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Transfers of own goods – VAT refund under Directive 9/2008

CHEP, a company based in Belgium, is active in pallet rental in Europe. To this end, CHEP purchases pallets in different Member States, which it then leases to other entities of the CHEP group established in each Member State, which sub-leases them to customers in their respective Member States. In 2014, CHEP acquired pallets from a Romanian supplier. The sales price invoiced by the latter included Romanian VAT. The pallets in question were transported from the supplier's premises in Romania to another destination also in Romania.

At the moment CHEP applied for the reimbursement of the Romanian VAT (through the procedure of Directive 9/2008), the Romanian authorities rejected to the application. Indeed, the Romanian tax authorities found that, in addition to the pallets acquired in Romania, CHEP leased to CHEP Romania pallets which it had acquired in other Member States and transported to Romania for the purpose of such leasing. Pallets acquired in other Member States would thus have been subject to a transfer of own goods, which is assimilated to an intra-Community acquisition in Romania, so that CHEP had to register for VAT purposes in Romania.

As CHEP did not agree with the Romanian Authorities, the case was brought to the Court of Bucharest, which addressed questions to the European Court of Justice.

Transfers assimilated to intra-EU supplies/acquisitions

The VAT Directive treats certain transfers of goods, i.e. transfers of own goods to another Member State, as intra-Community supplies/acquisitions. There are however a number of derogations which do not fall within the qualification of a transfer to another Member State. For example, the dispatch or transport of goods for the purposes of the temporary use of those goods within the territory of the Member State in which the dispatch or transport ends, for the purposes of supplies of services carried out by the taxable person established in the Member State in which the dispatch or transport of the goods began, is not considered to be a transfer to another Member State.

The EU Court of Justice reminds that the application of that derogation is explicitly subject to cumulative conditions. First of all, the use in the Member State of destination of the goods dispatched or transported for the purposes of the supply of services by the taxable person concerned must be temporary.

According to the Court, it would be contrary both to the letter of the provision of the VAT Directive and to the requirement of strict interpretation and to the objectives of the transitional regime to extend the application of that provision to cases of use for an indefinite or extended period or use resulting in the destruction of the goods concerned.

The Court also underlines that the derogation does not apply where the goods have been dispatched or transported by the taxable person from Member States other than that in which that taxable person is established.

Reimbursement under Directive 9/2008

The taxable person not established in the Member State of refund is entitled to a refund of the VAT paid under two conditions. First, during the period to which the application for refund relates, the taxable person must not have had either his place of business or a fixed establishment or his permanent address or usually reside in the Member State of refund. Secondly, during the same period, he must not have made any supply of goods or services deemed to have taken place in that Member State, with the exception of certain specific transactions such as transport and ancillary transactions or supplies of goods and services for which the recipient is liable to pay VAT (reverse charge).

On the other hand, the EU Court of Justice points out that neither Article 170 of the VAT Directive, nor Article 3 of Directive 2008/9, nor any other provision of those Directives makes the right of a taxable person established in another Member State to obtain a refund of VAT subject to any formal condition that he is not identified for VAT purposes or is not required to be identified for VAT purposes in the Member State of refund.

Therefore, contrary to the position defended by the Romanian Government, a Member State cannot exclude a taxable person established in another Member State from the right to a refund of VAT on the sole ground that that taxable person is or should be identified for VAT purposes in the first Member State.

Source: European Court of Justice - Judgment of the Court of 11/06/2020, Case C-242/19