The judgment in Brose Prievidza offers a significant clarification on the scope of the right to a VAT refund within the European Union. At the heart of the case lies a practical yet fundamental question: can a Member State refuse to refund VAT merely because the goods in question did not leave its territory?
1. Facts and the question referred to the Court
The Brose Prievidza case originated from a request for a value added tax (VAT) refund submitted by a Slovak company to the Bulgarian tax authorities.
The company had purchased production equipment in Bulgaria and paid Bulgarian VAT on those purchases. The company then applied for a refund of this VAT under Directive 2008/9/EC (the “8th Directive”), which governs VAT refunds for taxable persons established in another Member State of the European Union.
The Bulgarian authorities rejected the application on the ground that the purchased goods had never physically left Bulgaria. In their view, the absence of transport to another Member State meant that the operation could not give rise to a right of refund.
The question referred to the Court of Justice of the European Union (CJEU) was therefore whether a Member State may refuse a VAT refund solely because the goods in question did not leave its territory.
2. The CJEU’s position
In its judgment of 23 October 2025, the Court held that the mere fact that the goods did not leave the supplier’s Member State cannot, in itself, justify a refusal of a VAT refund.
The Court relied on the combined interpretation of:
- Article 4(b) of Directive 2008/9/EC, and
- Articles 138(1) and 171 of Directive 2006/112/EC on the common system of value added tax.
According to the Court, such a refusal can only be justified where, in light of all the circumstances, the supply forms part of a single economic transaction or constitutes an ancillary supply to an intra-Community supply.
In other words, the physical movement of the goods cannot, by itself, deprive a taxable person of the right to a VAT refund.
This reasoning is consistent with the Court’s established case law, which favors an economic and functional interpretation of VAT. Fiscal neutrality must be safeguarded, and rights to deduction or refund cannot be limited for purely formal reasons.
3. VAT Refunds under the 8th Directive
The VAT refund system between EU Member States is governed by Directive 2008/9/EC of 12 February 2008, which lays down the rules for refunding VAT to taxable persons who are not established in the Member State of refund but are established in another Member State.
This mechanism allows businesses to recover VAT paid in another Member State on expenses related to their taxable economic activities.
Who can apply?
In principle, any business established in an EU Member State can apply for a VAT refund under the Eighth Directive, provided certain conditions are met:
- The company must not have a fixed establishment (head office, branch, warehouse, etc.) in the Member State where the refund is sought;
- It must be registered for VAT in its home EU Member State;
- It must not have carried out taxable transactions in the Member State of refund during the refund period, or only transactions subject to reverse charge.
Companies established outside the European Union may also be entitled to a VAT refund, but under a different regime, the 13th Directive (Directive 86/560/EEC), which imposes other conditions and, in some cases, reciprocity requirements.
Eligible expenses and refund amounts
VAT may be refunded on goods and services used for business purposes, provided that such expenses would give rise to a right of deduction under the national rules of the Member State of refund.
If the VAT would not be deductible locally (for example, on entertainment, accommodation or passenger vehicles), it cannot be refunded.
The amount of VAT refunded depends on the nature of the expenditure and on the national legislation of the country concerned.
In some Member States, partial refunds may apply to certain types of expenses.
Deadlines and practical arrangements
The refund application must be submitted no later than 30 September of the year following the year in which the VAT was incurred.
For instance, VAT paid in 2025 must be claimed by 30 September 2026.
Applications can cover different periods:
- Quarterly, Semi-annual (in some countries), or Annual.
The minimum refundable amounts vary according to the period covered and are, in principle:
- €400 minimum for a quarterly or semi-annual claim,
- €50 minimum for an annual claim.
The procedure is entirely electronic: the application is submitted through the online portal of the applicant’s home tax authority, which forwards it to the Member State of refund.
Invoices and supporting documents must be attached electronically, in accordance with national requirements.
4. Significance and contribution of the judgment to the VAT refund regime
The Brose Prievidza judgment reaffirms the principle of VAT neutrality, holding that the right to a VAT refund cannot be denied for purely formal or administrative reasons. Member States must assess refund claims based on economic reality, not on the mere absence of physical movement of goods.
By promoting a substantive rather than formalistic approach, the CJEU strengthens legal certainty and ensures a uniform application of VAT rules across the EU. Ultimately, the decision underlines that VAT should never represent a definitive burden on businesses but should operate as a neutral fiscal instrument within the internal market.
Eurotax gives you the latest news about VAT, excise and customs. For more information about our VAT refund service, you can visit our page here. Do not hesitate to contact us if you have any question.
