Substantive vs. formal requirements for assessing VAT refund claims

In its recent decision in Case C-746/22, the Court of Justice of the European Union commented on the assessment of VAT refund claims. The specific subject of the dispute was a Slovak company's claim for a refund of VAT paid in Hungary and, in particular, the correctness of the Hungarian tax authorities' procedure.

It is apparent from the course of the proceedings described above that the Hungarian tax authorities requested that the application for a refund of VAT be completed within a period of one month, to which the applicant did not respond. The tax administration therefore discontinued the proceedings. The applicant appealed against that decision and provided the information and evidence requested in the subsequent proceedings. However, the tax administration did not take this into account in the appeal proceedings, referring to Hungarian law and the prohibition on the submission of new evidence enshrined therein.

In its assessment of the case, the Court of Justice of the European Union emphasised the importance of the neutrality of the VAT system, stressing that, if the substantive requirements are met, the refund must be granted, even if the applicant for a VAT refund does not comply with certain formal requirements. The Hungarian tax authority's procedure, according to the Court, contravened not only the fundamental principle of neutrality of VAT but also the principle of effectiveness, in particular by effectively linking the effects of the limitation period to the one-month time-limit.

If you need assistance with a cross-border VAT refund, please contact our tax team.