In a recent judgement, the Supreme Court has ruled that the limitation period for refunding a VAT credit starts only as from the request for refund by the VAT taxpayer. The case law on this issue was diverging until recently. The Supreme Court has now settled the discussion in favour of the VAT taxpayer.
The theoretical discussion basically evolves around the question as to when the “cause” for the claim for refund is deemed to arise. This can either be the moment when the VAT taxpayer requests a refund of the VAT credit (which it can do in its VAT return) or the moment when the VAT return is filed that generates the VAT credit position (regardless of when the VAT taxpayer requests for a refund of this VAT credit). The limitation period then expires upon the termination of the third calendar year following the year in which the cause of the refund arose. The VAT authorities are of the view that the cause of the refund occurs on the moment of the filing of the VAT return which led to the VAT credit position. The Supreme Court has now ruled in favor of the VAT taxpayer that the “trigger” for starting the limitation period to obtain a refund is the moment when the VAT taxpayer requests for a refund of the VAT credit in its VAT return. This means that in practice there is no time limit for a VAT taxpayer to request a refund as long as the VAT credit position remains in place. If a request for refund would be refused, it is possible to appeal before the end of the third year following the negative decision.
Note that it remains very important that VAT taxpayers timely exercise their right to deduct input VAT (which is usually the cause of the VAT credit position). The deduction in the VAT return should still occur before the end of the third calendar year following the year in which the deductible VAT became due.
VAT taxpayers who are in dispute with the VAT authorities can hence now rely on this decision of the Supreme Court.
For further information, please contact:
Guido De Wit, Partner, Linklaters