The introduction of Delegated Regulation (EU) 2023/137, which updates the NACE business activity classification to NACE Rev. 2.1 effective 1 January 2025, is creating a temporary challenge for businesses filing foreign VAT refund applications across the EU.
While some Member States have adopted the new codes from 2025, others will implement them in 2026, potentially causing mismatches when referencing business activities in VAT refund applications – leading to possible rejections or delays.
To address this transitional issue, the German Federal Central Tax Office (BZSt) has published specific instructions to avoid rejections of applications:
Verify NACE Code Consistency
Before submitting an application, businesses should verify that their NACE Rev. 2.1 code corresponds to an existing code from the previous version (valid until 31 December 2024). If a match exists, no further action is required. If no direct match exists, choose a code that appears in both the old and new nomenclature, and which most closely aligns with your actual economic activity.
This approach helps ensure compatibility with Member States that have not yet transitioned to the new code set.
Handling rejected applications
If your application was already rejected for technical reasons related to NACE code discrepancies, BZSt will contact you directly for resolution.
Why this matters
Businesses applying for foreign VAT refunds must pay careful attention to the NACE codes they use in their applications. Use of incompatible or unrecognised codes may lead to technical rejections in countries still using the pre-2025 nomenclature.
During this transitional period (2025–2026), aligning NACE code selection with both versions is the safest course of action to prevent administrative delays.
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Authors
Lisa Dowling
Specialising in International VAT Compliance solutions, Lisa brings a wealth of knowledge and insight in her dealings with a host of international clients ranging from start-ups through to multinationals. With 21 years VAT experience behind her, Lisa has managed VAT compliance issues and solutions globally for over 11 years. Fintua have 12,000 + corporate clients in over 109 countries and many of these are members of the Fortune 500.
