The Court of Justice of the European Union (CJEU) has gone straight to judgment in the Hungarian case of Alakor Gabonatermelö és Forgalmazó Kft2 relating to the recovery of VAT on subsidised costs and unjust enrichment.

The taxpayer argued that it should be allowed to recover the full amount of VAT on expenditure that was partly subsidised from government and EU funds, following the CJEU judgment in the case of PARAT Automotive Cabrio3.

Since the “disallowed VAT” was included in the grant funding, the Hungarian government took the view that it was inappropriate to allow a further VAT refund. The CJEU decided that a refusal to repay the tax was permitted by EU law, provided that the economic burden of the refusal was neutralised.

It seems likely that, in a case where the grant funding was provided on a “VAT inclusive” basis, the national court will conclude that this was the case and that the taxpayer in this case will be denied the windfall of a further repayment.

Click here for the judgment of the court.