If you are a taxable person established in the EU and have paid VAT in another EU member state, you can claim that VAT under the 8th Directive (subject to the conditions of Council Directive 2008/9/EC).
The 8th Directive establishes a streamlined process applicable throughout all EU member states, including Malta, allowing taxable persons in the EU to reclaim VAT expenses incurred in jurisdictions in which they are not VAT registered.
Eligibility criteria
To be eligible to claim such VAT refund, all of the following criteria must be satisfied:
1. The taxable person is established in the territory of a member state.
2. During the refund period, the taxable person has not had in the member state of refund, the seat of his economic activity, or a fixed establishment from which the business transactions were effected (or if no such seat or fixed establishment existed, his domicile or normal place of residence).
3. During the refund period, the taxable person has not supplied any goods or services which are deemed to have been supplied in the member state of refund, with the exception of certain supplies.
In addition to the above, the taxable person must ensure that:
• The VAT claimed is supported by proper tax invoices; and
• The transactions carried out give rise to a right of deduction in the member state of establishment (for example in the case of Malta, the applicant must be a taxable person registered for VAT under Article 10). If the taxable person carries out both transactions which give rise to a right of deduction and transactions which do not give rise to a right of deduction, only such proportion of the VAT which gives rise to a right of deduction may be refunded by the member state of refund.
Application
To obtain a VAT refund, the taxable person must submit an electronic refund application through the online portal of the member state in which the taxable person is established.
The refund application shall contain, among others, basic information on the applicant, bank account details, information on the supplier, and the nature of the goods and services acquired for each invoice.
The member state of refund may require the applicant to submit by electronic means a copy of the invoice document where the taxable amount is €1,000 or more. Where the invoice concerns fuel, the threshold is €250.
Submission deadline
The deadline for the submission of the VAT refund application is September 30 of the calendar year following the refund period.
Once the application is submitted, an electronic confirmation will be sent to the applicant. The member state of refund will then review the application and must inform the taxpayer of its decision, whether to approve or refuse, within four months of its receipt by the respective member state.
The refund application must cover a period of at least three calendar months but no more than one calendar year
Where the member state of refund considers that it does not have all the relevant information on which to make a decision, it may request, by electronic means, additional information within the four-month period.
The member state of refund shall be provided with the information requested within one month. The member state of refund shall then notify the applicant of its decision to approve or refuse the refund application within two months of receiving the requested information.
In the event that the refund application is approved, refunds of the approved amount shall be paid by the member state of refund at the latest within 10 working days of the expiry of the four-month deadline.
On the other hand, if the refund application is refused, whether in whole or in part, the grounds for refusal shall be notified by the member state of refund to the applicant together with the decision. The applicant can appeal the decision to competent authorities of the member state of refund.
Other important considerations
1. The refund application must cover a period of at least three calendar months but no more than one calendar year. Exceptions may be made for applications spanning less than three calendar months if the period represents the remainder of a calendar year.
2. For applications covering less than one calendar year but more than three months, the VAT refund amount must be €400 or more.
3. In the case of a refund for a full calendar year or the remaining part of a calendar year, the VAT amount eligible for refund should not fall below €50.
How can Fenlex help?
The VAT team can assist in determining one’s eligibility to apply for a VAT refund, as well as in preparing and submitting the application. For more information, e-mail info@fenlex.com.
Disclaimer: This article is of a general nature and should not be relied upon as a substitute for professional advice or in formulating business decisions. Fenlex accepts no liability in this respect.
William Cassar is a senior manager and the head of tax at Fenlex Corporate Services. He is a certified public accountant and a member of the MIT, the Malta Institute of Accountants (MIA) and the Institute of Financial Service Practitioners (IFSP). He also sits on the tax sub-committee of the Malta Maritime Law Association (MMLA).