Directive 2008/9/EC lays down detailed rules for the refund of value added tax, provided for in Directive 2006/112/EC, to taxable persons not established in the Member State of refund but in another Member State. These allow one month to provide missing information for an incomplete VAT refund application. But what if this happens only later on, during an appeal process? The European Court of Justice ruled on such a case on 16 May 2024, and we take a look at it in this article.
Consequences of incomplete VAT refund application
If the Hungarian tax authority is unable to make a well-founded decision based on information available to it regarding a VAT refund application submitted by a taxable person not established in Hungary, it can request additional information or documents to fill in the gaps. The deadline for providing this information is one month.
If the applicant fails to provide any information despite being requested to do so by the tax authority, they fail to meet this obligation. For lack of such information, the VAT refund application cannot be assessed, and the tax authority will terminate the VAT refund procedure.
In this case the applicant can appeal, but in the procedure initiated based on an appeal, the applicant may not refer to new facts or evidence which they were aware of before the first-instance decision – in the case of an inspection, before the expiry of the deadline for submitting comments – but did not present them or refer to them despite being called upon to do so by the tax authority.
Favourable decision regarding deadline for providing missing information
A company established in a Member State of the European Union submitted a VAT refund application to the Hungarian tax authority. The tax authority could not make a meaningful decision based on the information available to it, so it asked the company to provide some more information. The tax authority set a deadline of one month for doing so, as stipulated in the VAT Act.
The company did not send the documents to the tax authority by the deadline as required for the assessment of the application, so the tax authority terminated the procedure. The company appealed against the decision, and in doing so provided the tax authority with the documents it had previously asked for in the request for information.
The appeal was dismissed by the second-instance authority given that the applicant had referred to evidence that was already available to it before the first-instance decision, but which it had not produced when requested to do so by the authority.
The company subsequently filed an action with the Metropolitan High Court because in its view, the requirement that it cannot refer to new facts and evidence already in its possession in the course of an appeal constitutes a substantive restriction of the right of appeal, and in its opinion this does not apply in the VAT refund procedure. In those circumstances, the Metropolitan High Court decided to stay the proceedings and to refer the certain questions to the Court of Justice for a preliminary ruling.
Court of Justice judgment (C-746/22)
The Court found that it is contrary to the principles of VAT neutrality and effectiveness if national legislation prohibits a taxable person submitting an application from providing information requested by the first-instance authority for the purposes of assessing the VAT refund application during any appeal to the second-instance authority, since the one-month deadline is not a peremptory time limit.
Generally speaking, where can a VAT refund application be submitted and until when?
For Member States of the European Union, a VAT refund application may be submitted in the Member State of establishment by 30 September of the year following the refund period.
We recommend that taxpayers established in Hungary and in EU Member States should abide by this deadline, and review the local regulations of each Member State regarding applications and the required documents to ensure that VAT refund procedures receive a positive outcome.
We are happy to help with submitting foreign VAT refund applications and the subsequent procedure for both domestic and foreign applications, and we are happy to provide further information on the detailed rules. Please do not hesitate to contact our VAT experts.
