Undue VAT : new preliminary ruling from the CJEU
In the judgment of 05/09/2024 (C 83/23), the CJEU introduces a new condition for the direct reimbursement by the tax authorities to the purchaser of goods of the VAT unduly charged and paid by the supplier.
As a reminder : the unduly charged VAT cannot be claimed from the tax authorities by the purchaser of goods or by the beneficiary of services, but only by the supplier. The purchaser or beneficiary must obtain the reimbursement of the undue VAT directly from the supplier. In the event that this reimbursement appears impossible or excessively difficult, in particular due to the liquidation of the supplier, the purchaser or beneficiary may claim the VAT from the tax authorities.
This exception was confirmed in the preliminary ruling of the CJEU of 15/03/2007, in case C-35/05 of Reemtsma Cigarettenfabriken GmbH. The case concerned the Italian VAT which was incorrectly invoiced by the supplier on its marketing services taxable in the country of establishment of the customer (German taxpayer) and therefore not recoverable in Italy under the 8th European Directive, except in circumstances raised by the Court. The condition of impossible VAT reclaim from the supplier was supplemented by the conditions of absence of fraud or abuse committed by taxable persons and of absence of tax revenue loss for the Member State. These last points take origin from the case C-397/21 of HUMDA which was judged by the CJEU on 13/10/2022. The judgement concerned the Hungarian VAT deducted by the taxpayer established in Hungary, under the conditions of common law. The invoiced services related to goods located in Italy and they were therefore subject to the Italian VAT.
The new decision of September 5th deals with a similar case of the German VAT which was erroneously invoiced on the local sale of goods still located in Italy. The deduction of the German VAT made by the established taxable person (H GmbH) under the conditions of common law was rejected by the German tax authorities and no refund could be granted to the claimant in frame of the subsequent appeal, despite the liquidation of the supplier. Indeed, the undue VAT collected by the German tax authorities from the supplier had already been paid back to the supplier’s liquidator. Therefore, a new refund of the same VAT amount to the purchaser would represent a double payment for the tax authorities.
Although this decision may appear contrary to the principle of VAT neutrality, the Court reminds us of the responsibility of taxable persons acquiring goods and services to check the compliance of supplier invoices with the intra-Community VAT rules. In fact, in the last case, the purchaser had not challenged the supplier about the invoiced German VAT and had not requested to reissue the invoices with the Italian VAT, which would represent a higher rate. As a result, the Italian Member State experienced a loss of tax revenue.
Solutions
It is highly important for companies to identify any VAT related errors before settling supplier invoices in order to avoid the adjustment of the wrongly deducted VAT and the refusal of the undue VAT refunds by tax authorities. On the other hand, the correction of invoices will be easier to obtain in real time, from active suppliers. This action will prevent companies from long procedures of undue VAT recovery and from definitive VAT loss. To raise awareness of VAT risks related to place of taxation rules among your accounting teams, BTOBNICE provides the following services:
- cross-border VAT audit
- intra-company VAT training
- operational VAT advice
Contact our VAT expert for obtaining a quote: contact@btobnice.com
