A recent decision by the Greek Dispute Resolution Directorate (DRD) highlights the strict evidentiary standards applied when businesses request VAT refunds on high-value assets.

In this case, a company sought a VAT refund of €61,752.72 following the import of a Ferrari intended for rental use. The tax authorities ultimately rejected the claim, concluding that the company failed to demonstrate actual use of the vehicle in taxable economic activity.

Background of the Case

A limited partnership imported a Ferrari from Germany with a net acquisition value of approximately €256,000, paying over €61,000 in VAT at customs clearance.

The company filed a VAT refund claim, arguing that the vehicle was acquired within the framework of a newly introduced business activity:Passenger car rental services without a driver (Activity Code 77111001), a VATable activity.

Specifically, the company:

Increased its share capital.
Amended its corporate purpose.
Obtained a certificate of lawful operation from the Regional Tourism Authority.
Registered the vehicle for rental use with a defined circulation period.

The company requested a VAT refund, arguing that:

Findings of the Tax Audit

During on-site inspections, several critical findings emerged:

The company maintained its registered office in a 10 m² space located inside a garage owned by one of its partners.
There were no external indications of a car rental business in operation.
The vehicle was not present at the company’s premises.
During a second visit by the Tax Office, the building entrance was closed and no professional activity was observed.
No rental agreements, booking records, invoices, photographic evidence, or documentation demonstrating operational activity were provided.

The company relied solely on the purchase invoices, the submitted VAT return, and the tourism licensing documents.

The DRD’s Assessment

The Dispute Resolution Directorate concluded that:

The right to deduct or obtain a VAT refund requires a real and direct connection between the expense incurred and taxable transactions.
Mere intention to carry out a taxable activity is insufficient.
The actual business use of the vehicle was not demonstrated.
No evidence was submitted to substantiate an operational car rental activity.

Furthermore, the company’s arguments alleging violations of:

the principle of sound administration,
the principle of legitimate expectation,
and insufficient reasoning of the tax assessment,

The administration held that it is bound by the principle of legality and must objectively verify the existence of genuine economic activity before granting a VAT refund.

The administrative appeal was therefore dismissed.

Practical Implications of the Decision

This case highlights several critical tax principles:

1️⃣ Intention Alone Is Not Sufficient for VAT Refund

Proven business use is required.

2️⃣ Formal Licensing Does Not Automatically Secure VAT Recognition

Tax authorities examine the actual substance of the activity.

3️⃣ High-Risk or High-Value Investments Trigger Enhanced Scrutiny

Particularly in cases involving luxury assets.

4️⃣ The Burden of Proof Lies with the Taxpayer

The business must demonstrate:

Actual premises
Operational structure
Real transactions
Direct link between the expense and taxable supplies

VAT and Investment Expenditure: When Is Deduction Allowed?

Under VAT legislation:

Input VAT is deductible only when goods or services are used for taxable output transactions.

If business use cannot be substantiated — or if there is suspicion of private use (especially regarding passenger vehicles) — the tax authority may deny the deduction or refund.

Particular caution is required in cases involving:

Luxury vehicles
Start-up activities without proven turnover
Businesses with minimal physical presence

Conclusion

This decision serves as a clear reminder:

Tax compliance is not limited to documentation. It requires genuine and demonstrable economic activity.

Proper tax structuring before major investments can prevent:

Rejection of VAT refunds
Administrative penalties
Lengthy tax disputes
Liquidity constraints