Brussels, 07/09/2012 (Agence Europe) - A company which has sold goods for transport to another member state may be refused the VAT exemption if it has failed to prove that the supply is an intra-Community transaction, or if it knew or should have known that the supply is somehow connected with fraud by the purchaser and has failed to take reasonable measures to avoid participating in fraud. On the other hand, if the company has produced the requisite proof and acted in good faith, it cannot be refused the VAT exemption on the ground that the purchaser did not transport the goods to a destination outside the member state of dispatch.
Thus ruled the European Court of Justice on Thursday 6 September 2012 in Case C-273/11, in which interpretation of EU VAT Directive 2006/112/EC was requested. Baranya Court in Hungary wanted to know how much information must be supplied to prove that the goods exempt from VAT had actually been sent to another country (as required by EU VAT exemption rules) if the selling company does not actually carry out the delivery itself, and whether said company can be held responsible for misdoings by the purchaser if it is shown that the goods never reached the destined member state.
In the ruling, the Court of Justice notes, first of all, the three conditions which must be satisfied if a VAT exemption is to be granted for an intra-Community supply of goods: (a) the right to dispose of the goods as owner must have been transferred to the purchaser; (b) the vendor must establish that the goods have been dispatched or transported to another member state; and (c) as a result of that dispatch or transport, the goods must have physically left the territory of the member state of supply. In response to the two questions raised by the Hungarian court, the European Court of Justice said that in the absence of any specific provision in the VAT Directive as to the evidence capable of establishing that an intra-Community supply of goods has been carried out, it is for the member states to determine what constitutes satisfactory evidence, but in accordance with the general principles of EU law, such as the principles of legal certainty and proportionality. In that regard, the Court states that the obligations with regard to evidence must accordingly be determined in the light of national law and in accordance with the general practice established in respect of similar transactions. However, a member state may not require the taxable person to provide conclusive proof that the goods have physically left its territory. Once these obligations have been met, the seller cannot be held liable for VAT in the member state of supply if the purchaser fails to fulfil their contractual obligation to ship or transport the goods out of the country of supply. In the particular case, it is the purchaser that must be held liable for the VAT in the country of delivery. However, the Court points out that a vendor may not be granted the VAT exemption attaching to an intra-Community transaction if it knew or should have known that the transaction was part of a tax fraud committed by the purchaser and had not taken every step which could reasonably asked of it to prevent that fraud from being committed. (FG/transl.fl)