The European Court of Justice ruled in two recent judgments that the VAT deduction respectively the VAT refund in certain cases is still possible, even if the period to exercise the right to deduct or to submit the request for refund has expired.
The 'Volkswagen' judgment of March 21, 2018 concerned goods purchased by Volkswagen Germany between 2004 and 2010 in Slovakia for which in first instance no VAT was charged. In 2010, the Slovak supplier determined that this should have been done and the VAT was still charged. Volkswagen submitted a request for refund to the Slovak tax authorities in 2011. This refund request was (partially) rejected because the legal deadline for the refund had expired for part of the invoices.
In the 'Biosafe' judgment of April 12, 2018, Biosafe, a Portuguese supplier, sold goods between 2008 and 2010 to another Portuguese company and had charged a reduced VAT rate on its invoices. Afterwards, this turned out to be incorrect and the Portuguese tax authorities claimed the difference from Biosafe. Biosafe wanted to charge this amount to its customer but this last one refused to pay because the period for exercising the right to deduct had expired.
In both cases, VAT was thus charged too late by the supplier, making it impossible for the buyer to recuperate the VAT.
The Court of Justice’s judgement
In both cases, the Court ruled that ‘it was objectively impossible for the buyer to exercise the right to a refund / right of deduction earlier on the basis of the invoices originally issued, since [...] he did not have documents correcting the original invoices nor did he know that VAT had to be paid or that an extra amount was due '.
The Court emphasizes that:
- the right to deduct / the right to a refund is a fundamental principle which guarantees the neutrality of VAT between VAT taxpayers;
- the exercise of the right to deduct / the right to a refund depends on the fulfillment of material and formal conditions;
- having a valid invoice is one of the formal conditions;
- it is not a problem that the exercise of the VAT deduction respectively refund is subject to an expiration period in order to guarantee legal certainty.
Since in the present case it is only after the expiry period that the customers were aware of the (additional) VAT amount due, they could only exercise their right to deduct / refund at that moment.
On the basis of these judgments, it must therefore also be possible in Belgium to exercise the right to deduct VAT or the right to request a VAT refund after the expiration period in case the material and formal conditions are only fulfilled after this period.