Hot VAT topic in France

published on April 3, 2018

A new track for foreign EU-companies to contest the rejection of their French special VAT refund applications

In a recent judgment of 4 December 2017 (judgment no. 392575), the French Council of State (Conseil d'Etat) opens up a new access for VAT taxable persons (businesses) established in another EU Member State to contest the rejection by the French tax authorities of their VAT refund claims (procedure known as the "8^th EU VAT Directive").

According to Art. 15 of that EU VAT Directive 2008/9/EC, the application for VAT refund borne by a EU business in a Member State other than that in which it is resident, must be submitted at the latest by 30 September of the year following the VAT refund period. This request is introduced via the portal set up by the State of residency. The deadlines are generally known by businesses and will be considered in practice within a respective time line.  

In the specific case decided, however, an Italian taxable person submitted his refund application for reimbursement of VAT borne in France in 2011, on 1 October 2012, relying on the indications of the Italian portal which accepted this postponement due to the fact that 30 September of that year was a Sunday. The French Tax Administration had rejected his request for reimbursement for foreclosure.

According to the Council of State, it is up to the EU Member State where the companies introducing their application forms are taxable to carry out the checks falling within its scope of application, in particular regarding the rules of subjection that the Member State of refunding is not able to check. On the other hand, it is incumbent upon the Member State of reimbursement to assess whether the deadline condition for submitting the application has been respected (this analysis clearly results from the provisions of Art. 7 and 15 of the EU VAT Directive 2008/9/EC). And the verification of compliance with the deadline is carried out by the State of reimbursement in the light of the rules of its internal law which ensured the transposition of this directive.

The Council of State notes that no transposition has been made in its internal national law by France on this point (the CGI does not foresee the necessity for the taxable person not established in France to submit his refund request before the 30 September). Consequently, the French Tax Administration can not oppose the late nature of the request to refuse reimbursement.

Notice for use in practice

Obviously, the chances of success can not be guaranteed, but following this judgment, taxable persons in the EU whose French VAT refund applications have been rejected for foreclosure may have an interest in claiming a refund of VAT again (via their national portal) with reference to the recent decision of the Council of State. Following this judgment, foreclosure should no longer be enforceable by the French Tax Administration (at least as long as Art. 15 of Directive 2008/9/EC is not transposed in France).

That issue, which state is entitled to decide about the fulfilled deadline, is also discussed for example in Germany (in German literature and also former within the legislation process).