ECJ Judgement On Reduction Of Default Interest Normally Payable On Overpaid VAT

Following the ECJ’s judgement in case C-387/16, Member States are not allowed to reduce the amount of interest on refunds of overpaid VAT which are not refunded in due time.


This interpretation of Article 183 of Council Directive 2006/112/EC, read in the light of the principle of fiscal neutrality, refers to reasons connected to circumstances not attributable to the taxable person, such as the high amount of interest when compared the amount of overpaid VAT or the period of time during which the overpayment was not refunded.

In the case mentioned, the Supreme Administrative Court of Lithuania raised the question to the ECJ if the reduction of the interest payable under national law on overpaid VAT which was not refunded in due time was in line with Article 183 read in the light of the principle of fiscal neutrality.

This inquiry was the consequence of a Court case between the Dutch established company Nidera BV and the Lithuanian tax authorities, where Nidera BV requested the payment of default interest for the period between the refund request and the date of the actual payment, whereas the Lithuanian tax authorities were only willing to pay the default interest from the date on which the ECJ delivered its judgement. In this previous case C385/09, the ECJ decided that Nidera BV was allowed to deduct input VAT for purchases made in Lithuania, although the Company was not registered for VAT purposes in Lithuania at the moment of the purchase.


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