The ECJ ruled on the refundability of the improperly charged VAT
C‑83/23. – H GmbH | The incorrectly charged and remitted VAT may not be reclaimed by the customer directly from the tax authority if the supplier had this VAT refunded during an insolvency procedure.
The plaintiff in the background case is a German business dealing with rental of tangible assets. In 2008, the plaintiff acquired a motorboat from another German company which purchased the boat in Italy. The seller charged German VAT on the sales which was deducted by the plaintiff. The boat was then subsequently rented back by the seller. This sales and purchase transaction was investigated by the German tax authority both at the level of the seller and the plaintiff.
The tax authority established that the sales of the motorboat was subject to Italian VAT as the boat did not leave the domestic territory of Italy. The seller was therefore held liable to pay the improperly charged German VAT, on account of the fact that it is indicated in the invoice, whereas refused the VAT deduction at the level of the plaintiff. In addition to the above purchase, other motorboat acquisitions took place between the plaintiff and the German seller in 2007, 2010, and 2012. The German tax authority investigated the ones performed in 2007 and 2010 but only on the plaintiff’s side. The tax authority refused the deduction of the German VAT on the ground that it was charged incorrectly. By that time, the seller company was under insolvency procedure, therefore the plaintiff was unable to reclaim the incorrectly charged VAT from the seller. However, the insolvency administrator arranged for the correction of the wrong invoices and reclaimed the undue German VAT.
This resulted in a situation where the plaintiff was unable to recover or claim the improperly charged VAT, collected earlier by the seller company, whereas this VAT amount was partially refunded to the seller company. The European Court of Justice took the view that it may not be required that the tax authority investigates the potential Italian VAT evasion (and refuse the refund of the German VAT to the seller company with respect of the Italian VAT fraud) and the customer is not entitled to reclaim the improperly charged VAT directly from the tax authority, by reference to the principles of effectiveness and neutrality, if this VAT has already been refunded to the seller.
