The European Court of Justice issued an interesting ruling last week in the ongoing saga of the VAT issues of Martens Transport.
Martens is a Belgian group of related companies in the trucking / transportation industry. Like any organization, they had internal charges for various services. Payments were made, but unfortunately the payments were not accompanied by corresponding compliant VAT invoices.
The ‘supplying’ company had to account for the VAT on the charge. The ‘buying’ company did not have the right to reclaim the VAT incurred, because the invoices were incorrect.
I would have thought that the Belgian tax administration should have allowed the invoices to be duly corrected, even when the errors were discovered during an audit. But they didn’t, and the Court of Justice did not have the means to change that policy.
Also, at that time Belgium did not recognize the concept of “fiscal unity” [edited from the original version as per Michel Lambion's comment below]. That facility, which applies for example in The Netherlands, considers related groups of companies as a single taxpayer, and thus inter-company charges between group members are disregarded for VAT.
Shame on the Belgian VAT Man, but also a stark reminder that inter-company charges should be invoiced correctly, and properly accounted for in the VAT filings.
The court ruling is here: