In practice, it can occur that a taxpayer incorrectly charges VAT to a customer. For example, charging VAT while the underlying service is actually VAT exempt or applying the standard VAT rate, while actually the low VAT rate applies.
A supplier who incorrectly charges VAT to its customer, is held to remit that incorrectly charged VAT to the tax authorities. This provision aims to prevent a possible tax revenue loss for the tax authorities that could otherwise occur if customers deduct VAT that was never paid to the tax authorities by the supplier. Incorrectly charged VAT that was paid to the tax authorities be refunded if certain conditions are met.
The Dutch State Secretary of Finance published a new Decree, that clarifies the legal status of such a refund request. In practice, there was a lack of clarity at this point. If the refund request is submitted within six weeks after incorrectly charging the VAT, the refund request will be considered a formal objection against that VAT being due. The tax authorities must issue a formal decision to such an objection. If the taxpayer doe not agree with the decision, the taxpayer can appeal against the decision before court. If the refund request however is filed outside the six weeks deadline, but within five years after incorrectly charging the VAT, the tax authorities will handle the refund request at the inspector’s discretion. In such case, there is no possibility to object against the decision of the tax inspector.
Also, the new Decree explicitly states that a refund request will be denied in case it follows from new developments in case-law that the VAT was charged incorrectly. For example, if it is industry practice to apply the general VAT rate to certain products, and the Supreme Court rules that the reduced VAT rate applies to such products, then it becomes clear that VAT was incorrectly charged (for the difference between the standard rate and the reduced rate). However, under the new Decree, such incorrectly charged VAT would not qualify for refund.