CJEU on possibility of refunding VAT incorrectly invoiced and paid
In its judgment, the Court of Justice of the European Union (CJEU) held that VAT invoiced and paid incorrectly/without justification can only be refunded to the supply recipient if the VAT cannot be recovered from the supplier.
The supplier issued incorrect tax documents for the sale of goods, including German VAT, which they paid and the customer subsequently claimed. However, the tax authority found that the goods were in Italy at the time of the sale, therefore German VAT should not have been stated in the tax documents. On these grounds, the tax administrator denied the customer's claim to deduct VAT.
Insolvency proceedings were subsequently initiated against the supplier. The insolvency administrator corrected the tax documents relating to the supply of the goods so that they did not state the relevant amount of VAT. On that basis, the German tax administrator refunded the supplier the relevant VAT, which was then included in the assets in the insolvency proceedings. The customer therefore requested the German tax authorities to refund the incorrectly invoiced and paid VAT.
The CJEU clarified that the possibility for the purchaser or supply recipient to claim a refund of incorrectly invoiced and paid VAT directly from the tax administration is an exception and only permissible if it is impossible or excessively difficult to recover the VAT from the supplier or supply provider. This presupposes that the purchaser or supply recipient has exhausted all other possibilities to recover their claims.
In the present case, the supplier not yet registered in Italy had the option to register there for VAT purposes. Consequently, they could issue invoices including Italian VAT to the customer, enabling them to claim the VAT deduction in Italy. However, the insolvency administrator refused to issue tax documents containing Italian VAT.
According to the CJEU, in order not to bear the VAT, the customer could have brought civil action against the insolvency administrator in charge of the liquidation of the supplier, demanding them to issue an invoice containing Italian VAT. However, the customer did not do so.
In conclusion, the CJEU stated that the customer cannot claim the refund of VAT directly from the tax authority if the tax authority has already refunded the VAT to the supplier. The fact that the supplier is in liquidation is not relevant in the present case.