ECJ finds interest payable where VAT credit incorrectly refused

Sun 17th Nov 2013

The European Court of Justice (ECJ) has this month ruled that member states may not lawfully withhold interest due on VAT credits or refunds.

Romanian company seeks VAT credit interest

The case concerned a Romanian company.  The local tax authorities offset a VAT credit they were due back through the Romanian VAT registration.  They offset it against an outstanding amount due against new tax assessments raised, and included penalty interest.  When this assessment was withdrawn as incorrect, the Romanian company sued for interest due on the original VAT credit – this was based on interest due from 45 days after the submission of the VAT credit claim.

The Romanian company then won its case at the court of Appeal.  The Romanian Tax office continued to contend that since it had correctly processed the original claim within 45 days, no late interest was due. The case was therefore referred to the ECJ, which is the highest court of appeal on EU-related legislation.  It reviewed the position in terms of the EU VAT Directive.

ECJ holds that EU member states cannot block VAT interest

The ECJ has now ruled that tax authorities still have to pay any late interest, and they cannot rely on other delaying tactics or procedures where the subsequently prove to have no grounding.