On 19 December 2018, the European Court of Justice gave its judgment in Case C‑414/17 (AREX CZ a.s.). The case deals with the question of which transaction in a cross-border sales chain is to be regarded as the exempt intra-Community supply if there is a single physical movement of goods.
The case concerns multiple sales of fuel which had originally been loaded in refineries of Shell Austria GmbH in Austria. It was sold by the Austrian company Doppler Mineralöle GmbH (‘Doppler’) to four different companies, Burley s.r.o., Profikredit s.r.o., Bore s.r.o. and Top Ten Development s.r.o (‘the Czech first purchasers’), each of which is established in the Czech Republic.
The Czech first purchasers had entered into a contract with Garantrans s.r.o. (‘Garantrans’), which acted for them as registered consignee within the meaning of the Excise Duty Directive in order to facilitate transport under a duty suspension arrangement.
The Czech first purchasers sold the fuel to a further link in the chain, established in the Czech Republic. That link was in some cases TM Truck s.r.o. and in other cases Cllaruss Gall s.r.o. Those companies in turn sold the fuel to Kont Fuel Distribution s.r.o (‘Kont Fuel’) and in other cases to Benaft s.r.o. (‘Benaft’), the direct contractual partners of Arex.
For the sale to Arex, Kont Fuel and Benaft showed the Czech VAT paid by Arex and paid over by Kont Fuel and Benaft. Arex claimed deduction of the VAT paid to Kont Fuel and Benaft.
The fuel was transported from Austria to the Czech Republic under a duty suspension arrangement at the expense of Arex. Garantrans paid excise duty on behalf of the Czech first purchasers in the Czech Republic.
Note: Normally the product subject to excise duty must first be transported to a place across the border designated by a registered consignee within the meaning of the Excise Duty Directive, where it is released for consumption. Only then can the transport to the final place of consignment take place.
On the basis of a tax inspection of Arex, the Czech Republic tax office took the view that, as consignee of an exempt intra-Community supply, Arex was liable for tax on an intra-Community acquisition. It therefore conducted a reassessment of the VAT payable with concurrent VAT deduction. However, it denied Arex the right to deduct the VAT paid to Kont Fuel and Benaft, as that VAT had not been due at all because it related to an exempt intra-Community supply.
Arex, on the other hand, considers that the Czech first purchasers had made an intra-Community acquisition. Arex argued that the supply relating to the transport under a duty suspension arrangement is always the exempt intra-Community supply. The acquisition associated with that supply is therefore subject to tax whilst all subsequent supplies are subject to VAT in the Czech Republic.
In view of the large number of sales which correspond to a single cross-border movement of goods, the referring court asks which of the supplies is the exempt intra-Community supply. In particular, the question arises whether it is relevant that the transport took place under a special excise duty suspension arrangement.
Opinion of the Advocate General
Advocate General KOKOTT delivered its opinion on 25 July 2018.
The conclusion in this Opinion is that the VAT rules are separate from the Excise rules, and, that the exemption for excise duties does not automatically mean that this determines the place of supply for VAT of a transaction.
1. Article 138(2)(b) of Directive 2006/112/EC is applicable only to the supply of products subject to excise duty for taxable persons, whose other acquisitions are not subject to VAT pursuant to Article 3(1) of that directive. Other than the exemption laid down therein, Article 138(2)(b) of the directive does not contain any provision for the purpose of ascribing movement of goods under a duty suspension arrangement to a certain supply in the case of a cross-border supply chain.
2. In ascribing the single cross-border movement of goods to a certain supply in a supply chain, the crucial factor is who bears the risk for the accidental loss of the goods when the goods are transported to another link in the supply chain.
The European Court Of Justice ruled as follows:
- In the presence of a chain of successive operations which has given rise only to one intra-Community transport of the excise goods under the excise duty suspension scheme, the acquisition made by the operator liable to pay the excise duty in the Member State of destination of the consignment or the transport of the excise duty can not be classified as an intra-Community acquisition, when such transport can not be attributed to this acquisition.
- In the presence of a chain of successive acquisitions involving the same products subject to excise duty and only one intra-Community transport of these products under the suspension of excise duty, the fact that those products are transported under that system is not a decisive factor in establishing to what acquisition the carriage must imputed for the purposes of its value added tax bid under that provision.
In short: the ECJ agrees with the AG, and for VAT purposes the transportation itself is still the most important and decisive factor to determine where in the supply chain the intra-Community transaction takes place.