Judgment of 25 October 2018 in case C-528/17 (Milan Božičevič Ježovnik), dealing with the question if a customs agent can be held liable for VAT if there is VAT fraud after the goods have been imported.
Context: Reference for a preliminary ruling — Value added tax (VAT) — Directive 2006/112/EC — Article 143(1)(d) — Exemption from import VAT — Importation followed by an intra-Community supply — Risk of tax evasion — Good faith of the taxable importer and supplier — Assessment — Duty of care of the taxable importer and supplier
Decision
Article 143(1)(d) 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 to the effect that, in circumstances where the taxable importer and supplier benefitted from an exemption from import value added tax on the basis of an authorisation issued after a prior examination by the competent customs authorities in the light of the evidence provided by that taxable person, the latter is not required to pay value added tax after the event where it is revealed, during a subsequent examination, that the substantive conditions for the exemption had not been met, except where it is established, in the light of objective evidence, that that taxable person knew, or should have known, that the supplies subsequent to the imports at issue were involved in fraud committed by the customer and that he did not take all reasonable steps in his power to avoid that fraud, which is a matter for the referring court to determine.
Facts (simplified):
- Mr Božičevič Ježovnik was a sole trader, importing and distributing bananas. He imported bananas from a third country into Slovenia.
- The imported bananas were placed under the procedure known as ‘customs procedure 42’ which allows their release for free circulation, with no import VAT payable. In order to demonstrate that those bananas were intended to be transported in another Member State, Mr Božičevič Ježovnik provided end-use and final destination declarations bearing the stamp of the declared recipients of the goods.
- Mr Božičevič Ježovnik sold the imported bananas to customers established in Romania following negotiations conducted and orders made over the telephone. The invoices and other documents were exchanged by email, fax and normal post. Before the conclusion of the contracts, Mr Božičevič Ježovnik checked the Economic Operators Registration and Identification number (‘EORI number’) and the validity of the VAT identification numbers of the customers. He asked them to make a declaration to the effect that they would be responsible for the transport of the bananas to another EU country.
- After receiving payment from the customers, Mr Božičevič Ježovnik brought the customs-cleared bananas to the port of Koper (Slovenia), thus transferring the ownership rights over the bananas to those customers. The customers then took charge of the transportation of the bananas from Slovenia to Romania and the cross-referencing of the CMR consignment notes which were validated after the goods were unloaded at their final destination.
- The Slovenian customs authorities found that a number of Romanian customers had been registered for VAT shortly before the first delivery and removed from the VAT system on the same day. According to the customs authorities, the CMR consignment notes presented by Mr Božičevič Ježovnik were barely legible and incomplete, and contained insufficient information about the date and place for unloading the goods. In addition, the customs authorities noted that the sales value of the bananas and the price for which they were purchased by Mr Božičevič Ježovnik were identical or deviated only marginally, that the weight of the bananas indicated in the sales invoices differed from the figures provided in the customs declarations and that the invoices registered in the accounts differed from those submitted, for the same goods, to the customs office and the tax authorities.
- The customs office gathered information from the Romanian tax authorities. According to those authorities, some of the Romanian customers were ‘missing traders’ who did not conduct any business at the registered address, who did not answer their calls and whose directors were Turkish, Iraqi, Hungarian or Egyptian nationals. In addition, according to those authorities, some transporters confirmed that the bananas were transported to and unloaded at a wholesale centre in Romania. They stated that they had received the transport orders over the telephone and that payment had been made in cash. Other carriers questioned the authenticity of the signatures on the transport documents and the existence of any link with the customers.
- In the light of that information, the customs office considered that Mr Božičevič Ježovnik had not demonstrated that the bananas at issue had left the territory of Slovenia and been delivered to the declared customers. In addition, that office considered that Mr Božičevič Ježovnik did not act with due care, failed to carry out the basic checks of the customers and disregarded the indications of VAT fraud.
- Mr Božičevič Ježovnik received a VAT assessment.
Questions
- Is the importer (declarant), who, at the time of the import, requests exemption from payment of VAT (import in accordance with procedure 42), liable for payment of the VAT (when it is subsequently found that the conditions necessary for exemption have not been satisfied) in the same way that he is liable for payment of the customs debt?
- If the answer is in the negative, is the liability of the importer equal to that of a taxable person making an intra-Community supply of goods?
- In the latter case, must the subjective element showing that the importer intended to abuse the VAT scheme be assessed differently from a case of the supply of goods within the European Union? Must that assessment be less strict, in the light of the fact that, in procedure 42, exemption from payment of VAT must be authorised in advance by the customs authority? Or must it be more strict, inasmuch as the transactions concerned are connected with the first entry into the European Union internal market of goods originating from third countries?
Decision
Article 143(1)(d) 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 to the effect that, in circumstances where the taxable importer and supplier benefitted from an exemption from import value added tax on the basis of an authorisation issued after a prior examination by the competent customs authorities in the light of the evidence provided by that taxable person, the latter is not required to pay value added tax after the event where it is revealed, during a subsequent examination, that the substantive conditions for the exemption had not been met, except where it is established, in the light of objective evidence, that that taxable person knew, or should have known, that the supplies subsequent to the imports at issue were involved in fraud committed by the customer and that he did not take all reasonable steps in his power to avoid that fraud, which is a matter for the referring court to determine.
Summary
Where the taxable importer and supplier benefitted from an exemption from import VAT on the basis of an authorisation issued after a prior examination by the competent customs authorities in the light of the evidence provided by that taxable person, the latter is not required to pay VAT after the event where it is revealed, during a subsequent examination, that the substantive conditions for the exemption had not been met. Except where it is established, in the light of objective evidence, that that taxable person knew, or should have known, that the supplies subsequent to the imports at issue were involved in fraud committed by the customer and that he did not take all reasonable steps in his power to avoid that fraud, which is a matter for the referring court to determine.
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