CJEU: tax administrator may also refund wrongly charged VAT
The Court of Justice of the European Union (CJEU) ruled in Case C-453/22 that a taxpayer has the right to demand from a tax administrator a refund of VAT that a supplier has wrongly charged to the taxpayer and will not return due to the statute of limitations.
A taxpayer – a German farmer – purchased timber from its subcontractors and then supplied it to its customers. Invoices received by the farmer indicated the basic tax rate he claimed on input. He then applied output VAT at a reduced rate.
A German court ruled that a reduced rate should also have been applied to the received invoices and assessed additional VAT plus interest, as the farmer had wrongly claimed a higher tax on input. However, the subcontractors refused to correct the invoices and refund the wrongly charged VAT on the grounds that the limitation period had already expired. The taxpayer then turned to the tax administrator, demanding the additionally assessed VAT and interest to be waived.
According to the CJEU, a claim to refund wrongly paid VAT can be subsumed under a right to recover amounts paid but not due (undue enrichment). A penalty of a full denial of the right to a refund of VAT wrongly charged and paid but not due appears disproportionate where no tax evasion or harm to the budget of the member state has been ascertained. As it would be very difficult for the taxpayer to obtain the wrongly charged VAT from subcontractors, the taxpayer indeed has the right to demand the refund directly from the tax administrator.
The CJEU also commented on the risk of a double refund of VAT, which, in its opinion, was non-existent. If the subcontractors subsequently wanted to correct the tax documents, they would have no other intention than to obtain a tax advantage; in such a case, the subsequent refund of the VAT to the subcontractors would be precluded.