French VAT refund for taxable persons established in the European Union: a procedural error may result in the loss of the VAT credit

Background of the dispute: an error in the request for a refund of a VAT credit

Abo Wind AG, a German company, develops projects in the field of renewable energies. It provides services (transfer of rights for the design of wind farm projects) under the general VAT territoriality regime for the benefit of its French subsidiary (Article 44 of Directive 2006/112/EC).

Under the reverse charge mechanism, the Company should not have charged VAT on these services: the VAT was therefore incorrectly invoiced by the Company. However, any VAT invoiced incorrectly is in principle due in accordance with article 283 3 of the French Tax Code (FTC).

In order to benefit from the reimbursement of its VAT credit, amounting to more than 4 million euros for the fourth quarter of 2018, the German company identified itself in France and filed, on January 16, 2019, an application for the reimbursement of this credit based on the domestic procedure provided for in article 271 IV of the FTC governing requests for reimbursement of VAT credits for taxable persons established in France (procedure known as the 6th Directive): in other words, the procedure offered through CA3 and its annex being equal refund request.

However, the administration considered that the company should have taken the route provided for non-established and unregistered foreign taxable persons, under articles 242-0 M and following of Annex II to the FTC transposing Directive 2008/9/EC (procedure known as the 8th Directive) (procedure known as the 8th Directive), which requires an application for a refund of VAT credit to be submitted via the tax authority of the Member State of establishment before 30 September of the year following the period to which relates the request for reimbursement, under penalty of foreclosure.

The tax authorities rejected his request on October 16, 2019, a rejection that was confirmed by the Paris Administrative Court on March 28, 2023. The company appealed this judgment.

The central question: what procedure should a European taxable person not established in France follow to obtain a refund of a VAT credit?

The arguments of Abo Wind AG

The company maintained that it could benefit from the domestic procedure for the reimbursement of VAT credits, as long as it carried out taxable transactions in France.

Interestingly, in its defence, the Company argued in the alternative that it was indeed liable for VAT in France: in fact, due to its billing error, it had incorrectly invoiced VAT that it had to remit to the French State.

She also argued that:

• The violation of the principles of VAT neutrality, legal certainty, legitimate trust and loyalty, due to the questioning of his status as a taxpayer, his VAT registration in France and his right to deduct or refund VAT;
• Serious doubt as to the compatibility of French provisions with Directive 2008/9/EC, due to an unjustified difference in treatment between taxable persons established or not established in France, in contradiction with the principle of neutrality;
• An infringement of the freedom of establishment and the provision of services, due to a limitation period applicable only to taxable persons not established in France.

The company requested that questions for a preliminary ruling be referred to the Court of Justice of the European Union.

The arguments of the Court of Appeal

The Court rejects the company's arguments.

Initially, it reminds the German Company that the services provided did not fall under the derogatory rule of territoriality in connection with buildings (Article 259 A of the FTC) but in reality to the rule of principle provided for in article 259 of the FTCtransposing article 44 of the VAT Directive. Consequently, the Company did not carry out transactions that could be located territorially in France but simply provided international services subject to the international reverse charge mechanism.

Secondly, the Court recalls that:

• Article 271 IV of the FTC is reserved for taxable persons established in France or for foreign operators liable for the tax and who have a French VAT number in accordance with article 286 ter of the FTC,
• However, the Company has certainly carried out taxable transactions in France, but these transactions are part of the list of transactions not taken into account for the choice of procedure: in fact, article 242-0 O of Annex II of the FTC considers that it is not appropriate to take into account transactions subject to international (283, 2 FTC) or domestic (283, 1 FTC) reverse charge.
• As a result, the Company was not eligible for the domestic procedure. Since the deadline for filing an application is a foreclosure period, the procedural error normally runs until expiry, without the judge being able to grant regularization.

The Company argued, through its counsel, that it had been liable for VAT due to a billing error. However, the Court rejects this argument, recalling that the legislation lists limitatively the transactions that are taken into account in order to exclude a foreign operator from the benefit of the reimbursement procedure provided for in the 8th Directive. The analysis must therefore be carried out on a technical level, not a factual one. In this case, the transaction in question was subject to the reverse charge mechanism provided for in article 283, II of the FTC. The fact that the operator incorrectly invoiced VAT, and that this error causes, according to domestic law, that the tax is chargeable, has no impact on the assessment of the right to a refund.

Consequently, the Court considers that a company not established in France, but in another Member State of the European Union, must necessarily and only file its request for a refund of a VAT credit via the derogatory procedure provided for in articles 242-0 M to 242-0 Z ter of Annex II to the FTC within the stipulated limitation period.

Finally, the Court rightly considers that there is no reason to refer questions for a preliminary ruling to the CJEU.

A decision in line with European case law

The Court applies the consistent case-law of the Council of State (in particular CE 9e-10e s.-s. 27/05/2009, No. 308471, SA Lurgi) according to which the procedure provided for foreign taxable persons is exclusive: they cannot opt for the national procedure.

It also applies Community case-law, considering that the period provided for in terms of reimbursement of VAT to European taxable persons not established in the State where the tax is due, for the submission of an application for a refund of VAT, is a period of foreclosure (in particular CJEU, 21 June 2012, CJEU, 21 June 2012, case 294/11, 5th ch., Ministero de l'Economia e delle Finanze c/ Elsacom NV). This period is not contrary to the principle of VAT neutrality.

What to remember for taxable persons established in another Member State and often operating in France

1. The applicable procedure requires the transactions carried out to be properly qualified for VAT purposes.

In the judgment in question, the Company carried out an erroneous analysis of the transactions carried out:

• On the one hand, it mischaracterized the nature of the benefits by wrongly considering them to be taxable in France because of a link with a building (in this case, a wind farm), on the basis of article 259 A of the FTC. However, in the absence of a sufficiently direct link with that building, the services actually fell under the principle of general territoriality provided for in Article 44 of Directive 2006/112/EC, and were therefore subject to the reverse charge mechanism applicable to cross-border services.
• On the other hand, persisting in its error, the German company failed to take into account the fact that such services are, under domestic law, subject to the domestic reverse charge mechanism since the customer is a taxable person established in France with a French VAT number with a French VAT number, in accordance with Article 283, 1 of the FTC.

Therefore, prior analysis of the nature of the transactions is crucial. It is also essential to verify, in order to determine the applicable refund procedure, that the foreign operator is carrying out a transaction giving rise to the right to deduct, and for which none of the first two paragraphs of article 283 of the FTC is applicable. Otherwise, the domestic procedure of the 6th Directive cannot be applied.

2. A company not established in France cannot take advantage of the domestic procedure for requesting a VAT credit refund without having carried out transactions excluded from the framework of article 242-0 O of Annex II of the FTC

In the absence of domestic transactions carried out and for which the operator would be liable for VAT (or exempt for example with intra-community deliveries), the operator must file his request through his Member State of establishment.

A VAT billing error cannot allow the operator to claim that he is liable for VAT.

In order to request a VAT credit refund in France, taxable persons established in another EU Member State must:

• Send their request via the electronic portal of their Member State;
• Accompany their request with the necessary supporting documents such as an electronic copy of invoices or import documents;
• Submit the application no later than 30 September of the calendar year following the repayment period, which may not be less than three calendar months unless it constitutes the balance of a calendar year, nor longer than one calendar year, under penalty of foreclosure.

Attention, it is only after the communication of all the required information that the request is deemed to be submitted.

The Member State of establishment must then verify the applicant's status as a taxable person before any transmission to the French tax authorities, which must be done within 15 calendar days from receipt of the request.

3. A decision encouraging European taxable persons not established in France to check their tax status and their VAT refund requests

This case illustrates the vigilance that taxable persons must pay to the territoriality of their transactions, which determines the VAT regime to be applied and who is liable for the tax.

Taxable persons must therefore be careful to apply the correct VAT credit refund procedure at the risk of wasting time and being foreclosed, while the principle of VAT credit is not the subject of any debate.

Conclusion

The CAA Paris judgment, June 27, 2025, illustrates the rigor that must be attached to the VAT credit refund procedure for European taxable persons not established in France. A procedural error, even in the case of an unquestionable VAT credit, can prevent reimbursement.

It is therefore necessary to ensure the VAT treatment of transactions carried out in France and then, on this basis, to determine the applicable procedure.

A mistake could be costly for foreign operators.

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