A manufacturing business involved in tooling production approached us. They asked us to investigate a EU Refund Directive VAT reclaim they had made over the past few years.
They had previously filed a VAT reclaim in Italy during the years 2005, 2009, 2010, 2011 and 2012. However they had not received the claims themselves, nor any decisions from the Italian authorities. As a result, the business’ potential refunds ranged from 20,000 to 150,000 EUR.
Overseas tax authorities
In our experience the Italian authorities are one of the strictest tax authorities in Europe. Usually when they process VAT refund claims, they will query the claim and allow 30 days for a company to respond with supporting documentation/information. They then close the claim and deny a refund if their questions are not answered. This short time frame to respond puts pressure on a business. The recovery of the VAT becomes a much more intensive project.
How we helped
We worked systematically to investigate each individual claim that the client had made. We determined the current position and what had happened in the past. As a result, we confirmed that the Italian tax authorities queried at the time of the claim and wrote to the client. However, for various reasons the client did not respond to those letters. Subsequently the tax authority closed the cases for each year. This had led to hundreds of thousands of euros of VAT unclaimed by the client.
We managed to get all the cases from 2009-2012 re-opened. We demonstrated exactly what happened and how technically the claims were still “alive”. Within 6 months the Italian authorities fully refunded the 2012 claim worth EUR 50,000 and significant steps had been made to receiving the others as well.
Going forward we are helping the client by analysing all future claims ahead of submission, so there is validation that the claim is correct. We are also managing the submission process which is relieving the client of an administrative burden whilst at the same time giving increased efficiency.
Need more information? Contact our VAT experts.