Supply chain ABC - Place of second supply
Successive supplies relating to the same goods — Place of the second supply — Information provided by the first supplier — VAT identification number — Right to deduct — Legitimate expectation on the part of the taxable person regarding the existence of the conditions giving rise to the right to deduct.
In accordance with earlier cases relative to A-B-C transactions, the ECJ ruled that the first sale (by A) may not be zero-rated where C may dispose of the goods in the Member State of departure before the intra-Community transport takes place.
The Court even goes a step further: where C may dispose of the goods in the Member State of departure, the supply by A may not be zero-rated even if B presents itself with a VAT number issued by the country of destination and A has not been informed that the goods would be resold by B to C. That case-law again shows that the allocation of transport to a well-defined supply in the chain is crucial. The ECJ proves to be even stricter than in a previous case-law where A was given conclusive information (shipment and VAT registration number) allowing to treat first supply as a zero-rated one under certain circumstances (see ECJ C-430/09).
Comments: The businesses involved in intra-Community trade should be very careful, especially where they are not in charge of the transport. In the latter situation, they do indeed not necessarily have all the information allowing to determine in which commercial relationship the transport is deemed to take place and the risk is therefore high that the VAT exemption is erroneously applied.
The first sale (of A) may not be exempted of VAT - where goods are to be delivered directly to the final customer (C) - whilst they are still physically in the country of the first supplier (A).Where the first supply may not be zero-rated, the processing or the transformation of goods is not to affect the possibility to zero-rate the subsequent supply.
Comments: That case-law again shows that the allocation of transport to a well-defined supply in the chain is crucial. However, it is somewhat disappointing in the sense that it assumes that the second supply occurs before intra-EU shipment without giving any concrete indications. In case of supply chain, notably in trading raw products, one must pay a very specific attention to the logistic terms and conditions between A-B and B-C.
The Simplified Scheme for Triangulation is applicable even if B is resident and registered for VAT purpose in the Member State of departure, where B uses the VAT identification number of another Member State. Additionally, that scheme is applicable even in the case B has not submitted its Intra-EU Listing in due time.
Comments: Some EU countries have refused the application of the above-mentioned simplified scheme if B was registered in the country of departure. With that judgement, the ECJ discards this restrictive approach adopted by various National Tax Authorities in regards to the use of the simplified scheme for triangulation supplies.
VAT Directive should be interpreted as not precluding the tax authority of a Member State from making the exemption from VAT of an intra-Community supply subject to the provision by the supplier of the VAT identification number of the person acquiring the goods, with the proviso that the grant of that exemption should not be refused on the sole ground that that requirement was not fulfilled where the supplier, acting in good faith and having taken all the measures which can reasonably be required of him, is unable to provide that identification number but provides other information which is such as to demonstrate sufficiently that the person acquiring the goods is a taxable person acting as such in the transaction at issue.
Intra-EU - Conditions for VAT exemption
Article 138(1) — Conditions of exemption for intra-Community transactions characterised by the obligation on the purchaser to ensure, as from the time of their loading, the transport of the goods of which it disposes as owner — Obligation on the vendor to prove that the goods have physically left the territory of the Member State of supply — Removal from the register, with retroactive effect, of the customer’s VAT identification number.
Article 138(1) of VAT Directive is to be interpreted as not precluding, in circumstances such as those of the case before the referring court, refusal to grant a vendor the right to the VAT exemption for an intra-Community supply, provided that it has been established, on the basis of objective evidence, that the vendor has failed to fulfil its obligations as regards evidence, or that it knew or should have known that the transaction which it carried out was part of a tax fraud committed by the purchaser, and that it had not taken every reasonable step within its power to prevent its own participation in that fraud.
A vendor may not be refused the VAT exemption for an intra-Community supply, in accordance with Article 138(1) of VAT Directive solely on the ground that the tax authority of another Member State has removed the purchaser’s VAT identification number from the register, with retroactive effect from a date prior to the sale of the goods even though the number was removed after the goods had been supplied.