Commentary

V7.279 Refunds of VAT for persons established in other EU member states

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.279 Refunds of VAT for persons established in other EU member states

Part V7 Tax planning | Commentary

V7.279 Refunds of VAT for persons established in other EU member states

Basic principles of a refund claim

A business can only reclaim input tax on its VAT return if the tax in question was incurred in the country in which it is registered for VAT. Therefore, if a UK business makes a trip to France in the course of business, and incurs French VAT, it is not permitted to reclaim this VAT in Box 4 of its UK VAT return.

Equally, a business registered for VAT in another EU country cannot reclaim UK VAT on its return – only input tax it incurs in its own country.

However, there is a refund system in place to enable a business to reclaim VAT paid in EU countries other than its own. This scheme would apply to a UK business paying VAT in any other EU member state and vice versa for an EU business registered outside the UK paying VAT in this country.

An important point is that the VAT paid in the other EU member state must be deductible under the normal VAT rules of the country where the expenditure was incurred. See Examples 2 and 3.

Example 2

ABC Ltd is registered for VAT in the UK. The managing director of the company has been on a business trip to Paris to visit a major French customer. He stayed in a hotel in the middle of Paris and incurred French VAT of €200.

What is the position regarding the French VAT that

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