No VAT refund where supply of services for consideration is not established

• The Court of Appeal of ’s-Hertogenbosch ruled that a company was not entitled to a VAT refund because the documentation submitted did not demonstrate the necessary taxable transaction.
• The evidence did not sufficiently establish that services had been supplied for consideration. A VAT-relevant service requires a sufficiently direct relationship between the service supplied and the remuneration received.
• The judgment emphasizes the importance of supporting documentation. Businesses claiming VAT treatment based on supplies of services should be able to demonstrate the underlying legal relationship, the services actually performed and the corresponding consideration.

Extended article

The Court of Appeal of ’s-Hertogenbosch has rejected a company’s claim for a VAT refund because the company failed to demonstrate that services had been supplied for consideration.

The dispute concerned a fundamental requirement of the VAT system: the existence of a taxable transaction. It is not sufficient that activities have taken place or that amounts have been paid. For a service to constitute a transaction for consideration, there must be a sufficient connection between the service supplied and the remuneration received.

Based on the documentation presented by the taxpayer, the Court concluded that this requirement had not been demonstrated.

Evidence of the underlying transaction is essential

The judgment underlines the importance of looking beyond invoices, payments or accounting entries in isolation.

For VAT purposes, businesses should be able to demonstrate the economic and contractual reality underlying a transaction. Relevant evidence may need to establish the identity of the parties, the nature of the services, the respective obligations of the parties and the connection between the service and the payment.

Where such evidence does not establish a service supplied for consideration, the VAT consequences claimed by the taxpayer may not follow.

The judgment therefore provides another reminder that VAT follows the actual underlying transaction. Documentation should not merely record payments but should support the existence and nature of the transaction to which the claimed VAT treatment relates.