Following the UK’s departure from the EU on 31 January 2020 – and after a transition period of 11 months – there were changes in how businesses trade with EU member states from 1 January 2021.
As a result, businesses must follow a different route to get VAT refund paid in EU countries. From 1 April 2021 UK businesses no longer have access to the EU electronic portal. The deadline for claiming VAT incurred on expenses in the EU on or before 31 December 2020 was 31 March 2021.
How to claim a refund on or after 1 January 2021
Any VAT incurred in EU member states can be claimed via the following systems:
- the EU VAT refund system
- the 13th Directive process.
Who should use the EU VAT refund system?
The EU VAT refund system can be used to make a claim for a refund of VAT incurred in an EU member state if your business is established in Northern Ireland or you have an establishment in Northern Ireland and you make:
- any supplies of goods in, or from, Northern Ireland
- EU intra-community acquisitions of goods.
If you meet the conditions, you can use the system to claim back VAT on invoices for goods only. You will need to use 13th Directive process for everything else such as VAT on purchase of services or where you are not eligible to use the EU VAT refund system.
See HMRC updated VAT notice 723A for more detailed guidance.
How to claim a refund under the 13th Directive process
Full guidance on how to get refund under the 13th Directive process is divided in two categories:
- VAT refunds to non-EU businesses
- VAT refunds to foreign tourists.
VAT refunds for non-EU businesses
UK businesses which are not required to register for VAT in the European Union, and who have incurred VAT in connection with their activities in an EU country, are entitled to deduct that VAT.
This ‘deduction’ is made by means of a refund from the EU country where they paid the VAT.
Claimants must send an application to the national tax authorities in the EU country where they incurred the VAT – see VAT refunds - country guide.
Full rules and procedure to follow can be found in Directive 86/560/EEC
To qualify for a refund under this procedure (see Article 1 Directive 86/560/EEC), during the refund period a business must NOT have:
- been based in any EU country or territory or
- supplied goods or services in the country where they incurred the VAT – except:
- exempted transport and ancillary services (Articles 144, 146, 148, 149, 151, 153, 159 or 160 VAT Directive) or
- services to customers solely liable for payment of the related VAT under the reverse-charge mechanism (Articles 194, 196 or 199 VAT Directive).
Additionally, you need to be aware of any EU country-specific conditions. Any EU country may:
- refuse to refund VAT in this way if the claimant’s country/territory does not grant reciprocal refund rights for VAT or similar to businesses based in that EU country
- impose restrictions on the type of expenditure qualifying for refunds
- insist that the claimant appoint a tax representative.
VAT refunds for non-EU tourists
EU retailers can provide a VAT refund for goods sold to non-EU tourists when exporting them. Specifically, this covers:
- tourists whose permanent address or habitual residence (as stated in their passport or other recognised identity document) is not in the EU
- EU nationals living outside the EU (who can prove this with a residence permit or similar).
Tourists must meet the following conditions to be able to claim VAT refund:
- the tourists must provide proof of residence (eg non-EU passport or residence permit)
- the goods must be taken out of the EU within three months of being bought. The tourist must provide a stamped VAT refund document proving this
- the value of the goods bought must be above a certain minimum (set by each EU country)
- retailers can either refund the VAT directly or use an intermediary. One or other of them may charge a fee, deductible from the refunded VAT amount.
More information can be found on VAT refunds for non-EU tourists.
ACCA technical factsheet – Cross-border VAT in 2020 and beyond
ACCA's Summary of VAT impacts