ECJ says companies can reclaim VAT paid in error
Advocate general rules that tax authorities must repay tax paid following German case
European Union (EU) member states must ensure foreign EU companies that
wrongly pay VAT are able to reclaim the money if mistakes are discovered, a
European Court of Justice advocate general has said.
Eleanor Sharpston has concluded that under EU VAT legislation, a local
company wrongly invoicing for VAT (and then handing it over to their local
government), should try to recover the money under national tax rules. Its
foreign business partner should then sue for the wrongly paid VAT.
But, importantly, if this solution was blocked for legal reasons not linked
to the merits of the foreign company’s case, Sharpston said EU member states
should establish ‘a means whereby the customer who has borne the burden of the
amount invoiced in error may recover that amount from the tax authorities’.
The ECJ usually adopts its advocate generals’ advice. The case involves
German tobacco company Reemtsma Cigarettenfabriken wrongly paying VAT to an
Italian advertising agency.