
VAT. These conditions also ensure the symmetry of the tax arrangements 
adopted. In particular, the condition that the supply is to be made to an active 
VAT taxpayer ensures a symmetrical reduction in input tax by the purchaser of 
the goods supplied. If no such restriction were present, this would mean that final 
consumption was not taxed and that proper tax collection would not be ensured. 
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26 In the view of the referring court, the foregoing arguments militate in favour of 
the need to ensure that the conditions stipulated in Article 89a and Article 89b of 
the Law on VAT are cumulatively fulfilled.