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VAT: Commission refers the UK to the Court and launches infringement proceedings against Spain concerning the refund of VAT to non established taxable persons

European Commission - IP/08/141   31/01/2008

Other available languages: FR DE ES

IP/08/141

Brussels, 31 January 2008

VAT: Commission refers the UK to the Court and launches infringement proceedings against Spain concerning the refund of VAT to non established taxable persons

The European Commission has decided to refer the UK to the European Court of Justice following its refusal to amend its legislation concerning the refund of VAT borne by taxable persons not established in the EU. It has also requested Spain to change its administrative practice concerning the refund of VAT to taxable persons established in a Member State of the Community other than Spain. This request takes the form of a reasoned opinion (second step of the infringement procedure provided for in Article 226 of the EC Treaty). If the administrative practice is not amended within two months in order to comply with the reasoned opinion, the Commission may decide to refer the matter to the European Court of Justice.

United Kingdom: recovery of VAT borne by taxable persons not established in the EU

In December 2004 the United Kingdom amended its domestic VAT legislation transposing the 13th VAT Directive. That Directive lays down the arrangements for the refund of VAT to taxable persons not established in the territory of the Community.

As a result of the amendment, a taxable person established outside the Community is denied the right to recover VAT paid or due in the UK on goods or services in so far as they are used for the purpose of insurance or financial transactions supplied to customers established outside the EU. By contrast, a taxable person established in the UK is entitled, under UK domestic legislation, to recover VAT in such cases.

The Commission, however, considers that the 13th VAT Directive, interpreted in connection with the relevant Community legislation, must be understood as allowing taxable persons established outside the Community to recover VAT borne in the UK on goods or services acquired and used for the purpose of insurance or financial transactions supplied to customers established outside the EU.

The UK government has not amended its legislation following the reasoned opinion sent to it by the Commission on 29 June 2007 (see IP/07/1004). In view of this stance, the Commission has decided to refer the case to the European Court of Justice.

Spain: refund of VAT to taxable persons established in a Member State of the Community other than Spain

A taxable person established in the Community, who is charged VAT in a Member State other than that where he is established, is entitled to recover that VAT according to the 8th VAT Directive, which provides that:

  • (i) the taxable person is entitled to claim the refund of the VAT from the tax authorities of the Member State where it was charged;
  • (ii) the refund must be made within six months of the date when the application, accompanied by all the relevant documents, was submitted to the competent authority.

The aforementioned provisions of the 8th VAT Directive have been transposed into Spanish law. However, the Commission (after receiving numerous complaints and seeking information from the Spanish authorities by means of a letter of formal notice) has reached the conclusion that refunds to taxable persons not established in Spain are taking in a large number of cases much longer than the prescribed period.

It is settled case-law that, by disregarding the six-month time-limit for the refund of VAT to non established taxable persons, a Member State is in breach of its obligations under the 8th VAT Directive. Therefore, the Commission has formally requested Spain to change its administrative practice in this field by means of a reasoned opinion.

The Commission's reference numbers are 2005/4756 (UK) and 2005/4918 (Spain).
For the press releases issued on infringement procedures in the taxation or customs area see:

http://ec.europa.eu/taxation_customs/common/infringements/infringement_cases/index_en.htm
For the latest general information on infringement measures against Member States see:

http://ec.europa.eu/community_law/index_en.htm


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