Article 5 of Directive 2008/9/EC ends with a sentence that settles more refund claims than any deadline does. Entitlement to an input tax refund, it says, “shall be determined pursuant to Directive 2006/112/EC as applied in the Member State of refund”. Not as applied where your company sits. Not as applied by whoever approved the expense policy. As applied by the country you are claiming from.
That single clause is why a delegate dinner in Berlin and an identical delegate dinner in Paris, same purpose, same supplier category, same standard of documentation, do not come back the same way. Nothing has gone wrong with the claim. The Directive is working exactly as it was written.
Every claim is governed by two countries, not one
The refund state decides what is deductible. The state of establishment decides whether you qualify at all, and how much of the tax is yours to recover.
Article 6 of the same Directive sets the first condition: a taxable person not established in the Member State of refund “has to carry out transactions giving rise to a right of deduction in the Member State of establishment”. Its second paragraph does something finance teams routinely miss. Where a claimant carries out both transactions giving rise to a right of deduction and transactions that do not, only the proportion attributable to the former is refundable, calculated in accordance with Article 173 of Directive 2006/112/EC as applied by the Member State of establishment.
So a partially exempt business, an insurer, a bank, a group with an exempt holding function, carries its domestic recovery position into every foreign claim it files. The expense can be fully recoverable under German or Italian rules and the claimant still cannot have all of the tax back. Two different national rulebooks apply to the same invoice, and neither of them is optional.
The divergence is lawful, and it is not going away
Article 176 of Directive 2006/112/EC is the reason the exclusions never converged. It preserves exclusions from the right of deduction that Member States already had in their national law, which is why a restriction drafted long before the common system was harmonised still decides whether a hotel bill from last March is recoverable.
The Court of Justice has been policing the edges of that standstill for decades. Danfoss A/S and AstraZeneca A/S v Skatteministeriet (C-371/07, judgment of 11 December 2008) turned on exactly this, in that instance a Danish exclusion and canteen meals provided free of charge to business contacts and staff. Cases like it define how far a Member State can stretch or revive an old exclusion. What they cannot do is remove the divergence, because the Directive deliberately allows it.
The practical consequence for anyone budgeting a recovery programme: there is no principle you can learn once and apply across a travel or events footprint. There is a set of national answers, and they have to be looked up per country, per expense category, per claimant type.
What that looks like on a real file
France excludes accommodation, passenger transport, and fuel and lubricants. On a typical French travel file that is the two largest lines gone before anyone opens the invoices, and the recoverable balance is often restaurant and conference costs that finance had assumed were the small part of the spend.
The Netherlands does something different in kind. Rather than excluding passenger car rental, it applies a correction of 16 per cent to it, so the expense is recoverable but not in full. Belgium caps vehicle costs at 50 per cent. Three countries, three mechanisms: a flat exclusion, a percentage correction, a cap. A claim built on the assumption that a category is either in or out will misstate two of the three.
Those are three rows. Our VAT Chart tracks fifteen expense categories country by country, with separate charts for EU and non-EU based corporate and commercial aviation companies, because ground handling, fuel, Eurocontrol charges and repairs diverge on their own terms again. If you want the current chart for the countries you actually spend in, request it from VATcube rather than working from a general principle that does not exist.
The rate is a second variable, and it moves
Recoverability is a yes or no. The amount is not. German restaurant services moved to 7 per cent permanently from 1 January 2026. Ireland applies 9 per cent to restaurant services from 1 July 2026, with hotels excluded from that change. Spanish fuel returned to 21 per cent from 30 June 2026.
Same expense, recoverable in each case, materially different amounts. A recovery forecast built on last year’s effective rates will be wrong in both directions at once, and the error is invisible until the refunds land.
For non-EU claimants there is a filter before any of this applies
Everything above concerns businesses established in the EU. A claimant established outside it is in the 13th Directive, 86/560/EEC, where the first question is not what is deductible but whether the country will deal with you at all.
Italy applies reciprocity to Switzerland and Norway only. Croatia to Serbia and Switzerland only. Germany operates a list that includes the USA. Where reciprocity is not satisfied, the expense analysis never begins.
Then the exclusions layer on top of the claimant’s status rather than the expense. Germany excludes fuel outright for non-EU claimants, so a US operator’s German fuel is blocked not because fuel is non-deductible in Germany but because of who is claiming. France requires a fiscal representative before a 13th Directive claim can proceed at all. Two facts about the same claimant that a purely expense-led review would never surface.
The failures that no exclusion list will show you
Article 4 of Directive 2008/9/EC puts two things outside the refund procedure entirely: amounts of VAT which, according to the legislation of the Member State of refund, have been incorrectly invoiced, and amounts invoiced in respect of supplies which are, or may be, exempt under Article 138 or Article 146(1)(b) of Directive 2006/112/EC.
That is the quiet one. A supplier charges domestic VAT on what was properly an intra-Community supply. The invoice looks perfect. The expense is a recoverable category. The claim is still refused, and refused correctly, because the tax office is not the right counterparty. The money has to come back from the supplier, and by the time a refusal arrives the supplier may have been acquired, may dispute it, or the correction window in their own country may have closed.
The related failure pattern is coding. An expense is classified in the ERP by what it was called on the purchase order, then claimed against a foreign category it does not belong to. Conference catering, delegate hospitality, staff entertainment and client entertainment are one line in most accounting systems and four different answers across a European footprint.
What makes this work hard
Not the filing. The filing is the last hour of it. The hard part is holding, for every country you spend in, the current exclusion position, the current rate, the claimant-status overlay, the treatment of the specific expense rather than its generic name, and the domestic pro rata that follows the claimant into every claim. Then keeping all of it current, because the rate changes above all happened inside twelve months.
That is the work VATcube does, in over 25 countries across the EU plus Norway, Switzerland, the UK, Israel and Serbia, on a no win, no fee basis. If you have foreign VAT sitting in your accounts and no clear view of how much of it is actually recoverable, send us the spend profile and we will tell you what the position is before you commit to anything.
This article is general information about VAT rules and procedure as at the date of publication. It is not tax advice and should not be relied on for a specific claim. VAT rules change frequently and vary by jurisdiction. Contact VATcube for advice on your circumstances.
