The CJEU examined the administrative services connected with the VAT refund of foreign travellers in a Hungarian related case
C‑427/23. – Határ Diszkont Kft.
In relation to VAT refunds available to foreign passengers, the CJEU held that the administrative services performed by a retailer for consideration cannot be regarded as either an ancillary service, a service directly connected with an export, or an exempt financial service. The judgment also confirms that a taxable person cannot rely on the lawfulness of its practice solely on the basis that the tax authority did not challenge it during previous audits.
The plaintiff operates a retail business in Hungary near the Serbian border. A considerable number of its customers are residents of a third country (Serbia) who make use of the VAT refund scheme available to foreign travellers. The plaintiff, for consideration, handles the related administrative process and issues a separate invoice for the service fee when the customer returns the VAT refund form stamped by the customs authority of exportation. The claimant has a well-established practice for this administration and previously sought a formal opinion from the central directorate of the national tax authority to confirm that, in this context, the administration qualified as an ancillary service to the supply of goods. On that basis, the claimant treated the service fee as part of the taxable amount of the VAT-exempt export of goods, and the tax authority did not contest this treatment in the course of several prior VAT audits.
However, during an audit for the year 2020, the tax authority concluded that the VAT refund administration constituted an independent transaction for VAT purposes and that its fee was subject to VAT at the standard rate of 27%. The claimant disputed the tax authority’s finding and, after unsuccessful objections and an appeal, brought an action before the Szeged Regional Court, which referred the matter to the CJEU for a preliminary ruling.
The CJEU essentially agreed with the interpretation of the tax authority conducting the audit. The court held that the administration in question could not be regarded as an ancillary service, since ancillary status requires that the transactions be mutually dependent in such a way that one transaction cannot exist without the other, and vice versa. Such mutual dependence is absent where the supply of goods is completed before the VAT refund procedure is finalised, and where it is the customer’s subsequent decision whether to export the goods from the EU and claim the VAT refund. The CJEU further confirmed that this type of administration cannot be considered a service directly connected with an export for VAT purposes, since the export is effected by the customer, not the retailer, and the administration related to the VAT refund has no influence on the export, which precedes the refund in time. The court also ruled out the possibility of treating the service as an exempt financial service, noting that VAT exemptions must be interpreted strictly and that financial services, by their nature, involve the movement of money and changes in legal and financial positions. The administration at issue may have no such effects.
The judgment is also instructive in that the CJEU confirmed: the mere fact that the tax authority did not previously challenge a taxpayer’s VAT treatment does not justify assuming that the authority considers that treatment lawful. Similarly, a taxpayer cannot place legitimate reliance on a prior professional opinion issued by the tax authority, and the authority has no obligation to notify taxable persons ex officio of changes in legislation or in the authority’s interpretation of the law.
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