New System for reclaiming foreign VAT

Currently, UK and EU businesses can claim back VAT they have incurred in Member States where they are not registered for VAT (nor liable to be registered) by submitting an ‘8th Directive claim’.  From 1 January 2010 the ‘8th Directive’ refund system will be overhauled in the hope that it will become much simpler and quicker for businesses to receive the refunds they are due.

The overhaul reforms the way in which claims are submitted, and introduces strict time limits for Member States to action the claims they receive.

New System

The key features of the new system are as follows and apply to all claims submitted post 1 January 2010:

• Applications are to be submitted electronically via a portal set up by the applicant’s home Member State. 

• The deadline will move to 30 September following the refund period (calendar year), giving 3 extra months for businesses to prepare and submit the claim.

• Original or copy invoices will not be required at the time of submission except for fuel receipts for €250+ (excl. VAT) and for services for €1,000+ (excl. VAT) at the discretion of the refunding Member State.  Where the validity of the claim is in doubt, Member States will have the option of requesting original invoices, irrespective of the invoice value.

• The Member State must notify the applicant of its decision to approve or refuse the application within 4 months of receipt.  The Member State can extend this time limit to 8 months if it requests additional information from the claimant.

•       The refund must be paid to the claimant within 10 days of the 4 or 8 month deadline.

•       Interest is payable to the applicant on late repayments.