The recent CJEU judgment in Case T-233/25 (Mokoryte) is one of the most significant recent decisions concerning the relationship between the civil law assignment of receivables and the right to correct the VAT tax base. This ruling is particularly important for the construction industry and entities operating in multi-tiered contracting models, where assignment of receivables is a common practice.
The starting point for the analysis is Article 90(1) of Directive 2006/112/EC, which provides for the possibility of reducing the taxable amount in the event of, among other things, total or partial non-payment. This provision reflects the fundamental principle of VAT neutrality, according to which tax should not be imposed on a taxpayer to the extent that they have not received remuneration for their services.
However, the Mokoryte case reveals the limits of this principle – especially in situations where civil law structures interfere with tax relations.
The facts of the case were relatively typical for the construction market. The developer commissioned a project to a contractor, who then entrusted some of the work to a subcontractor. Due to the developer's insolvency, the contractor failed to receive payment, which resulted in non-payment to the subcontractor. To partially settle its obligations, the contractor assigned its receivable from the developer to the subcontractor. Ultimately, however, this receivable proved uncollectible due to the developer's bankruptcy proceedings ending without satisfying its creditors.
The subcontractor, recognizing that it had borne the economic burden of the unpaid remuneration, issued corrective invoices and reduced the VAT tax base. However, the tax authorities denied the right to the correction, stating that only the contractor, as a direct service provider to the developer, was eligible for such a taxable person.
The EU Court shared this position, formulating a clear thesis: a subcontractor who acquired a receivable by way of assignment is not entitled to correct the VAT tax base in the event of its irrecoverability.
A key element in the judgment's justification is the distinction between two separate taxable transactions. The first occurs between the subcontractor and the contractor, and the second between the contractor and the developer. The court emphasized that these relationships are independent from a VAT perspective and cannot be "combined" through civil law constructs.
With respect to the first transaction, the Court found that the contractor's obligation to the subcontractor had been fully settled – partly through monetary payment and partly through assignment of receivables. Importantly, the assignment was classified as a form of remuneration with economic value. This means that there was no reason for the subcontractor's failure to pay that could justify a VAT adjustment.
Even more important, however, is the second part of the Court's reasoning, which concerns the very essence of the right to correction. The Court clearly stated that this right is closely linked to the taxpayer's status as the entity liable for VAT on a given transaction. In other words, it is available only to the entity that delivered the goods or provided the services and settled the tax on that basis.
The consequence of this approach is the rejection of the possibility of "transferring" the right to adjustment along with the receivable. The Court clearly emphasized that the VAT Directive does not provide for a mechanism for transferring taxpayer status or the rights associated with it through civil law transactions, such as the assignment of receivables.
This argument was further strengthened by reference to the principle of VAT neutrality. Contrary to taxpayers' intuition, this principle does not justify granting the right to correction to any entity that has borne the economic burden of non-payment. Its function is to ensure that the tax does not burden the original taxpayer to the extent that they have not received remuneration. In the case at hand, this entity was the contractor, not the subcontractor as assignee.
The ruling has far-reaching practical implications. First, it confirms the autonomy of VAT law from civil law. Structures such as the assignment of receivables, while effective in the area of obligations, do not automatically produce tax consequences regarding VAT-related rights and obligations. Second, the ruling limits the possibilities of tax optimization by "transferring" the risk of bad debts to entities that could potentially benefit from tax corrections.
From a practical perspective, this means special caution is necessary when structuring settlements in subcontracting chains. Assignment of receivables should not be viewed as an instrument allowing for the transfer of the right to bad debt relief. Entities acquiring receivables must consider that the risk of their uncollectibility will be economic, not tax-related. The question is whether the Supreme Administrative Court will uphold this line and finally close one of the most contentious chapters of the Polish Estonian CIT.
This article is for informational purposes only and does not constitute legal advice.
The law is current as of May 4, 2026.
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