Update on foreign VAT refund claims
On 2 May 2019, the Court of Justice of the European Union released a favorable decision for taxable persons claiming back VAT to a Member State where they are not established1. The Court ruled that a late response to a request of information from the VAT authorities of that Member State does not affect the rights of the taxable persons to regularize their situation with the competent national authorities. Moreover, the EU Commission also lodged an infringement action against Germany considering that its administrative practice violates the right of foreign taxable persons to a VAT refund. Concerned taxable persons should consider actions they may undertake to regularize or protect their situation.
Taxable persons often incur VAT in Member States where they have no VAT establishment. Typically, this concerns costs such as hotels, restaurants, accommodation, cabs and other transports, assistance to seminars or trainings, participations to fairs and similar events, etc.
Based on the Directive 2008/09/EC, taxable persons could claim back this VAT via the website of their national VAT authorities (“eTVA” in Luxembourg). They must file the claim before 30 September of the year following the refund period, i.e. the period when they have incurred the VAT2.
Article 20 (1) of the Directive allows the VAT authorities of the Member State to which the taxable person claims back VAT, to ask additional information. The VAT authorities could ask information from the taxable person or from third parties including the competent authorities of its Member State of establishment. Article 20 (2) of the Directive foresees a delay to answer of one month as of the date of receipt of the request.
In the case at hand, a German company incurred French VAT on some of its costs and filed a refund claim. The company did not answer within the one-month delay to a request of the French VAT authorities, which denied the refund. However, the company brought the case to the French jurisdictions, which lodged the case with the Court of Justice of the European Union.
The Court has decided that the one-month delay of Article 20 (2) of the Directive does not create a mandatory time limit for the taxable person and that non-compliance with this delay does not result in the automatic forfeiture of the right to a refund of VAT. In contrast, we should recall that the above-mentioned deadline of 30 September is a mandatory time limit and that non-compliance with this results in the forfeiture of the right to a refund of VAT.
We should also mention that the EU Commission lodged an infringement action against Germany on 24 January 2019. Specifically, Germany refuses ─ in some cases ─ to refund VAT without asking for additional information from the foreign taxable person where it considers that the information provided by the foreign taxable person is insufficient for coming to a decision on the refund claim. The EU Commission considers that this practice violates the right of foreign taxable persons to a VAT refund. We could expect the decision of the Court during the course of next year, possibly before the next summer holidays.
The decision of the Court offers an opportunity for concerned taxable persons to consider the relevant actions that they may undertake with the competent national authorities. The infringement action against Germany may also offer opportunities. Concerned taxable persons should follow-up the outcome of this case and should prepare potentially necessary protective actions.
1 C-133/18, Sea Chef Cruise Services GmbH
2 Further information regarding this procedure can be found in the Deloitte “European VAT refund guide 2018” (https://www2.deloitte.com/global/en/pages/tax/articles/vat-refund-guide.html)