C‑453/22. – Michael Schütte
Improperly charged but settled and remitted VAT can be reclaimed directly from the tax authorities if the customer may not reclaim it from the supplier due to limitation.
The European Court of Justice held in another case as well that the taxable person may eventually seek reimbursement of the improperly charged VAT directly from the tax authorities.
In the background case, the plaintiff purchased timber from various suppliers and subsequently resold and delivered it to his customers as firewood. The suppliers accounted for 19% (German) VAT however the plaintiff applied the reduced VAT rate of 7% to the resales. The administrative court found that the suppliers should have charged 7% VAT on the timber sales, hence the plaintiff had the right to deduct only the reduced VAT.
The tax authority sought to recover the VAT due resulting from the irregular VAT deduction. The plaintiff reached out to the suppliers and claimed back the improperly charged VAT however they referred to the limitation provided by the civil law and were reluctant to make any repayment. The plaintiff then applied to the tax authority for discharge, on grounds of equity, which claim has been rejected on the ground that if the suppliers were yet to modify their invoices and reclaim the payable VAT, such VAT would be reimbursed twice. The case was brought before the German administrative court which referred to the European Court of Justice for preliminary ruling. The ECJ stressed that not only the supplier’s insolvency may prevent the recipient of the invoice to claim back the improperly charged VAT from the supplier. This may also be the case where the supplier referred to the limitation provided by the civil law, hence may not be in the position to modify its invoices in good faith. A VAT reclaim of such a supplier would constitute an abusive practice which could not result in reimbursement. Consequently, in the background case, the principle of effectiveness requires that the purchaser concerned be able to address his application for reimbursement to the tax authorities directly and be entitled to a default interest as well.
