On 3 April 2025, the Court of Justice of the European Union (CJEU) issued a significant judgment in case C-164/24, Cityland EOOD, which questions the way Tax Authorities in EU Member States deregister VAT numbers.
The case concerned the Bulgarian Tax Authorities’ decision to remove Cityland from the VAT register due to repeated failures to meet tax obligations. This action was based on national legislation allowing deregistration in cases of repeated breaches. However, the company argued that its non-payments stemmed from genuine business difficulties, not fraudulent intent.
Cityland challenged the decision and asked whether the Bulgarian law was compatible with EU rules.
In its judgment, the CJEU ruled that:
- Directive 2006/112/EC on the common VAT system — along with the principles of legal certainty and proportionality — does not allow Tax Authorities to remove a business from the VAT register solely for repeated non-compliance.
- National laws must require an assessment of the nature and seriousness of the taxpayer’s conduct, rather than allowing automatic deregistration without a case-by-case review.
The ruling makes it clear that VAT deregistration must be proportionate and tailored to the individual situation. It reinforces the procedural rights of taxpayers under EU VAT law.
While Member States can adopt measures to secure tax collection and fight fraud, they must still comply with fundamental EU principles — especially the principle of proportionality.
