Refund of VAT

How to receive a refund of VAT wrongly charged?

Aiki Kuldkepp
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The Court of Justice of the European Union (ECJ) recently decided on the issue of VAT refunds. The ECJ explained under which conditions the buyers of the goods or services can claim undue VAT back directly from the tax authorities. The direct claim may be possible if a seller refuses to correct invoices and pay back VAT charged too much relying on civil law limitations. In addition, a direct claim by a buyer may be possible if national legislation makes it impossible for suppliers to obtain a refund of undue VAT, for example, due to end of statute of limitations periods. The article presents the facts and conclusions of the case and briefly comments on previous ECJ decisions on this topic and pending cases. The article concludes with results for the practice of the decision.


If (too much) VAT is charged by mistake or if the supplier later finds out that he should not have charged any VAT at all, he must still report and pay this VAT to the tax authorities. The buyer is not allowed to deduct incorrectly charged VAT as his input VAT. Therefore, if the VAT is incorrectly charged, then the buyer should ask his supplier to cancel (or credit) the incorrect invoice and to issue a correct invoice with a correct amount of VAT or without any VAT on it.

What if the buyer is not able to recover overpaid VAT from the supplier, e.g. because the supplier is not obliged to correct the invoice under civil law? This question was referred to ECJ in Case C-453/22 (Schütte).

Facts of Case C-453/22 (Schütte) 

German farmer and forester (Schütte) is engaged in the timber trade. He purchased timber and received invoices with VAT at a rate of 19%. However, the German Court (Finanzgericht Münster) found that those transactions should have been subjected to a reduced rate of 7%. 

Therefore, the German tax authorities (GTA) reduced the buyer's deduction of input VAT from 19% to 7%, and the GTA claimed from the buyer (Schütte) back the VAT that was wrongly charged by his suppliers plus interest.

Schütte then asked the suppliers to correct the invoices issued to him and to pay him back the VAT that they had charged too much from him.

Suppliers invoked the defense of the statute of limitations under civil law and did not correct the invoices. Schütte did not receive the repayments he had claimed from his suppliers. Schütte therefore applied to the tax office for discharge, on grounds of equity, from the additional VAT recovery of which had been sought and the interest in respect of that VAT amount.
The tax office rejected that application on the ground that Schütte himself was responsible for the situation. 


On 6 July 2022, the German Court referred to the ECJ a question whether a taxable person that overpaid VAT to upstream suppliers can claim a reimbursement of the VAT, including interest, directly from the tax authorities. 

The referring court also asked whether this possibility of a direct claim against tax authorities also exists if the suppliers could still correct the invoices and also claim the VAT from the tax authorities,  with the result that there is a risk that those authorities will have to reimburse the same VAT twice. Namely, the court was concerned that under German law the suppliers could still correct the invoices and claim reimbursement of the overpaid amounts from the GTA on the basis of corrected invoices, and the GTA may then – possibly – no longer have a right of recourse against the suppliers.

Previous case law on this topic

The ECJ has stated in its previous decisions that the supplier which has paid the VAT to the tax authorities in error may seek to be reimbursed and, the buyer may bring a civil law action against that supplier for recovery of the sums paid but not due.

Furthermore, the ECJ has previously decided that the principle of effectiveness permits a claim by a recipient of a supply directly against the tax authorities if it is impossible or excessively difficult to recover overpaid VAT from the supplier, e.g., in cases of supplier insolvency.

In its judgment of 15 March 2007 in C-35/05 (Reemtsma), the ECJ decided that a recipient is granted a direct claim against the tax authorities if he has overpaid VAT to a supplier but does not receive a refund from the supplier or if the refund is excessively difficult to obtain. In case C-397/21 (HUMDA)), the ECJ decided that where a receiver of a service can claim directly from the tax authority a refund of the VAT wrongly charged by its supplier, that authority is obliged to pay interest on that amount where it has not made that refund within a reasonable period of time after having been requested to do so. 

Decision in case C-453/22 (Schütte)

On 7 September 2023, the ECJ gave its decision in Case C-453/22 (Schütte). The ECJ decided that the principle of effectiveness required the tax authorities to accept Mr. Schütte’s claim where his suppliers had a valid limitation defense to a contractual claim; Mr. Schütte therefore had a valid claim against the German tax authorities. 

The main arguments and conclusions of the decision

From previous ECJ decisions it follows that, in principle, the buyer should demand a refund from the supplier if the latter has invoiced too much VAT. If the refund of a buyer from its supplier proves impossible or excessively difficult, then the tax authorities should refund the VAT not due directly to the buyer. Such refund should be made together with interest.

The ECJ states that the right of deduction realizes the principle of neutrality and, in principle, cannot be limited. 

According to the ECJ, direct claim against the tax authorities exists even if the time limit to correct invoices under civil law is exceeded. The ECJ states that the statute of limitations constitutes a reason for making the enforcement of the claim excessively difficult and thus makes the direct claim against the tax authorities, possible. 

The buyer can invoke a direct claim even if the supplier could still correct invoices and claim the VAT paid too much from the tax authorities. If the service provider invokes the statute of limitations under civil law against the service recipient, he is acting abusively if he also seeks a VAT refund from tax authorities who may consequently refuse to provide such a refund. The risk that the tax authorities need to refund the VAT twice therefore does not exist. 

Main results for the practice of the decision

The main result of the decision is that a right for a direct claim against the tax authorities also applies in the case of civil law limitation. The buyer is protected if his input VAT deduction as well as refund from the supplier has failed. 

Recipients of services or buyers of goods who are unable to recover unduly paid VAT from their suppliers, should consider whether they have a direct claim against their Member State's tax authorities based on the judgments of the ECJ.

The buyers having the direct claim against the tax authorities, could file applications or appeals. 
The decision shows that appeals against the strict tax policies of some Member States may pay off where those policies/practices are against the EU VAT principles such as neutrality and efficiency.

New cases referred to the ECJ on this topic

Further questions on the direct claim against the tax authorities are already referred to the ECJ. Namely, on 12 June 2023, a preliminary ruling request, lodged on 15 February 2023, was published in the Official Journal of the European Union. By this, the German Federal Fiscal Court (Bundesfinanzhof) made reference to ECJ for a preliminary ruling in the case of H GmbH v. Tax office of M (C-83/23) on the existence of a direct claim against the tax authorities when the taxable person has paid undue VAT.

More specifically, the referring court asks whether the direct claim is possible where undue VAT was paid when obtaining a reimbursement of such VAT from the supplier is excessively difficult or impossible. In this particular case, the tax authorities had already refunded the VAT to the supplier based on the supplier’s corrected invoice. However, the supplier did not repay anything to the buyer.