Flashback on ECJ Cases C-606/12 and C-607/12 (Dresser Rand) – Deemed intra-Community supply of ‘own goods’ unless returned to Member State of origin

On March 6, 2014, the ECJ issued its decision in the joint cases C-606/12 and C-607/12 (Dresser Rand) related to the condition relating to the return of goods to the Member State from which they were initially dispatched or transported to determine whether a x-border supply of ”own” goods qualifies as a taxable transaction.

Article in the EU VAT Directive

Article 17(2)(f) of Directive 2006/112/EC

Article 17
1. The transfer by a taxable person of goods forming part of his business assets to another Member State shall be treated as a supply of goods for consideration.
“Transfer to another Member State” shall mean the dispatch or transport of movable tangible property by or on behalf of the taxable person, for the purposes of his business, to a destination outside the territory of the Member State in which the property is located, but within the Community.
2. The dispatch or transport of goods for the purposes of any of the following transactions shall not be regarded as a transfer to another Member State:

(f) the supply of a service performed for the taxable person and consisting in valuations of, or work on, the goods in question physically carried out within the
territory of the Member State in which dispatch or transport of the goods ends, provided that the goods, after being valued or worked upon, are returned to that taxable person in the Member State from which they were initially dispatched or transported;

Facts

Dresser-Rand France manufactures industrial natural gas compressors. It concluded a contract with a Spanish customer for the delivery of the complex goods. DR France moved its goods from France to Italy. Subsequently, in Italy, an Italian subcontractor carried out some work related to these goods (whose performance should be classified as a supply of goods or a supply of services – there is a dispute on this). Subsequently, the final goods were delivered to the Spanish end customer.

Should a transfer of own goods from France to Italy be regarded as an intra-Community supply of goods or should such a transfer be excluded from this concept under Art. 17.2.f VATD, according to which there is no intra-Community supply of goods if the goods are the subject of services rendered on them after the transfer has been made, and then they are returned to the taxpayer in the original country of dispatch.

Questions

Does the transfer of goods to Italy from another Member State for the purpose of verifying whether those goods may be adapted to other goods acquired within Italy, without anything being done to the goods brought into Italy, come within the notion of ‘work on the goods’ referred to in Article 17(2)(f) of Directive 2006/112/EC and, in this connection, is it appropriate to assess the nature of the transactions which took place between F.B. ITMI and DR-IT?

Is Article 17(2)(f) of Directive 2006/112/EC to be interpreted as precluding the Member States from providing in their legislation or practices that the dispatch or transport of goods is not to be treated as a transfer to another Member State except on condition that the goods are returned to the Member State from which they were initially dispatched or transported?

AG Opinion

None

Decision

Article 17(2)(f) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that, in order for the dispatch or transport of goods not to be classified as a transfer to another Member State, those goods, after the work on them has been carried out in the Member State in which dispatch or transport of the goods ends, must necessarily be returned to the taxable person in the Member State from which they were initially dispatched or transported.

Source