Recovery denied for unduly charged VAT but the tax authorities must reimburse
European UnionA Romanian entity was charged input VAT on the sale of goods that was later requalified as a VAT free transfer of a going concern. Given that the time limit for the seller to correct the relevant invoices had passed, it was impossible or excessively difficult for the Romanian entity to recover the unduly charged VAT directly from them.
The Court was however of the view that Member States must, in light of the principle of neutrality, provide for taxpayers the possibility of adjusting such input VAT when it was incorrectly charged by a person acting in good faith.
The CJEU therefore held that, where the seller can no longer make the relevant adjustment and it is therefore impossible or excessively difficult for the buyer to recover the incorrectly charged input VAT from that seller, the buyer should be able to apply for a reimbursement directly from the tax authorities.
Key takeaway
This follows the Reemsta principle. The judgment provides further support for taxpayers who paid VAT that turned out not to be due to the tax authorities. In many cases, whether this VAT could be recovered was mostly dependent on the (commercial) relationship between the seller and the buyer. The fact that the tax authorities are responsible for making sure that VAT remains neutral , albeit in restricted circumstances, is a welcome confirmation.
