Latest European Court of Justice rulings on VAT (Part II)
In today's newsletter, we continue our coverage of the European Court of Justice's VAT rulings of 7 April 2022. This time we look at the Advocate General's Opinions. The Advocate General's Opinions do not have binding legal effect, but future decisions of the Court of Justice will generally follow the interpretation of the law contained therein.
C‑696/20 - B. kontra Dyrektor Izby Skarbowej w W.
In this case, a Dutch-based company ("B") was involved as an intermediary in a chain involving at least three operators. It purchased goods from a company established in Poland ('BOP') and re-sold these goods to its own customers in other Member States. Although this chain did not involve fraud, and although VAT was effectively declared at all stages, the Polish authorities considered that this was wrongly done, as the supply of goods related to the transport of goods directly from the BOP to B's final customers was wrongly classified. Whereas B treated the first transaction (BOP's sales to B) as a domestic transaction and the second transaction (B's own sales to its customers) as an intra-Community transaction and linked the transport to the latter, the Polish authorities linked the transport, and thus the intra-Community character, to the first transaction.
This reclassification led the Polish authorities to apply the so-called “fictitious place of supply” rule. According to it, in the case of intra-Community acquisitions of goods, if it cannot be proved that the VAT is paid by the person acquiring the goods in the Member State of arrival of the goods, the VAT is payable in the Member State whose VAT ID number the customer used when acquiring the goods. Since B was unable to prove that VAT was levied on the reclassified intra-Community acquisition in the Member States of final destination of the goods, the Polish authorities claimed payment of VAT on the basis of the Polish VAT ID number used by B for that acquisition, even though the tax had already been charged by B's customers in the Member State of arrival of the goods.
In the Advocate General's opinion, the application of the fictitious place of supply rule is independent of the country VAT ID number used by the customer when acquiring the goods (the use of the VAT ID number of the Member State of dispatch of the goods is not an exclusion). The fictitious place of supply rule is applicable for the first transaction of a chain transaction irrespective of whether the tax on the second supply is paid at the place of arrival of the goods. However, if the VAT exemption on the first transaction as an intra-Community supply is disputed by the domestic authorities, the related intra-Community acquisition cannot be taxed, since the VAT liability attached to the intra-Community acquisition presupposes a VAT-exempt intra-Community supply.
C-294/21 - Navitours SARL
Under the relevant provisions of the VAT Directive, the place where transport services are supplied shall be the place where transport takes place, having regard to the distances covered.
In the Advocate General's opinion, in the special situation where the place of supply of passenger transport services is the place which, under international agreements concluded by the Member States, falls within the jurisdiction of several Member States, the common system of value added tax does not preclude the two Member States from agreeing to share the right of taxation or to have it exercised by one of them alone. In the latter case, the other State loses its right to tax the transaction.
The judgments of the Court of Justice and the Opinions of the Advocate General in these cases provide a new, modern perspective on the interpretation of the rules of the common system of value added tax at a principled level, which will highly contribute to the future development of the interpretation of the EU VAT law by the national authorities.
20 April, 2022
