Court of Justice

In GE Auto Service Leasing GMBH (C-294/20), the German taxpayer submitted an ‘Eighth Directive’ VAT reclaim to the Spanish tax authority. The Spanish tax authority twice requested that the taxpayer provide the original invoices and more detail of the nature of its business in Spain and the use to which the relevant goods and services were put. The taxpayer replied some months later saying that it still wished to pursue its refund request but that it could not provide the original invoices at that time.

Some further months later, the Spanish tax authority rejected the refund requests and almost at the same time, the taxpayer responded to the tax authority’s request for details of its business in Spain. The taxpayer then appealed against the refund refusal and provided some, but not all, of the invoices requested.

The Spanish tax authority then sent the taxpayer a further request for details to prove its entitlement to a refund. Specifically, the taxpayer was asked to provide the contracts and the invoices issued, a certificate of status from the German tax authority, as well as such as certain details about the tax rate to which its activity was subject and any partial exemption method. The taxpayer did not meet this later request and some months later the Spanish tax authority rejected the taxpayer’s appeal for reconsideration and confirmed its refusal of the refund on the basis that the taxpayer had not provided the requested information. The tax authority explained that it needed to know, among other things, whether the finance lease contracts of the taxpayer included an option to purchase goods and where the taxpayer’s customers were based.

The taxpayer made a claim before the Economic-Administrative Court and provided invoices, finance leasing contracts, VAT declarations as well as a certificate of status from the German tax authority. Although the Economic-Administrative Court rejected the claim on the ground that the relevant evidence should have been provided to the tax authority, the Spanish Supreme Court said that the administrative court should reconsider the claim in the light of all evidence provided by the taxpayer.

The CJEU was however asked whether a taxpayer can be denied a VAT refund when the taxpayer has not submitted to the relevant tax authority the documents and information required by the Eighth Directive in the timeframe required.

The Court noted that while the right to a VAT refund, like the right to deduction, constitutes a fundamental principle of the VAT system, a taxable person can only benefit from the VAT refund if it complies with the obligations to provide information and original documentation to prove its entitlement. The principle of legal certainty required that a taxpayer could not be allowed to submit a request for a VAT refund without any time limitation and noted that the Spanish tax authority had repeatedly asked for the required information to prove the taxpayer’s entitlement. It was however for the referring court to verify that the national rules implementing the Eighth

Directive were no less favourable that the national rules governing VAT recovery by taxpayers established in Spain.

The Court noted that the taxpayer had been given adequate time by the tax authority to respond to its requests but did not regard the fact that the taxpayer had only produced the requested information and documents when the court proceedings had begun as abusive.

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DLA Piper comment:

Any business seeking a VAT reclaim must ensure that they submit their VAT reclaim together with all supporting information/documents to tax authorities within the strict time limits provided. They should also ensure that they promptly respond to any tax authorities request for further information. Businesses which fail to do so and instead seek to substantiate their claim at the appeal stage are at risk of their claims not being considered.

We anticipate that EU tax authorities may now seek to defend claims by businesses who have failed to provide their supporting information, but seek to appeal.