The European Commission has published a study evaluating the current VAT recovery regimes operating in different EU member states. The study, prepared by PwC on behalf of the Commission, highlights areas in which these regimes are inconsistent with EU law and identifies ways in which they could be improved.
Suggestions for improvement include promoting greater understanding of the rules for claiming VAT refunds and reimbursements, reducing language barriers, ensuring that claim verification procedures are proportional, reducing financial risks for claimants generated by the current regimes, and promoting systematic data collection by tax administrations.
The study looks separately at refunds and reimbursements. Refunds are defined as non-domestic repayments of VAT incurred in cross-border supplies. Reimbursements are domestic repayments of deductible input tax incurred in excess of output tax due in the member state in which the taxpayer is registered for VAT.
The main challenges identified were:
lack of detailed and consistent data available within most member states, making comparisons difficult across the EU 28;
limited follow-up between departments within tax administrations; and
difficulties in receiving late payment interest.
Systems used by national administrations are limited in their capacity to extract data at a sufficient level of detail, and most administrations do not have a clear allocation of responsibilities for the collection of VAT refund and VAT reimbursement data between departments. Where refund claims are rejected on grounds that the taxpayer requires a local VAT registration, processes for following up applications for registration are often lacking, which restricts administrations’ ability to ensure correct treatment of all taxable activity in their member state and can add to difficulties in identifying non-compliant taxpayer behaviour.
There is a trend among member states towards taking a significant amount of time to repay reimbursement claims. Delays are often a result of repeated and extensive document requests, and drawn-out claim verification processes. Around a third of businesses who took part in the research reported receiving late payment interest to which they were entitled in fewer than half their VAT refund claims. For VAT reimbursement claims, 33% of respondents stated that tax administrations did not make late interest payments.
The main recommendations for improvements are:
standardised collection and systematic sharing of data on VAT refunds and reimbursements across member states;
improved follow-up processes between departments within national tax administrations, with guidance and support for businesses to clarify the circumstances under which they should become VAT-registered foreign traders; and
increased adherence by member states to the rules on late payment interest for taxpayers.
The Commission says it will examine the results and cooperate with member states to ‘put in place the best strategies and solutions for possible inconsistencies of legislation and for an effective implementation of the law’.
See VAT refunds and reimbursements: A quantitative and qualitative study at bit.ly/2JC7DLD.
The European Commission has published a study evaluating the current VAT recovery regimes operating in different EU member states. The study, prepared by PwC on behalf of the Commission, highlights areas in which these regimes are inconsistent with EU law and identifies ways in which they could be improved.
Suggestions for improvement include promoting greater understanding of the rules for claiming VAT refunds and reimbursements, reducing language barriers, ensuring that claim verification procedures are proportional, reducing financial risks for claimants generated by the current regimes, and promoting systematic data collection by tax administrations.
The study looks separately at refunds and reimbursements. Refunds are defined as non-domestic repayments of VAT incurred in cross-border supplies. Reimbursements are domestic repayments of deductible input tax incurred in excess of output tax due in the member state in which the taxpayer is registered for VAT.
The main challenges identified were:
lack of detailed and consistent data available within most member states, making comparisons difficult across the EU 28;
limited follow-up between departments within tax administrations; and
difficulties in receiving late payment interest.
Systems used by national administrations are limited in their capacity to extract data at a sufficient level of detail, and most administrations do not have a clear allocation of responsibilities for the collection of VAT refund and VAT reimbursement data between departments. Where refund claims are rejected on grounds that the taxpayer requires a local VAT registration, processes for following up applications for registration are often lacking, which restricts administrations’ ability to ensure correct treatment of all taxable activity in their member state and can add to difficulties in identifying non-compliant taxpayer behaviour.
There is a trend among member states towards taking a significant amount of time to repay reimbursement claims. Delays are often a result of repeated and extensive document requests, and drawn-out claim verification processes. Around a third of businesses who took part in the research reported receiving late payment interest to which they were entitled in fewer than half their VAT refund claims. For VAT reimbursement claims, 33% of respondents stated that tax administrations did not make late interest payments.
The main recommendations for improvements are:
standardised collection and systematic sharing of data on VAT refunds and reimbursements across member states;
improved follow-up processes between departments within national tax administrations, with guidance and support for businesses to clarify the circumstances under which they should become VAT-registered foreign traders; and
increased adherence by member states to the rules on late payment interest for taxpayers.
The Commission says it will examine the results and cooperate with member states to ‘put in place the best strategies and solutions for possible inconsistencies of legislation and for an effective implementation of the law’.
See VAT refunds and reimbursements: A quantitative and qualitative study at bit.ly/2JC7DLD.
