It is important to note that most businesses must first register for VAT to qualify for VAT refunds. Taxpayers trading in EU – Member States will have to register for VAT once they meet the applicable registration thresholds, please find below the thresholds for a few EU Member States (Caragher, 2025):
| EU Member State | Threshold for Residents | Threshold for Non-residents |
| Spain | Nil | Nil |
| Germany | 100 000 EUR | Nil |
| France | 85 000 EUR (Goods) 37 500 EUR (Services) | Nil |
| Italy | 85 000 EUR | Nil |
| Poland | 200 000 PLN | Nil |
| Ireland | 85 000 EUR (Goods) 42 500 EUR (Services) | Nil |
| Luxembourg | 50 000 EUR | Nil |
| Portugal | Nil | Nil |
As you may notice the thresholds for Non-resident business is Nil (this is the case in all EU Member States), this means that as soon as non-resident business trades in these countries they must register for VAT in all the countries they trade in.
This does create an administrative burden thus the EU has measures in place such as the EU One-Stop Shop for distance sales to alleviate the burden on these businesses. It is important to understand the thresholds as it is only once businesses meet these thresholds that they may start claiming VAT refunds.
When can VAT be reclaimed?
In order to understand the procedures for reclaiming foreign VAT, we must understand when VAT can be re-claimed.
“A taxpayer would be entitled to a VAT refund where the “total amount of VAT charged to the taxpayer on the acquisition of goods and/or services (to be referred to as Input Tax) exceeds the total amount of VAT charged by the taxpayer on supplies of goods and/or services (to be referred to as Output Tax)” (SARS, 2024). This simply means that the taxpayer pays more VAT on their purchase than they receive on their sales.
VAT refunds may result in a full deduction or a proportional deduction of the Input tax. Full VAT deduction applies to goods and services which are used for activities that gave rise to the deduction while proportional VAT deduction may apply where expenditure can be directly attributed to both activities that gave rise to the deduction and those that did not. (Eurpoean Commission, n.d.)
It is important to note that not all VAT paid on purchases may be reclaimed, VAT can only be reclaimed if incurred in connection with the taxpayer’s business activities. Now how can a taxpayer reclaim foreign VAT refunds.
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Procedures to Reclaim VAT Refunds
There are two ways to claim a VAT refund in a foreign Member State, EU businesses can use the EU VAT Refund Scheme, the 8th Directive, while non-EU businesses can use the 13th Directive (Budd, 2025).
“EU businesses must send an electronic refund claim to their own national tax authorities who will then proceed to confirm the business’ identity and validity of the claim”. Once the validity of the request is confirmed, the national tax authority will forward the claim to the Member State where the VAT was incurred. (European Comission, n.d.).
Non-EU businesses must “submit a refund request to the tax authorities of the member state where the VAT was incurred”. It is important to note that the different EU Member States will have different VAT refund procedures. The non-EU business will have to consider the different documents required to be submitted and their deadlines, this will be dependent on what Member State the refund is being requested. (Taxually, 2025).
Foreign VAT Refunds
It is possible to claim back VAT paid in an EU Member State where the taxpayer does not reside. (European Comission, n.d.). We will have a look at three different scenarios: VAT refunds to EU businesses paid in other EU Member States, VAT refunds to non-EU businesses, and VAT refunds to non-EU tourists.
Foreign VAT Refunds to EU Businesses
EU businesses may reclaim VAT in a Member State they do not habitually supply goods or services, thus are not required to register for VAT in those Member States, provided that they incur VAT in connection with their activities in that Member State, (European Comission, n.d.).
The below requirements must be met during the refund period in order to qualify for the refund; the businesses must Not have (European Comission, n.d.):
- “Been based in the refunding Member State”,
- “Supplied goods or services there except exempted transport and ancillary services”, or
- “Supplied to customers liable for VAT under the reverse-charge mechanism”
The businesses must also be VAT registered in their own Member state supplying goods or services with a right of deduction in order for their Member State to refund the VAT incurred.
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Foreign VAT Refunds to non-EU businesses
Similar to EU businesses that have paid VAT in other EU Member States, non-EU businesses may obtain a VAT refund on VAT that they have incurred in connection with their activities in an EU Member state that they do not habitually supply goods or services and thus are not required to register (European Comission, n.d.).
The requirements are similar to those above however non-EU businesses must also consider the following:
- Any EU Member state may refuse them the VAT refund if the non-EU’s country of establishment does not grant similar refund rights to businesses established in that Member State (the refunds may relate to VAT or other taxes),
- The EU Member State may place restrictions on the expenditure that qualifies for a refund.
- The non-EU business may require a Fiscal Representative.
Foreign VAT Refunds to non-EU Tourists
VAT incurred on goods sold to non-EU tourists who bring them out of the EU may be claimed as a refund. The non-EU tourists may request these refunds from the EU retailers or from specialized intermediaries, (European Comission, n.d.).
The following conditions, however, apply:
- Proof of residence outside the EU must be provided by the tourists,
- The goods must be removed from the EU within 3 months from purchase,
- “The value of the goods must be above a certain amount”, determined by the respective Member State.
Final Thoughts
The foreign VAT refund process can get complicated, and businesses must consider the possibility of an audit being initiated by the Tax Office, failure by taxpayers to adhere to the refund request procedures or failure to respond to Audit letters with the relevant information and within the required timeframe may result in refunds being denied. Speak to a VAT IT Compliance expert today and ensure your refund claims are submitted correctly, on time, and with full regulatory alignment. Contact our team for support across EU jurisdictions.
