Law firm clients should take note of a recent European Court decision (C-516/14 Barlis) concerning the right of legal services' recipients to deduct VAT. The decision discusses the detail that is required on an invoice.

Barlis received services from a law firm that issued its invoices with a generic description of 'legal services rendered between specific dates' or for 'legal services to a present date.' Barlis sought to recover the VAT on the invoices but the Portuguese tax authorities rejected the claim on the grounds that the invoices did not meet the requirements provided for in the Portuguese VAT Code. The court held, in part, that invoices that only provide a broad description of the services (e.g., legal services), with insufficient detail to determine the nature or VAT rate applicable, do not in principle comply with the VAT invoice requirements.

The case highlights the importance of ensuring that VAT invoices, or supporting documentation, provide sufficient information to enable both the nature and time of a supply to be properly established. In light of the judgment, US law firms with EU operations that provide invoices to EU-based clients may wish to consider their current invoicing procedures and, importantly, whether a start and end date is clearly stipulated on invoices or supporting documentation when billing for legal services. For details, see "Judgment: Invoices should contain sufficient detail to confirm the nature and date of a supply" in EY VAT News — week to 19 September 2016. EY has an EU VAT team specialising in law firms based in the UK.

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