VAT Refund Guide for Businesses in Europe 2025
VAT is an indirect tax applied to the production and distribution of goods and services, which often results in higher operational costs for your business. The good news is that businesses can apply for a VAT refund in Europe if meeting certain requirements, getting significant financial relief.
With this policy, any businesses, even those established outside the EU can reclaim excessive VAT payments when consuming in the European Union. This greatly facilitates cross-border e-commerce and international trade. If you are looking for detailed refund instructions, then continue reading. This Europe VAT refund guide will explain relevant requirements, the application process, and anything else you may be concerned about.
Understanding VAT Refund in Europe
Currently, there are two main methods for VAT refunds in Europe: Directive 2008/09/EC (also known as the 9th Directive) and 13th Directive. The primary distinction between these two procedures lies in their applicability and refund objectives.
For businesses established in EU countries/regions, if you purchase goods or services in other member states, you can apply for VAT refunds directly to your home tax authority under Directive 2008/09/EC. In contrast, the 13th Directive is applicable to businesses outside the EU, especially those without a fixed establishment in the EU. If your business falls into this category, you need to entrust a local fiscal representative to submit your refund claim.
One important thing to note is that VAT registration is a must. Without it, you risk being unable to complete your VAT tax refund in Europe. So, it is a good idea to register for VAT as soon as possible for a smoother refund journey.
How to Claim a VAT Refund in Europe
A VAT refund in the European Union not only helps reduce your tax burden and operational costs but also improves cash flow. Therefore, understanding the claim procedures is essential. Below is a comprehensive guide:
For EU businesses
As mentioned above, VAT refunds are available to EU businesses under Directive 2008/09/EC. To be eligible, your business must not be established in the refunding EU member state. Meanwhile, during the refund period, you should not be carrying out any commercial activities there, such as supplying goods or services.
Since the latest Directive 2008/09/EC came into effect on January 1, 2010, the Europe VAT refund process has become more convenient. You can send an electronic refund claim to your own national tax authority to get things done. Moreover, you are required to provide the necessary information, including your VAT number, relevant invoices, payment vouchers, transaction proofs, and bank account details.
Additionally, the application for the previous calendar year should be submitted before September 30 each year. The processing time may vary among member states but generally ranges from 4-8 months.
For Non-EU businesses
If your business is registered outside the EU and has engaged in business activities that VAT incurred in an EU member state, you might be able to claim a refund under the 13th Directive. But remember, you can not supply goods or services there during the refund period.
Compared to EU-based businesses, businesses outside the EU may often find the VAT tax Europe refund process more complicated. This is because you will need to apply to the tax authorities in the EU member states where you made the purchase while they might have various requirements. Moreover, you might need a fiscal representative to handle your VAT refund in Europe, making the process tougher to go through.
Additionally, tax refund applications for the previous calendar year are due by June 30 or September 30. Late applications will not be processed. Also, it can take 6 months or more to get your refund, especially if multiple member states are involved.
While both EU and non-EU businesses can benefit from EU VAT refund policies, we have to say that it is not an easy task! Not to mention the varied regulations, long-list required documents, and complicated application process.
In this case, seeking help from VATAi, the professional solution provider is a wise decision with no doubt. Here comes a smart SaaS online platform with support from our professional team. No more hassle steps, you can get help with reliable VAT services on VATAi to make the refund process streamlined.
VAT Refund Guidelines by Country
Generally, the Europe VAT refund rate will be the same as the VAT rate you initially charged, but specific regulations may differ across European countries. It is advisable for businesses to thoroughly understand the specific regulations of each nation when claiming VAT refunds in Europe. Here are a few.
United Kingdom
The UK's VAT refund policy has become more complex post-Brexit. The standard VAT rate in the UK is currently 20%, but certain goods and services are subject to a reduced rate of 5%. In some cases, certain products may even be completely exempt from VAT. The highest refund rates are typically linked to the nature of the business's goods or services.
EU Businesses If your business is registered within the EU, you can still reclaim VAT refunds on purchases from Northern Ireland, under Directive 2008/09/EC. However, applications must be submitted to HMRC by September 30th of the year following the end of the refund period, and the relevant forms must be completed in full.
Non-EU Businesses Following Brexit, the 13th Directive no longer applies in the UK. Nonetheless, the UK has introduced domestic legislation allowing non-EU businesses to recover VAT refunds through a similar procedure. Applications must be submitted to HMRC within six months after the end of the prescribed year, which means they must be received by December 31st at the latest. It is important to note that, unlike before, the prescribed year in the UK refers to the twelve months from 1 July to 30 June.
Germany
In Germany, the standard VAT rate is 19%. For certain items, like food and books, a reduced rate of 7% applies. Unlike many EU countries, Germany imposes fewer restrictions on VAT deductions for most goods and services. It permits a 100% deduction for business expenses such as hotel costs, catering, telephones, taxis, and even entertainment.
Nevertheless, Germany conducts extremely strict reviews of VAT refund claims, especially when it comes to verifying invoices and payment vouchers. If invoice documents are omitted during the process, even if the submission deadline has not yet expired, they cannot be submitted later. Therefore, it is advisable to prepare all necessary documents in advance to avoid Europe VAT refund delays caused by incomplete materials.
EU Businesses
Businesses registered in EU member states can make VAT refund applications in Germany in accordance with Directive 2008/09/EC. The applications are submitted to the German tax authority and completed through an electronic portal. The processing time for VAT refunds in Germany is usually relatively long, approximately 4 to 8 months.
Non-EU Businesses
Non-EU businesses located in countries that have reciprocal agreements with Germany (such as those from Australia, Canada, Japan, New Zealand, Norway, the United Kingdom, etc.) can apply for VAT refunds through the 13th Directive.
France
France offers relatively flexible VAT refund policies. Currently, its standard VAT rate is 20%, with reduced rates of 10%, 5.5%, and 2.1% also available. Also, as France offers a 100% deduction for most business activities, this allows you to enjoy one of the highest Europe VAT refund rates!
EU Businesses
When claiming a VAT refund in France under Directive 2008/09/EC, your businesses must not be registered there, have a fixed establishment, or provide taxable goods or services.
For a shorter refund period, like between 3 months to 11 months, the refund amount should be more than €400. Alternatively, if your claim relates to a calendar year or the remainder of a calendar year, the amount must not be less than €50.
Non-EU Businesses
Non-EU businesses follow the same VAT refund eligibility requirements as EU businesses. However, the difference is that businesses not located in the EU must appoint a fiscal representative and submit the refund application online under the 13th Directive.
Italy
Italy's VAT refund policy is relatively strict but efficient. The standard VAT rate is 22%, with reduced rates of 4%, 5%, 10% (i.e. medical services, educational services, basic necessities), and 0% (i.e. insurance services).
EU Businesses
The annual application deadline is September 30th of the following year, covering a minimum three-month period. Businesses can submit four quarterly refund claims or opt for a single annual claim. In most cases, a VAT refund claim will be done within 4 months. Once it is granted, it will be processed in EUR within ten business days.
Non-EU Businesses
VAT refunds can be claimed under the 13th Directive for businesses from non-EU countries/regions that have signed a reciprocal agreement with Italy (currently including Israel, Norway, Switzerland, and the UK). All refund claims must be submitted electronically and the tax authorities may request relevant supporting documents at a subsequent stage.
Spain
The standard VAT rate in Spain is 21%, with reduced rates of 10% or 4% for some goods and services. The specific refund amount depends on the amount of VAT paid and the type of stuff purchased. Please note that both EU and non-EU companies must apply to tax authorities by September 30th of the following year, after which you will not be able to claim a VAT refund in Europe successfully.
EU Businesses
According to Directive 2008/9/CE, EU businesses can submit VAT tax refund applications in Spain. Businesses are required to provide electronic copies of invoices and the taxable amount on the invoice or import documents must be at least €1,000 (€250 if fuel costs are involved). If you have already submitted a refund claim and subsequently received other invoices, you must cancel the previous submission and resubmit a new claim that includes all invoices.
Non-EU Businesses
Non-EU businesses can claim Europe VAT refunds under the 13th Directive but must confirm whether there is a tax reciprocity agreement between Spain and the host country. In addition, non-EU businesses are required to appoint a fiscal representative established in Spain to submit VAT refund claims. Starting from July 1, 2024, refund requests submitted by fiscal representatives for the first time must be accompanied by a valid authorization letter, otherwise, the application will be considered invalid.
Final Words
This article discusses VAT refunds in Europe, along with guidelines for some countries. You may feel overwhelmed with so much information and still find it confusing to figure out how to apply for a VAT refund in Europe. That is nothing unusual. Each European country's policies, requirements, and procedures are complex enough to warrant a paper for explanation. Therefore, it is very necessary to conduct in-depth research on the target country before claiming a VAT refund.
But you don't have to tackle this tricky task alone! For years, VATAi has been focusing on helping cross-border sellers with professional VAT services, including assistance with Europe VAT refunds. With a team of experienced professionals, we can make your tax refund process more efficient and handle any potential troubles. If you still have questions, please feel free to contact VATAi's VAT experts. Our team is always ready to help!
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