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ECJ Case C-108/17 (Enteco Baltic) – Judgment – Exemption may not be denied to an importer acting in good faith where the conditions for exemption from the IC supply made after importation are not fulfilled

Judgment of 20 June 2018 in case C-108/17 – Enteco Baltic

Context: Reference for a preliminary ruling — Value added tax (VAT) — Directive 2006/112/EC — Article 143(1)(d) and Article 143(2) — Exemptions from VAT on importation — Importation followed by an intra-Community supply — Conditions — Evidence of dispatch or transport of the goods to another Member State — Transport under an excise duty suspension arrangement — Transfer to the purchaser of the right to dispose of goods as owner — Tax evasion — No obligation of the competent authority to help the taxable person collect the necessary information to show that the conditions for exemption are satisfied


Articles in the EU VAT Directive

Article 138, 143(1)(d) and Article 143(2) of the EU VAT Directive 2006/112/EU

Article 138 (Exemption for intra-Community supplies)
1. Member States shall exempt the supply of goods dispatched or transported to a destination outside their respective territory but within the Community, by or on behalf of the vendor or the person acquiring the goods, for another taxable person, or for a non-taxable legal person acting as such in a Member State other than that in which dispatch or transport of the goods began.
2. In addition to the supply of goods referred to in paragraph 1, Member States shall exempt the following transactions:
(a) the supply of new means of transport, dispatched or transported to the customer at a destination outside their respective territory but within the Community, by or on behalf of the vendor or the customer, for taxable persons, or non-taxable legal persons, whose intra-Community acquisitions of goods are not subject to VAT pursuant to Article 3(1), or for any other non-taxable person;

(b) the supply of products subject to excise duty, dispatched or transported to a destination outside their respective territory but within the Community, to the
customer, by or on behalf of the vendor or the customer, for taxable persons, or non-taxable legal persons, whose intra-Community acquisitions of goods other
than products subject to excise duty are not subject to VAT pursuant to Article 3(1), where those products have been dispatched or transported in accordance with Article 7(4) and (5) or Article 16 of Directive 92/12/EEC;

(c) the supply of goods, consisting in a transfer to another Member State, which would have been entitled to exemption under paragraph 1 and points (a)>and (b) if it had been made on behalf of another taxable person.

Article 143 (Exemptions on importation)
1. Member States shall exempt the following transactions:
(d) the importation of goods dispatched or transported from a third territory or a third country into a Member State other than that in which the dispatch or transport of the goods ends, where the supply of such goods by the importer designated or recognised under Article 201 as liable for payment of VAT is exempt under Article 138;

2. The exemption provided for in paragraph 1(d) shall apply in cases when the importation of goods is followed by the supply of goods exempted under Article 138(1) and (2)(c) only if at the time of importation the importer has provided to the competent authorities of the Member State of importation at least the following information:
(a) his VAT identification number issued in the Member State of importation or the VAT identification number of his tax representative, liable for payment of the VAT, issued in the Member State of importation;
(b) the VAT identification number of the customer, to whom the goods are supplied in accordance with Article 138(1), issued in another Member State, or his own VAT identification number issued in the Member State in which the dispatch or transport of the goods ends when the goods are subject to a transfer in accordance with Article 138(2)(c);
(c) the evidence that the imported goods are intended to be transported or dispatched from the Member State of importation to another Member State. However, Member States may provide that the evidence referred to in point (c) be indicated to the competent authorities only upon request.


Facts

  • Enteco Baltic (Lithuania) operates in the wholesale fuel trade. It imported into Lithuania fuel from Belarus and placed the fuel under a customs procedure, which allows goods to be released for free circulation without being subject to VAT on importation. In the import declarations, Enteco Baltic specified the VAT ID numbers of purchasers in another EU country to whom it intended to supply the goods.
  • The fuel was sold with an ‘ex-works’ delivery term. Enteco Baltic kept the excise documents and a copy of the CMRs as evidence that the goods had been transported from Lithuania to another EU country.
  • The Lithuanian tax authorities performed an audit with Enteco Baltic and found that Enteco Baltic had provided sufficient evidence to show that the goods had left Lithuanian and that the right to dispose of the goods as owner had actually been transferred to the purchasers.
  • The Lithuanian Customs authorities however, also performed an audit, and found that Enteco Baltic had not supplied the fuel to the taxable persons shown on the import declarations, or had not shown that the fuel had been transported to the persons whose names were stated on the invoices. Therefore, a VAT assessment was raised for import VAT due by Enteco Baltic.

Questions

  • Is Article 143(2) of the VAT Directive  to be interpreted as prohibiting a tax authority of a Member State from refusing to apply the exemption provided for in Article 143(1)(d) of that directive solely because at the time of importation the goods were planned to be supplied to one VAT payer and therefore its VAT identification number was specified in the import declaration, but later, after a change in circumstances, the goods were transported to another taxable person (VAT payer) and the public authority was provided with full information about the identity of the actual purchaser?
  • In circumstances such as those of the present case, can Article 143(1)(d) of the VAT Directive be interpreted as meaning that documents that have not been disproved (e-AD [electronic administrative document] consignment notes and e-ROR [electronic report of receipt] confirmations) confirming transport of the goods from a tax warehouse in the territory of one Member State to a tax warehouse in another Member State may be regarded as sufficient proof of transportation of the goods to another Member State?
  • Is Article 143(1)(d) of the VAT Directive to be interpreted as prohibiting a tax authority of a Member State from refusing to apply the exemption provided for in that provision if the right of disposal was transferred to the purchaser of the goods not directly, but via the persons specified by it (transport undertakings/tax warehouses)?
  • Does an administrative practice conflict with the principle of neutrality of VAT and of the protection of legitimate expectations where under that practice the interpretation differs as to what is to be regarded as a transfer of the right of disposal, and as to what evidence must be submitted to substantiate such a transfer, according to whether Article 167 or Article 143(1)(d) of the VAT Directive is applicable?
  • Does the scope of the principle of good faith in relation to the levying of VAT also encompass the right of persons to exemption from import VAT (under Article 143(1)(d) of the VAT Directive) in cases such as that in the main proceedings, that is to say, where the customs office denies the right of a taxable person to exemption from import VAT on the basis that the conditions for further supply of goods within the European Union (Article 138 of the VAT Directive) were not complied with?
  • Is Article 143(1)(d) of the VAT Directive to be interpreted as prohibiting an administrative practice of Member States under which the assumption that (i) the right of disposal was not transferred to a specific contractual partner and (ii) that the taxpayer knew or could have known about possible VAT fraud committed by the contractual partner is based on the fact that the undertaking communicated with the contractual partners by electronic means of communication and that it was established when the investigation was carried out by a tax authority that the contractual partners did not operate at the addresses specified and did not declare the VAT on the transactions with the taxable person?
  • Is Article 143(1)(d) of the VAT Directive to be interpreted as meaning that, although the duty to substantiate the right to a tax exemption falls on the taxpayer, this does not, however, mean that the competent public authority deciding the issue of transfer of the right of disposal has no obligation to collect information accessible only to public authorities?

AG Opinion

(1)      Article 143(2)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2009/69/EC of 25 June 2009, as regards tax evasion linked to imports, must be interpreted as meaning that, in the light of the circumstances of the case in the main proceedings, it does not allow the competent authorities of a Member State to refuse the exemption provided for in Article 143(1)(d) of that directive merely on the basis that, at the time of importation, the goods were intended to be supplied to a taxable person in another Member State, which explains why the value added tax (VAT) identification number of that taxable person is specified in the import declaration, although, as the result of a subsequent change of circumstances, the goods were supplied to another taxable person (also liable for payment of VAT) and the authorities of the first Member State were provided with full information relating to the identity of the actual purchaser.

(2)      Article 143(1)(d) and (2)(c) of Directive 2006/112, as amended by Directive 2009/69, must be interpreted as meaning that documents, such as the electronic administrative document (‘the e-AD’) and the consignment note drawn up on the basis of the Convention, signed at Geneva on 19 May 1956, on the Contract for the International Carriage of Goods by Road (‘the CMR consignment note’), may be regarded as evidence establishing that, at the time of importation, the goods imported are intended to be dispatched or transported to another Member State. Article 138 of Directive 2006/112, as amended by Directive 2009/69, to which Article 143(1)(d) of Directive 2006/112, as amended, refers, must be interpreted as meaning that reports of receipt of e-ADs and ‘e-ROR’ confirmation letters may be regarded as evidence establishing that the imported goods, which were the subject of the intra-Community supply, left the territory of the Member State of importation and supply and were dispatched to the Member State of destination.

(3)      Article 143(1)(d) of Directive 2006/112, as amended by Directive 2009/69, must be interpreted as meaning that it does not allow the competent authorities of a Member State to refuse the exemption from import VAT where the right to dispose, as owner, of the goods which have been imported and supplied has not been directly transferred to the purchaser, provided that that right has indeed been transferred to that taxable person and not to other persons, which it is for the referring court to ascertain.

(4)      The principle of legal certainty must be interpreted as meaning that it prevents the customs authority of a Member State from refusing to grant entitlement to exemption from import VAT to a taxable person, acting in good faith and without its having been established that he knew or ought to have known that he was participating in tax evasion, on the ground that one of the substantive conditions for the VAT exemption for an intra-Community supply following importation is no longer fulfilled, even though that condition had already been regarded as having been fulfilled by the competent authority of the same Member State following an inspection of the evidence and documents provided by the taxable person. It is for the referring court to ascertain whether the facts of the case in the main proceedings make it possible to find that all those circumstances apply and all those conditions are fulfilled, it being understood that the mere fact that the taxable person used electronic means to communicate with the other parties to the contract cannot give rise to an assumption of negligence or bad faith on the part of that taxable person.

(5)      Article 143(1)(d) and (2) of Directive 2006/112, as amended by Directive 2009/69, must be interpreted as meaning, first, that it is for the taxable person who relies on the exemption from import VAT to establish that the substantive conditions for that exemption are fulfilled and, secondly, that that taxable person cannot require that the competent authorities of the Member State of importation, when examining whether the right to dispose of the goods supplied as owner was transferred to the purchaser, collect from other taxable persons information accessible only to the public authorities.


Decision

1.      Article 143(1)(d) and Article 143(2)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2009/69/EC of 25 June 2009, must be interpreted as precluding the competent authorities of a Member State from refusing exemption from value added tax on importation on the sole ground that, following a change of circumstances after the importation, the goods in question have been supplied to a taxable person other than the person whose value added tax identification number was stated in the import declaration, where the importer has communicated all the information on the identity of the new purchaser to the competent authorities of the Member State of import, provided that it is shown that the substantive conditions for the exemption of the subsequent intra-Community supply are actually satisfied.

2.      Article 143(1)(d) in conjunction with Article 138 and Article 143(2)(c) of Directive 2006/112, as amended by Directive 2009/69, must be interpreted as meaning that:

–        documents which confirm the transport of goods from a tax warehouse in the Member State of import, not to the purchaser but to a tax warehouse in another Member State, may be regarded as sufficient evidence of dispatch or transport of the goods to another Member State;

–        documents such as consignment notes on the basis of the Convention on the Contract for the International Carriage of Goods by Road, signed at Geneva on 19 May 1956, as amended by the Protocol of 5 July 1978, and electronic administrative documents accompanying movements under suspension of excise duty may be taken into account to show that, at the time of importation into a Member State, the goods concerned are intended to be dispatched or transported to another Member State within the meaning of Article 143(2)(c) of Directive 2006/112, as amended, provided that the documents are submitted at that time and include all the necessary information. Those documents, as also the electronic confirmations of the supply of the goods and the report of receipt issued following a movement under suspension of excise duty, are capable of showing that the goods have actually been dispatched or transported to another Member State in accordance with Article 138(1) of Directive 2006/112, as amended.

3.      Article 143(1)(d) of Directive 2006/112, as amended by Directive 2009/69, must be interpreted as precluding the authorities of a Member State from refusing an importer the right to the exemption from value added tax laid down in that provision for imports of goods into that Member State carried out by him and followed by intra-Community supplies on the ground that the goods were not transferred directly to the purchaser but were handled by transport undertakings and tax warehouses designated by the purchaser, where the power to dispose of the goods as owner was transferred to the purchaser by the importer. In this context, the concept of ‘supply of goods’ within the meaning of Article 14(1) of that directive, as amended, must be interpreted in the same way as in the context of Article 167 of the directive, as amended.

4.      Article 143(1)(d) of Directive 2006/112, as amended by Directive 2009/69, must be interpreted as precluding an administrative practice under which, in circumstances such as those of the dispute in the main proceedings, an importer acting in good faith is refused the right to the exemption from value added tax on importation where the conditions for the exemption of the subsequent intra-Community supply are not satisfied, because of tax evasion on the part of the purchaser, unless it is shown that the importer knew or ought to have known that the transaction was involved in tax evasion committed by the purchaser and did not take all reasonable steps in his power to avoid participation in the evasion. The mere fact that the importer and the purchaser communicated by electronic means of communication cannot allow it to be presumed that the importer knew or could have known that he was participating in tax evasion.

5.      Article 143(1)(d) of Directive 2006/112, as amended by Directive 2009/69, must be interpreted as meaning that the competent national authorities are not obliged, when examining the transfer of the power to dispose of goods as owner, to collect information to which only the public authorities have access.


Summary

  • EU countries cannot refuse a VAT import exemption on the sole ground that the goods were supplied to another person than the person whose VAT ID number was stated in the import declaration, provided that it is shown that the substantive conditions for the exemption of the subsequent intra-Community supply are actually satisfied
  • Documents which confirm the transport of goods from a tax warehouse in the EU country of import, not to the purchaser but to a tax warehouse in another EU country, may be regarded as sufficient evidence of dispatch or transport of the goods to another EU country
  • Documents such as CMRs and Excise documents may be taken into account to show that, at the time of importation into an EU country, the goods are intended to be dispatched or transported to another EU country 

Source


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