Re-invoicing or Cost Reimbursement Without VAT? Supreme Administrative Court Clarifies When a Transaction Is Not a Re-invoice

• Conditions for Re-invoicing: The Supreme Administrative Court clarified that for re-invoicing (reselling a service without a margin) to apply, the service must be purchased in the entity’s name for the benefit of another entity, with a direct link between the service and the payment by that entity. If these conditions are not met, the transaction may not qualify as re-invoicing.
• Reimbursement vs. Re-invoicing: The court distinguished between cost reimbursement and re-invoicing. If costs are incurred for the benefit of the entity that paid them and are simply reimbursed as compensation (not tied to providing a service), they are not subject to VAT. This was illustrated in a case where a former shareholder reimbursed a company for advisory services, which were deemed to be for the company’s benefit, not the shareholder’s.
• Implications for Businesses: This ruling is significant for capital groups that share costs, emphasizing the importance of correctly documenting cost reimbursements. If the service is utilized by another entity, a re-invoice with VAT can be issued; if the service was provided to the entity that incurred the cost, reimbursement should not include VAT. Businesses need to carefully assess service beneficiaries to ensure proper VAT treatment.

Source

• MDDP
• Central database of Administrative Court decisions

Reference to other ECJ Cases

•  ECJ C‑707/18 (Amarasti Land Investment) – Judgment – Intermediary in the provision of services or investment expenditure made for the needs of a business – VATupdate

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