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Basics of the VAT Refund Procedure

A comprehensive guide to understanding foreign VAT refunds, including requirements, procedures, and application processes for EU and third countries.

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Basics of the VAT Refund Procedure

1. Options for Refunding Foreign VAT

The increasing internationalisation of commercial transactions means that more and more German companies are also operating abroad. Employees travel to trade fairs and exhibitions or spend the night abroad on business for other reasons, while trucks are refueled abroad.

In cases like these, companies are charged foreign VAT. Unlike domestic invoices, this VAT cannot be claimed as part of the advance VAT return.

Good news: There is the possibility for a significant number of countries to get this foreign VAT refunded within the framework of the "VAT refund procedure".

  • Within the EU: This possibility exists in relation to all member states
  • Outside the EU: Depends on intergovernmental agreements regarding reciprocal reimbursement

2. Substantive Requirements

The refund procedure can only be used by entrepreneurs within the meaning of VAT law. Key requirements:

  • The trader must not be resident in the country in question
  • The trader must not have carried out taxable transactions triggering registration during the VAT refund period
  • Input VAT deduction restrictions must be observed

3. Applications to Third Countries

Application Process

  • Made directly to the foreign reimbursement authority
  • Forms must be filled in the respective national language

Key Points

  • VAT refund period: Usually at least three consecutive calendar months, at most one calendar year
  • Original invoices must usually be submitted
  • Entrepreneur's certificate valid for one year required
  • Minimum amounts apply for annual or quarterly allowances

4. Applications in EU Member States

Electronic Application Portal

Each Member State has set up an electronic portal. In Germany, this is at the Federal Central Tax Office (BZSt).

Application Requirements

  • Submit by September 30 of the calendar year following the year the invoice is issued
  • Minimum amount: EUR 50 for annual, EUR 400 for quarterly applications

Required Information

  1. Member State of reimbursement
  2. Name and full address
  3. Electronic communications address
  4. Description of business activity
  5. VAT refund period
  6. VAT ID number or tax number
  7. Bank details (IBAN and BIC)

Types of Goods/Services (Indicators)

  • Fuel
  • Rental of means of transport
  • Expenditure on means of transport
  • Tolls and road tolls
  • Travel expenses
  • Accommodation
  • Food, beverages, and restaurant services
  • Entrance fees to trade fairs and exhibitions
  • Luxury/entertainment/representation expenses

Important Notes

  • Substantive provisions of the country of refund are decisive
  • Input VAT on certain costs (travel expenses, representation) may be restricted
  • Processing time varies by country
  • Interest is payable if payment not made within four months and ten days