Cross-border VAT refunds for EU businesses
Most businesses who incur VAT in connection with their activities in an EU country where they do not habitually supply goods/services (and so are not required to register for VAT) are nevertheless entitled to deduct that VAT (Articles 170-171 a VAT Directive).
This ‘deduction’ is made by means of a refund from the EU country where they paid the VAT.
How to get a VAT refund
To avoid potential language problems, claimants send an electronic refund claim to their own national tax authorities – who then forward it to the EU country where the claimant incurred the VAT (once they have confirmed the claimant’s identity and VAT identification number, and the validity of their claim).
If the tax authorities in the EU country where they incurred the VAT are late in making the refund, claimants are paid interest.
Who can get a VAT refund?
To qualify for a refund under this procedure, during the refund period a business must NOT have:
- been based in the refunding EU country or
- supplied goods or services there – except:
- exempted transport & ancillary services (Articles 144, 146, 148, 149, 151, 153, 159 or 160 VAT Directive) or
- supplies to customers liable for payment of the related VAT under the reverse-charge mechanism (Articles 194-197 or 199 VAT Directive).
The claimant’s home EU country will not forward the claim to the refunding EU country if the claimant:
- is not a taxable person for VAT purposes
- only makes exempt supplies without right of deduction
- is covered by the special scheme for small businesses
- is covered by the flat-rate scheme for farmers.
VAT refunds for non-EU businesses
Businesses not based in the European Union who incur VAT in connection with their activities in an EU country where they do not habitually supply goods/services (and so are not required to register for VAT) are entitled to deduct that VAT.
This ‘deduction’ is made by means of a refund from the EU country where they paid the VAT.
How to get a VAT refund
Claimants must send an application to the national tax authorities in the EU country where they incurred the VAT.
Who can get a VAT refund?
To qualify for a refund under this procedure (see Article 1 Directive 86/560/EEC), during the refund period a business must NOT have:
- been based in any EU country or territory or
- supplied goods or services in the country where they incurred the VAT – except:
- exempted transport & ancillary services (Articles 144, 146, 148, 149, 151, 153, 159 or 160 VAT Directive) or
- services to customers solely liable for payment of the related VAT under the reverse-charge mechanism (Articles 194, 196 or 199 VAT Directive).
EU country-specific conditions
Any EU country may:
- refuse to refund VAT in this way if the claimant’s country/territory does not grant reciprocal refund rights for VAT or similar to businesses based in that EU country.
- impose restrictions on the type of expenditure qualifying for refunds
- insist that the claimant appoint a tax representative
VAT refunds for non-EU tourists
EU retailers can provide a VAT refund for goods sold to non-EU tourists when exporting them. Specifically this covers:
Tourists whose permanent address or habitual residence (as stated in their passport or other recognized identity document) is not in the EU.
EU nationals living outside the EU (who can prove this with a residence permit or similar).
Conditions
The tourists must provide proof of residence (e.g. non-EU passport or residence permit)
The goods must be taken out of the EU within 3 months of being bought. The tourist must provide a stamped VAT refund document proving this.
The value of the goods bought must be above a certain minimum (set by each EU country).
Retailers can either refund the VAT directly or use an intermediary. One or other of them may charge a fee, deductible from the refunded VAT amount.
Note that VAT refund rules vary in each EU country. For further information please check: EU country specific information on VAT.