European VAT

Input VAT Recovery and Time Limits

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The CJEU (Court of Justice of the European Union) judgement in Volkswagen AG (C-533/16) confirmed that when VAT is charged by a supplier to a customer – several years after the supply took place – Member States cannot deny a VAT refund to that customer solely based on the expiry of a time limit running from the date of the supply.

In this specific case, Slovakian companies that supplied car light moulds to Volkswagen did not charge VAT to the German automotive manufacturer, as they had incorrectly considered their supplies to be VAT exempt. Subsequently, the suppliers invoiced VAT on the supplies for a number of years, collected this VAT from VW, and paid it to the Slovakian tax authorities.

Volkswagen was not established in Slovakia, therefore, submitted an 8th Directive claim for this VAT. This claim is for traders that are not VAT registered, or established in a Member State, and are seeking to recover VAT. The Slovakian tax authorities had a five-year time limit for VAT recovery, from the date of the initial supply. Therefore, Volkswagen’s claims for VAT recovery on invoices relating to supplies, which took place more than 5 years earlier, was disallowed.

Nevertheless, the CJEU found that when a taxpayer has not been invoiced and has not paid VAT arising on a supply, VAT recovery cannot be denied. This is simply due to a time limit from the date of supply, which had expired before the refund claim was submitted.

Do note the judgment, in this case, was based on a specific pattern. Businesses which incur foreign VAT should pay close attention to the relevant time limits for submitting refund claims.

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