Germany curtails non-resident VAT recovery following tax case

Mon 9th Jun 2014

The German Ministry of Finance has acted curtail an extended VAT recovery option that was thrown open to foreign companies.

German Federal Tax Court helps VAT recovery

The tax ruling in August 2013 opened up the option for non-resident businesses to apply for repayment of German VAT incurred via the regular German VAT return even if a German VAT Reclaim under the 8th VAT Directive should have been used. The case was complicated by the appellant incorrectly having an open German VAT registration.

Federal Ministry of Finance curtails VAT

To prevent an overload of VAT recovery through the German VAT return system, the Ministry of Finance has now issued strict criteria for the application of the above allowance. In essence, companies can only revert to VAT returns if their situation exactly mirrors that of the tax case. In essence, a non-resident may only use its VAT return to claim German VAT incurred that should be applied for through a VAT reclaim if the tax authorities have incorrectly assessed or ignored a correctly submitted reclaim.

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