On 11 February, the EU General Court delivered a judgment (case T689/24) that has the potential to fundamentally change how VAT is settled for by many taxpayers. The Court held that Polish rules requiring taxpayers to wait with VAT deduction until the moment they receive an invoice are incompatible with EU law. The outcome is very good news for businesses: VAT may now be deducted earlier.

Only one thing matters now. Under the Court’s reasoning, the decisive factor is whether the taxpayer holds the invoice at the time of filing the VAT return. If this condition is met, VAT may be deducted for the period in which the tax obligation arose on the supplier’s side – generally, the month in which the goods were delivered or the services were performed – rather than the month in which the invoice was received.

In practice, this means a clear shift away from the longstanding Polish approach.

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What exactly has changed?

Until now, Polish VAT law forced businesses to postpone input VAT deduction until the invoice was actually received. In many cases, this resulted in a temporary deferral of deduction – or, in extreme situations, even a permanent loss of the right to deduct. Polish regulations provide no effective mechanism to compel a supplier to issue an invoice on time, leaving the purchaser exposed to delays beyond its control.

The EU Court has now made it clear that such postponement has no basis in the VAT Directive. The right to deduct arises at the moment the supply of goods or services takes place. The invoice serves as formal evidence of that right, but it is not a condition for its existence.

As a result, if – for example – a transaction takes place in February 2026, and the invoice reaches the purchaser only in March, but still before the deadline for filing the February VAT return (before 25 March), the taxpayer is fully entitled to deduct VAT in the February settlement.

Why this matters for businesses

First, it eliminates the forced “freezing” of cash tied up in input VAT already paid to suppliers. In many industries, invoices are received only towards the end of the following month. Until now, this often meant shifting VAT deduction to the next period, even though the delay was not caused by the buyer.

Second, monthend closing becomes faster and more flexible. If an invoice arrives before the VAT return is filed, it can be booked “retroactively”, giving accounting teams greater room to manage closing processes efficiently.

Third, fewer disputes with tax authorities should follow. If the taxpayer holds the invoice at the time of filing the return, the tax authorities are fully able to verify it. The EU Court explicitly noted that in such circumstances there is no increased risk of abuse.

What about KSeF? The ruling fits perfectly into the new reality

Mandatory einvoicing under KSeF only strengthens the practical impact of the judgment. In KSeF, the moment an invoice is made available is objective and indisputable – no emails, no delays, no “missing PDFs”.

This means that businesses can:

  • clearly demonstrate when an invoice was received,
  • quickly identify invoices relating to the previous settlement period,
  • safely apply earlier VAT deduction.

In practice, the combination of the EU Court ruling and KSeF makes VAT settlements more transparent and predictable than ever before.

What happens next?

Since the Court left no doubt as to the incompatibility of the Polish rules with the VAT Directive, national legislation will have to be amended. Businesses, however, do not need to wait. The judgment has direct effect and may already be applied in upcoming VAT returns.

That said, taxpayers choosing to apply accelerated VAT deduction – especially in the first months following publication of the judgment – should be prepared for questions from the tax authorities. It cannot be ruled out that, initially, the authorities will lack clear internal guidance, which may result in additional queries or requests for explanations.

This is also a good moment to take a closer look at internal processes. In many organizations, accounting systems and internal procedures are still built around the old principle: “VAT is deducted in the month the invoice is received”. This new approach should be properly reflected in system settings to avoid confusion and errors in VAT registers.

This is particularly important for highly automated accounting and reporting environments. Companies should verify how data flows through their ERP systems, how quickly invoices reach accounting teams, and whether KSeF is properly integrated into the monthend closing process.

If you would like to assess whether your current processes allow you to fully benefit from this change, or to discuss the impact of the judgment on your VAT settlements, we will be pleased to support you.