On 14 February 2019, the Court of Justice of the European Union (ECJ) gave its decision in Vetsch Int. Transporte GmbH concerning the exemptions from value added tax VAT upon import in the context of Intra-Community transfers and acquisitions.
THE FACTS OF THE CASE IN BRIEF
Vetsch is an Austrian limited liability company which operates a forwarding business. In the period between 10 December 2010 and 5 July 2011, Vetsch, as the indirect representative of two companies established in Bulgaria, submitted to the Customs Office declarations for release for free circulation in relation to goods imported from Switzerland, applying for the exemption set out in Paragraph 6(3) of the annex to the UStG 1994 containing provisions relating to the internal market, referring to ‘customs procedure 42’. The goods concerned were therefore released for free circulation with exemption from import VAT.
However, by decision of 6 September 2011, the Customs Office requested Vetsch to pay import VAT on the goods concerned, in accordance with Article 204(1) of the Customs Code; and on 31 January 2012, the Customs Office dismissed the appeal lodged by Vetsch against that decision.
Vetsch’s action against that decision of the Customs Office before the Federal Finance Court (Austria) was dismissed as unfounded by decision of 30 March 2016 due to the vendor of the goods at issue in the main proceedings had given the right of disposal over those goods to the Bulgarian recipients while the goods were in Switzerland prior to customs clearance in Austria.
The recipients had declared the intra-Community acquisitions of the goods concerned but were liable for tax evasion in Bulgaria as they had declared incorrectly that they had made an exempt intra-Community supply of the goods at issue to Vetsch.
Vetsch brought an appeal on a point of law before the Upper Administrative Court (Austria) against the decision of the Federal Finance Court (Austria), which was also dismissed as unfounded due to the referring court stated that the conditions for qualifying for the intra-Community transfer exemption in accordance with the VAT Directive had not been fulfilled, provided that the tax evasion in question occurred in the supply chain after the intra-Community transfer at issue and the intra-Community acquisition subsequent to that transfer.
QUESTIONS REFERRED TO THE ECJ
- Is the exemption under Article 138 of [the VAT Directive] for an intra-Community transfer from a Member State to be refused where the taxable person carrying out that transfer to another Member State does in fact declare in the other Member State the intra-Community acquisition linked to the intra-Community transfer, but commits tax evasion in connection with a subsequent taxable transaction concerning the goods in the other Member State by wrongfully declaring an exempt intra-Community supply from that other Member State?
- Is it relevant to the answer to Question 1 whether the taxable person had intended at the time of the intra-Community transfer to commit tax evasion in respect of a subsequent transaction concerning those goods?
CONCULUSIONS OF THE ECJ
The Court upheld that Article 143(d) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and Article 143(1)(d) of that directive, as amended by Council Directive 2009/69/EC of 25 June 2009, must be interpreted as meaning that the exemption from import value added tax laid down in those provisions may not be refused in respect of an importer designated or recognised as liable for payment of that tax, within the meaning of Article 201 of Directive 2006/112, in a situation, such as that in the main proceedings, in which, first, the recipient of the intra-Community transfer of goods effected after that import commits tax evasion in connection with a transaction which is subsequent to that transfer and is not linked to that transfer and, secondly, there is no evidence to support the conclusion that the importer knew or ought to have known that that subsequent transaction entailed tax evasion on the part of the recipient.
The full details of this case can be viewed on this link: Case C‑531/17
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Franco Falzon C.P.A., LL.M
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