A private limited company has been paying Dutch VAT for many years on distance sales to Belgian private individuals. It subsequently transpires that the turnover threshold for distance sales has been exceeded, meaning that VAT is payable in Belgium. The Belgian tax authorities issue additional tax assessments, which the private limited company pays. The company then submits supplementary tax returns and claims a refund of the VAT paid in the Netherlands. The tax inspector refunds an amount of €1.4 million.
The private limited company subsequently requested compensation for collection interest on the amounts repaid. The tax authority rejects this request on the grounds that it was not submitted in time. The court finds the company’s appeals to be well-founded and awards interest. On appeal, the tax authority argues that the responsibility for the correct payment of VAT lies with the company itself. The incorrect application of the distance selling scheme is entirely attributable to the private limited company. According to the tax authority, it is not required to pay compensation for recovery interest, as the tax was not levied in breach of EU law.
The Court of Appeal has ruled that the 'Dinkelland' judgment is relevant to the question of whether tax has been levied in breach of EU law. The Court of Appeal concludes from this that it is indeed relevant whether the business operator can be held responsible. In this case, it is not in dispute that the VAT initially declared and paid was a mistake on the part of the private limited company and not attributable to the tax inspector. Although the 'Dinkelland' case concerned input VAT, the Court of Appeal sees no reason to draw a distinction. The VAT refunded therefore does not qualify as tax levied in breach of EU law. The private limited company is not entitled to reimbursement of recovery interest.