Revenue Note for Guidance

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Revenue Note for Guidance

101. Intra-Community refunds of tax

Summary

This section deals with VAT refunds to foreign traders in other Member States. It implements Council Directive 2008/9/EC, which was adopted on 12 February 2008 and came into force on 1 January 2010. This Directive provides for an electronic refund procedure for foreign traders. The main features are:

  • refund applications must be made through an electronic portal set up by the Member State of establishment of the applicant;
  • each application is subject to an electronic approval process in the Member State of establishment before being passed on to the Member State where the VAT was incurred by the business (the Member State of refund).

Details

(1) Subsection (1) contains definitions.

  • the applicant is the taxable person who is established in a Member State other than the Member State of refund, and who carries out transactions giving rise to a right of deduction in that Member State;
  • the Member State of refund is where the VAT was charged to the applicant in respect of goods or services that were supplied to him/her or on imports into that Member State;
  • the refund application is the electronic form;
  • transactions are either deductible (i.e. give rise to a right of deduction in a Member State) or not deductible (i.e. do not give rise to such a deduction).

(2) Revenue is empowered to refund applicants for VAT they paid on supplies they received in the State or on imports of goods into the State, where a proper application from the applicant’s Member State (MS) is received.

(3) The rules on calculating the amount of refund are set out in subsection (3):

  • Paragraph (a) provides that the amount of tax refundable is the amount that the applicant was charged on business supplies received or on goods imported into the State, but only to the extent that he/she would have got deductibility in the State under Irish rules. This is subject to paragraph (b).
  • Paragraph (b) provides that if the applicant undertakes deductible and non-deductible transactions in his/her home MS, the refund amount is the proportion attributable to the deductible transactions, as determined by the home MS – see subsection (5) below for rules about correcting the application when the deductible proportion changes.

(4) Refund claims must be made electronically by the applicant through the dedicated portal set up in the applicant’s own MS.

(5) There is provision for the making of a correcting application when the deductible proportion calculated under subsection (3)(b) subsequently changes.

(6) The timing rules and tax details required on applications in the case of refunds to be made by Revenue are as follows:

  • Tax details cover the tax charged in respect of supplies invoiced to, and imports made by, the applicant in the refund period. Tax omitted from a previous application may also be included, if the transaction was completed in the year.
  • Applications cover 3 months to 12 months (calendar year), but can be less than 3 months for the calendar quarter starting 1 October.
  • Applications must be lodged on or before 30 September in the year following the refund period.

(7) There are two de minimis rules:

  • If the refund is for 3 months – 12 months (calendar year), the de minimis is €400.
  • There is a de minimis of €50 for claims relating to the last quarter (which can be less than 3 months – see subsection (6)) or a calendar year.

(8) Revenue must notify the applicant electronically if they decide not to forward his/her refund application to another Member State on the grounds that the applicant is not entitled to a refund.

(9) Subsection (9) sets out the actions taken by Revenue on receipt of a refund application.

  • The application is acknowledged as soon as possible.
  • Broadly, a decision is made on approval/rejection within 4 months and the applicant is notified. This time period is extended where additional information is requested.
  • Originals/copies of invoices or import documents may be requested, the tax authorities in the applicant’s MS may be contacted, and so on in order to establish the validity of the claim.
  • Revenue has 10 working days to pay the refund when an application is approved.
  • The reasons for rejection must be included in the notification when a refund application is refused.

(10) Revenue is allowed to deduct bank charges from refund payments that they make, at the applicant’s request, to another MS.

(11) Applicants must repay, with interest, refund amounts that were overpaid because of incorrect claims.

(12) Revenue will withhold the payment of a refund where the applicant owes money in respect of an earlier overpayment.

(13) Revenue must pay simple interest at the daily rate of 0.011% (see section 105(4)) in respect of amounts not refunded on time. Interest is not payable where information requested by Revenue is submitted late or is incomplete.

(14) The refund rules in the section do not apply in cases where the applicant should be registered for VAT in the Member State of refund. For example, if a German business supplies goods and services into Ireland, it would normally be obliged to register in the State, unless the supplies are to customers that are liable under the reverse charge rules – in this case, it won’t have to register in Ireland as the recipient is accountable and liable.

The subsection provides that applicants supplying goods and services that are deemed to be supplied in the refund Member State are excluded from the refund scheme, except in the case of reverse charge supplies, supplies under the special scheme for telecommunications services, broadcasting services and electronically supplied services (Union scheme) or exempt transport.

Relevant Date: Finance Act 2020