The Dutch municipality overpaid VAT from 2012-2016 due to not deducting on certain purchases and underestimating its pro-rata calculation. In 2017, it corrected its accounts and claimed a VAT refund with interest. However, the interest was not calculated retroactively from the date of tax payment. The court stated that if a member state levies tax in breach of EU law, the taxpayer should be compensated with interest for the entire time they were without the funds. The tax authority did not breach EU law when collecting VAT based on a return where the taxpayer did not exercise their right to deduct. If the taxpayer’s failure to exercise the right to deduct was due to an error, it is not considered a breach of EU law. Tax levied in breach of EU law are amounts collected due to national legislation incompatible with EU law or a requirement from the tax authority. In this case, there is no indication that the original settlement resulted from a requirement on the part of the tax authority.
Source Pawel Mikula
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