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In 2008, Weindel, a company active in the field of reconditioning services, imported goods from Switzerland, Hong Kong and China to Slovakia for reconditioning. Weindel released the said goods for free circulation. Once repackaged in Slovakia, the goods were supplied to other Member States or exported to third countries. The repackaging service was invoiced to the customer, a Swiss company which remained the owner of the goods concerned throughout the whole process. The invoices issued by Weindel therefore only related to the repackaging services and not to the imported goods.

Weindel paid the import VAT and wanted to recover it. The Slovakian Authorities were however of the opinion that Weindel was not entitled to deduct that import VAT.

The existence of a direct and immediate link between a particular input transaction and one or more taxable output transactions is, in principle, necessary in order for the taxable person to have a right to deduct input VAT. The right to deduct input VAT on the acquisition of goods or services presupposes that the expenditure incurred to acquire the goods or services forms part of the price of the taxable output transactions.

A right of deduction is however also allowed in favor of the taxable person, even where there is no direct and immediate link between a particular input transaction and one or more taxable output transactions, where the costs of the services in question form part of the general costs of the latter and are, as such, constituent elements of the price of the goods or services he supplies. Such costs have a direct and immediate link with the taxable person's entire economic activity.

In the case at hand, Weindel intervenes only as a provider of services, without having acquired the imported goods or borne the cost of importation, which suggests that here is no link between the payment of the VAT resulting from the importation and the price of the services provided by Weindel.

As a consequence thereof, the European Court of Justice ruled that the importer cannot benefit from the right to deduct VAT where he does not dispose of the goods in the same way as an owner and where the input import costs are non-existent or are not incorporated in the price of the particular output transactions or in the price of the goods and services supplied by the taxable person in the course of his economic activities.

This Order is of particular importance in case of toll manufacturing of imported raw materials. The European toll manufacturer should rather avoid acting as the importer of record unless there is also a customs suspensive regime in place (i.e. Inward Processing Relief). Otherwise, the import VAT could become a cost!

(Source : EUCJ, Weindel Logistik Service SR spol. s r.o., C‑621/19, 08/10/2020)