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VAT case law : VAT deduction by non-established taxpayers

A recent decision Nr. 466004 of the French Council of State confirms the primacy of substantive requirements over formal requirements for the deduction of input VAT under common law conditions.

Case summary / Eaton Industries LP :

The company established in the UK and VAT registered in France was buying locally goods from the French subsidiary and selling these goods outside the EU. The purchase invoices issued by the French subsidiary were mentioning the VAT number of the UK company, but the name of its Swiss branch. The sales invoices of the UK company were exempt of French VAT for reasons of onward exportations. The resulted VAT credit of 2,4M € relates to the period from 01/03/2017 until 31/03/2018. The French supreme administrative court confirms in its decision of 13/02/2024 the right of the UK company to claim the VAT credit.

This case law nevertheless raises the importance of the accurate wording of invoices issued between entities of an international group for avoiding any dispute about the company entitled to deduction and related delays in reimbursement of VAT credits.

The question about the mechanism of VAT recovery in absence of the collected VAT was clarified in the previous instance. A foreign company registered for VAT in France can declare the input VAT in its periodic returns without claiming it under the 8th/13th EU Directives.

The harmonisation of this rule within the EU seems important to guarantee eligible companies the neutrality of value added tax. Indeed, the retroactivity of foreign VAT reclaim  being generally of less than one year, there is a big  risk of losing the VAT recovery right if its local deduction is refused.

Find here the related case law :

BtoBnice is accompanying international companies in VAT registration, management of their mandatory declarations and VAT reclaim.

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