ECJ Rules VAT Refund Processing for Non-EU Buyers is Taxable Service, Includes VAT in Price

• The European Court of Justice ruled that processing VAT refunds for buyers not residing in the EU is subject to VAT.
• The agreed price for this service includes VAT.
• A company sold goods to non-EU buyers who exported them the same day.
• The company refunded the VAT amount shown on the invoice to the buyers and charged a processing fee of 15 percent of the refunded VAT.
• The company declared these fees as exempt from VAT in their tax returns.
• The tax authority rejected the exemption and questioned the service’s classification as ancillary to export.
• The court decided the VAT refund processing is an independent service subject to VAT, not exempt under the VAT Directive.
• The principle of legitimate expectation does not prevent the tax authority from applying VAT retroactively if they previously accepted the service as exempt without informing about changes in national law.
• Articles 73 and 78 of the VAT Directive oppose the tax authority’s practice of considering processing fees as net amounts without VAT when the supplier viewed the service as exempt and cannot recover VAT from buyers.

Source: blogs.pwc.de

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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