Richard Cornelisse

European VAT Refund

In Tax News, VAT planning on 19/05/2012 at 11:40 am

From Deloitte’s European VAT Refund Guide 2012

(new European VAT refund guide 2013 – Deloitte)

“The EU directive that entered into force on 1 January 2010 (i.e. Directive 2008/09/EC) introduced a new procedure for businesses established and registered for VAT purposes within the EU to request a refund of VAT incurred in other EU member states.

The directive allows EU businesses to submit a refund claim via the internet site of the tax authorities of the country in which the claimant is established (the previous system, known as the 8th VAT Directive system, required claims to be submitted in paper and in the country in which the VAT was incurred).

In addition, new deadlines apply for submitting a claim and for the processing of refunds by the authorities.

As under the previous rules, refund requests will be addressed by the member state of refund, the amount refundable will be determined under the deduction rules of that member state and the payment of the refund will be made directly to the claimant by the member state of refund.

While the new procedure should facilitate and expedite the processing of refund claims, businesses need to be aware of deadlines and issues connected with this new process, making any necessary adjustments to their internal systems.

The 2012 European VAT Refund Guide provides detailed information on the technical and practical aspects of this procedure.

The changes made by Directive 2008/09/EC do not affect refund claims by businesses that are not established or VAT registered in an EU member state; such businesses still recover VAT incurred in EU member states according to the procedure in the 13th VAT Directive.

The 2012 Refund Guide also contains information on this procedure.

EU Businesses (Directive 2008/09/EC)

Making Claims

Minimum amounts

Member states can set the minimum amount that may be recovered under each VAT refund application. The minimum for annual applications, or applications for the final part of a year, is EUR 50, but for interim applications, it is EUR 400. The table shows the current limits in each member state. Items omitted from earlier interim applications usually can be included in later applications filed in the same year.

Time limits

The application period is on a calendar year basis and the application form must be submitted by 30 September of the following year (different due dates may apply for quarterly refunds).

However, applications may relate to a period of less than three months where the period represents the remainder of a calendar year.

Procedure

Filing

As a general rule, the refund application must be submitted electronically through the tax portal of the tax authorities in the country in which the claimant is resident at the latest on 30 September of the calendar year following the refund period. The deadline will not be extended.

IT requirements

All refund claims submitted according to the procedure in Directive 2008/09/EC must be filed electronically. However, the method of filing, certifications, files accepted and other IT requirements vary from country to country.

Supporting documentation

In the first phase of an application, most member states do not require any documentation other than the application form (filed in the country of residence). Once the application has been transferred to the state in which VAT was incurred, that state can request additional documentation, such as invoices (originals or copies), import documents or other supporting documents.

It should be noted, however, that the European Court of Justice recently ruled that, in some cases, a nonresident business should be able to submit duplicate tax invoices where the originals have been lost for reasons beyond its control.

Refunds And Appeals

Another important change introduced by Directive 2008/09/EC is the introduction of fixed time limits for the tax authorities to issue a decision on refund claims.

The member state of refund has four months to decide on the application, starting from the day it confirmed receipt of the refund claim. The term is extended when additional information is requested and the claimant will be required to provide the information within one month.

Once the member state of refund receives the additional information, it has two months to decide on the claim.

If the claimant does not provide the information requested, the member state of refund must decide on the claim within two months after the one-month period expires for the claimant to respond.

The directive also states that when additional information is requested by the member state of refund, it has at least six months to issue its decision on the claim. When additional information is requested (after a first request), the final decision should be made within eight months of receipt of the application.

Once the tax authorities decide to issue a refund, it must be paid within 10 business days after expiration of the above deadlines. If payment of the refund is delayed, the tax authorities will have to pay interest.

Non-EU Businesses (13th Directive)

The rules for non-EU businesses are similar to those for EU businesses, except that:

  • Bulgaria, Cyprus, Czech Republic, Estonia, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Switzerland and the U.K. do not allow claims unless there is a reciprocity agreement or treatment for the recovery of VAT and other turnover taxes with the country in which the non-EU business home is established.
  • U.S. businesses that are not registered in Luxembourg can recover VAT incurred on or after 1 January 1999. For recovery of VAT incurred before this date, Luxembourg requires a reciprocity agreement with the home country of the non-EU business.
  • A fiscal representative (for VAT refund purposes) may need to be appointed in some member states.
  • Non-EU businesses usually must support claims with a certificate of taxable status rather than a certificate of VAT status. This should indicate that the non-EU business is a taxable person for business purposes in its own country. For example, the appropriate U.S. form is IRS 6166.

Additional conditions may apply by individual member states to allow non-EU businesses to recover VAT.”

Access country overviews via Deloitte – European VAT Refund Guide 2012

European Commission’s E-learning Module

  1. VAT Refund Electronic Procedure
  2. E-learning Module By The European Commission (Course On The VAT Directive)
  3. VAT Directive
  1. […] In addition, some businesses may not recover VAT, or may not recover it in full. Typically, this will apply to very small businesses and farmers/fishermen, on whose activities a specific VAT scheme applies, and businesses making supplies that are exempt from VAT. For these businesses VAT represents an additional cost, as these businesses are effectively treated as final consumers. This qualification as end user also applies to private individuals, public bodies and charities which are normally treated as non-businesses.  Refunds may be conditional to reciprocity being granted. Input VAT/GST incurred by US companies for example is Spain is not refundable. (more detail European VAT Refund 2012) […]

  2. […] In addition, some businesses may not recover VAT, or may not recover it in full. Typically, this will apply to very small businesses and farmers/fishermen, on whose activities a specific VAT scheme applies, and businesses making supplies that are exempt from VAT. For these businesses VAT represents an additional cost, as these businesses are effectively treated as final consumers. This qualification as end user also applies to private individuals, public bodies and charities which are normally treated as non-businesses.  Refunds may be conditional to reciprocity being granted. Input VAT/GST incurred by US companies for example is Spain is not refundable. (more detail European VAT Refund 2012) […]

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