European Commission Launches Review of VAT Refund Procedures

On 15th February, 2018, the European Commission launched a review of VAT refund procedures for businesses in the 28 EU Member States, to assess if they are compliant with current EU law and CJEU case law.

The review will run for eight months, during which time the Commission will scrutinise the tax provisions in each Member State to make sure the refund procedures in place enable businesses to quickly and easily recover VAT credits both in their own country and other EU countries.

The study will look at the length of time necessary to finalise refund procedures in each country as well as any unwarranted burdens in the system that may create financial risks for business.  Depending on the severity of cases of non-compliance, the Commission may initiate infringement proceedings against Member States for breaking the rules.

The area of VAT refunds is being looked at because in some EU Member States, these are received by businesses as “standard” on a monthly basis. However, the refund processes in some other EU Member States have previously involved a business waiting up to 21 months just to submit a claim for VAT and then up to another 12 months (or longer in some cases) for the money to be repaid.  This inconsistency in approach causes cash flow and administrative burdens for business which is something the Commission’s plan for a Single VAT Area is aiming to reduce, especially for micro-enterprises and SMEs.

A link to the European Commission’s press release can be found here