The European Commission’s VAT Committee has brought up the possibility of lessees of imported goods deducting VAT paid on the importation, even if they are not the owners of the goods. This issue was previously discussed in 2013, but there was no uniformity among Member States. To qualify for VAT deduction, two essential conditions must be met: the costs incurred must be necessary for the taxable person’s economic activity, and they must be part of the downstream costs. However, this second condition may be difficult to verify as the lessee does not bear the overall costs of the asset. The solution would involve designating the lessor as the debtor of the tax on importation, but this may not be feasible if the lessor cannot obtain a tax refund. The European Commission has asked Member States to comment on this matter, with a view to harmonizing procedures. Some Member States have allowed non-owners to deduct VAT, and the Portuguese Tax Authority has expressed support for this position. Harmonization at the community level is necessary to avoid bureaucracy and a total blocking of tax recovery.
Source Patricia D Sousa Silva
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