The European Court of Justice (ECJ) ruled on May 12 that refunds resulting from adjustments to the amount of value-added tax (VAT) that a taxpayer owes must be paid with interest when not paid within a reasonable period of time.
The case was before the ECJ on a request for a preliminary ruling referred by an Austrian court, which noted that Austrian tax law does not include rules on the application of interest on VAT credits. The ECJ considered whether, in the absence of such national rules, relevant EU law requires payment of interest for late refunds of excess VAT.
The ECJ concluded that while member states have some leeway in interpreting and applying the EU VAT Directive, they cannot undermine the principle of “fiscal neutrality” by not enabling a taxpayer to recover credits arising from the payment of excess VAT. Among other things, the ECJ said fiscal neutrality in this respect “implies that the refund is made within a reasonable period of time.”
The ECJ explained that if the refund of excess VAT is not made in a reasonable period time and the taxpayer is not entitled to interest, then the taxpayer is negatively affected, undermining the principle of fiscal neutrality.
However, the ECJ stated that the EU VAT Directive does not specify conditions for interest on late refunds, i.e., the rate to be paid and the date from which to pay the interest. These conditions are left to the member states. As Austrian law has no such provisions, the ECJ referred the case back to the Austrian court to determine whether and how it can give effect to the EU law.
Be the first to comment