Once there are no further transactions which are subject to VAT, a taxable party must submit a 604C declaration to the relevant control office. In practice, we find that taxable parties often only realise that they still have a VAT credit when they carry out this formality.
If the taxable party submits the 604C declaration and has a VAT credit, the remaining balance will be transferred to a special VAT account (and the taxable party thus ends up in the special refund procedure). The VAT credit will only be actually refunded after a trading cessation check. When trading ceases, there is no defined legal deadline within which these trading cessation checks must be performed, and no specific rules in this connection. In practice, we find that it sometimes takes years before there is a check and the taxable party’s credit balance is actually refunded.
It is therefore advisable to reclaim the VAT credit before submitting the 604C declaration. In this case the rules of the normal refund procedure will apply (rather than those of the special refund procedure).
However, please note that the 604C declaration must be submitted within one month after cessation of trading. A late submission will give rise to a VAT fine.
It is therefore up to the accountant to be proactive in telling clients to reclaim their VAT credit in time.