A UK VAT registered business is able to recover VAT it incurs in the EU. However, this is not done on the UK VAT return, but rather by a mechanism known as an “13th Directive” claim (Thirteenth Council Directive 86/560/EEC of 17 November 1986).
Via this procedure a UK business reclaims overseas VAT from the tax authority in the country it was incurred. This is different to the Retail Export Scheme.
Who can claim?
Any UK business which has a certificate of status and meets the following conditions:
The conditions
- the UK business has not undertaken any business which would require it to register for VAT in the country in which the claim relates
- a business must not have any fixed establishment, seat of economic activity, place of business or other residence (place of belonging) in the country of refund
- a VAT invoice is obtained
- the VAT was incurred for goods or services which give rise to the right of deduction (see below)
VAT not claimable
The following rules must be applied to a claim, and some claims are specifically refused:
Partial exemption
A business must apply the appropriate recovery rate for purchases using its partial exemption method.
Non-business expenses
Expenditure incurred in another country which relates to non-business activities is not claimable under the refund scheme.
Non-refundable supplies
VAT on the following supplies cannot be claimed
- incorrectly invoiced
- goods purchased which are subsequently exported
Further, the “usual” rules that apply to a UK VAT claim must be followed.
I have summarised what VAT is not claimable in each EU Member State here.
Minimum claim
Each country has a set minimum claim, but it is mainly around the €50 pa figure.
Time limit
Deadlines to request a refund are not standard and vary country to country. However, they are mainly 30 June or 30 September, and the claims are on a calendar year basis year (it is possible to make quarterly claims which have different deadlines).
How to make a claim
Claimants must send an application to the national tax authority in the country where the VAT was incurred.
Unfortunately, since Brexit, the claims procedure is more complex. There is no longer a single portal and the procedure to request refunds is not standard across the EU. A business needs to research the country specific information on VAT using links provided on the EU Taxation site and a claim for each country must be sent using the procedure set out by that country.
Full rules and procedure to follow can be found in Directive 86/560/EEC
Please note: Some countries require that a claim to be filed by a tax representative authorised by the local tax administration.
Time limits for the country of refund to process an application
The country of refund must notify the applicant of its decision to approve or refuse the application within four months of the date they first received the application.
Payment method
The refund will be paid in the country of refund or, at the applicant’s request, in any Member State. In the latter case, any bank charges for the transfer will be deducted by the country of refund from the amount to be paid to the applicant.
Penalties
All countries take a very serious view of incorrect or false applications. Refunds claimed incorrectly on the basis of incorrect or false information can be recovered and penalties and interest may be imposed, and further refund applications suspended.
Claims refused
If the country of refund refuses an application fully or partly it must notify a claimant of the reasons for refusal.
If this happens an appeal against the decision may be made using the appeals procedure of that country.
Interest on delayed applications
Interest may be payable by the country of refund if payment is made after the deadline.
Claims on UK VAT returns
VAT incurred overseas must not be claimed on a UK VAT return. If it is, it is liable to an assessment, penalties and interest levied in the UK by HMRC.