The EU system for cross-border VAT claims, that is to say where the VAT was incurred in a Member State where the taxpayer is not established, has undergone radical changes over the last few years.
Since 2010, a streamlined and locally based system has been in place, allowing taxpayers to route all such claims through their Member State’s tax authority. However, despite these improvements, all but the most simple of reclaims may present a challenge, meaning that the effort required to solicit a refund may not be worth making if the level of recovery is small.
The EU system allows for the refund of VAT incurred, so long as the claiming business does not have an establishment in the Member State they are reclaiming VAT from and has not got any requirement to be registered for VAT there.
When will cross-border VAT claims be considered?
Claims will be considered under local VAT recovery regulations and won’t be paid if recovery is ordinarily blocked. For example, entertaining expenses in the UK and generally VAT consumed in making exempt supplies.
All claims must be made online to the claimant’s local tax authority, who will have a dedicated web portal for such cross-border claims. Each claim must include details of what is being claimed for, who supplied it and their VAT ID, invoice details and sometimes a copy of the receipt or invoice. Some supplies will also require further information specific to the supply type.
Reclaims do not have to follow strict quarters, but must be for a period of between three months and a calendar year. A shorter period can be submitted to complete a year. Each reclaim should be for a minimum of €400, or local currency equivalent, if for a period of three months to a calendar year, or €50 if the claim is for a full calendar year or remainder thereof.
All claims for recovery of cross-border VAT must be made, fully completed and with relevant documentation where appropriate, by 30 September following the calendar year for which the claim is being made. Dependent upon the authorities involved, you may be able to amend or delete submitted entries after the deadline has passed, but you will be unable to add additional lines. The tax authority from whom the claim is being sought has four months from the date of receipt to either approve or reject the claim, or to ask further questions. Where additional information is sought, it has a further two months to reach a decision. In any case, a decision must be notified within eight months of the application being received. An appeals process exists for any claims or portions of claims that an authority rejects. This process varies between Member States.
Outside the EU, it may be possible to recover VAT incurred in foreign territories, but as these are not part of a harmonised system each territory has its own rules and regulations that would need to be followed.