VAT refund process for companies with local VAT number: Our 4-step approach

Companies operating in several countries and with a local VAT number generally obtain the refund of VAT on their local expenditure by including those in their local VAT return.

Although this approach is commonplace, it requires a rigorous understanding of the procedures and regulations in order to avoid the obstacles that the local tax authorities will put in your way in an attempt to avoid refunding anything.

Our firm suggests that you adopt a four-phases strategy designed to optimize your VAT refunds abroad.

The first question to consider is whether VAT refunds in the country in question are automatic or whether they have to be requested.

In some EU countries, such as Germany, Ireland and the Netherlands, refunds are processed automatically as soon as the VAT return shows an amount due. However, in other countries such as France and Belgium, the VAT credit is carried forward to the next period unless an explicit request for a refund is made. It is then up to the business to take the necessary steps with the local tax authorities to recover these funds, and the procedures can vary significantly from one country to another.

The time taken to obtain a VAT refund can vary considerably.

In some European countries, where the process is automated, the refund is generally credited to the bank account within a month. However, in countries where a formal application is required, timescales can differ significantly. In Spain, for example, refunds may only be made once a year, with some exceptions. This can be problematic, particularly if the tax authorities decide to carry out an audit before approving the refund.

It is therefore crucial to find out about the specific features of the repayment process in each country so that you can manage your expectations and cash flow as effectively as possible.

The tax authorities systematically carry out a preliminary examination of VAT refund applications in countries such as Poland, Hungary, Romania and Bulgaria. These tax audits can lead to lengthy administrative procedures, prolonging refund times, sometimes excessively.

Businesses often have to be extremely patient, sometimes for several years, to recover VAT. In the event of excessive delays, the Court of Justice of the European Union recognizes the right of businesses to claim interests. However, the interest rate applicable and the procedure to be followed to obtain these interests differ from country to country.