On April 22, 2010, the ECJ issued its decision in the case C-536/08 (X and fiscale eenheid Facet-Facet Trading).
Context: Sixth VAT Directive – Article 17(2) and (3) – Article 28b(A)(2) – Right to deduction – Transitional arrangements for the taxation of trade between Member States – Place of the intra-Community acquisitions of goods
Article in the EU VAT Directive
Articles 17(2) and (3) and 28b(A)(2) of the Sixth Directive (Articles 168, 169, 170, 40, 41, 42 of the EU VAT Directive 2006/112/EC).
Article 40 (Place of supply of an Intra-Community Supply of Goods)
The place of an intra-Community acquisition of goods shall be deemed to be the place where dispatch or transport of the goods to the person acquiring them ends.
Article 41 (Place of supply of an Intra-Community Supply of Goods)
Without prejudice to Article 40, the place of an intra-Community acquisition of goods as referred to in Article 2(1)(b)(i) shall be deemed to be within the territory of the Member State which issued the VAT identification number under which the person acquiring the goods made the acquisition, unless the person acquiring the goods establishes that VAT has been applied to that acquisition in accordance with Article 40.
If VAT is applied to the acquisition in accordance with the first paragraph and subsequently applied, pursuant to Article 40, to the acquisition in the Member State in which dispatch or transport of the goods ends, the taxable amount shall be reduced accordingly in the Member State which issued the VAT identification number under which the person acquiring the goods made the acquisition.
Article 42 (Place of supply of an Intra-Community Supply of Goods)
The first paragraph of Article 41 shall not apply and VAT shall be deemed to have been applied to the intra-Community acquisition of goods in accordance with Article 40 where the following conditions are met:
(a) the person acquiring the goods establishes that he has made the intra-Community acquisition for the purposes of a subsequent supply, within the territory of the Member State identified in accordance with Article 40, for which the person to whom the supply is made has been designated in accordance with Article 197 as liable for payment of VAT;
(b) the person acquiring the goods has satisfied the obligations laid down in Article 265 relating to submission of the recapitulative statement.
Article 168 (Origin and Scope of Right of Deduction)
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18 (a)and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.
Article 169 (Origin and Scope of Right of Deduction)
In addition to the deduction referred to in Article 168, the taxable person shall be entitled to deduct the VAT referred to therein in so far as the goods and services are used for the purposes of the following:
(a) transactions relating to the activities referred to in the second subparagraph of Article 9(1), carried out outside the Member State in which that tax is due or paid, in respect of which VAT would be deductible if they had been carried out within that Member State;
(b) transactions which are exempt pursuant to Articles 138, 142 or 144, Articles 146 to 149, Articles 151, 152, 153 or 156, Article 157(1)(b), Articles 158 to 161 or Article 164;
(c) transactions which are exempt pursuant to points (a) to (f) of Article 135(1), where the customer is established outside the Community or where those transactions relate directly to goods to be exported out of the Community.
Article 170 (Origin and Scope of Right of Deduction)
All taxable persons who, within the meaning of Article 1 of Directive 86/560/EEC, Article 2(1) and Article 3 of Directive 2008/9/EC and Article 171 of this Directive, are not established in the Member State in which they purchase goods and services or import goods subject to VAT shall be entitled to obtain a refund of that VAT insofar as the goods and services are used for the purposes of the following:
(a) transactions referred to in Article 169;
(b) transactions for which the tax is solely payable by the customer in accordance with Articles 194 to 197 or Article 199.
- X, an undertaking which is established in the Netherlands, markets computers and computer accessories. Over the period from 1 January 1998 to 31 December 1999, it purchased goods of that kind from undertakings having their registered offices in Member States other than the Netherlands and Spain (‘the suppliers’) and sold them on to customers established in Spain.
- In the invoices addressed to X the suppliers did not charge value added tax (VAT), but referred to X’s Netherlands VAT identification number. In the invoices sent to its customers, X subsequently referred to the application of Article 28c(E)(3) of the Sixth Directive.
- In its tax return for the period from 1 January 1998 until 30 September 1998, X did not include any VAT due in respect of intra-Community acquisitions. Nor did it deduct any VAT in respect of those intra-Community acquisitions. Furthermore, it did not make any statements on intra-Community supplies, as referred to in Article 37a of the Law on turnover tax and in the final subparagraph of Article 22(6)(b) of the Sixth Directive.
- By contrast, as regards the period from 1 October 1998 until 30 June 1999, X did include in its return the VAT due in respect of intra-Community acquisitions and it deducted that VAT. It also made statements on intra-Community supplies as referred to in the provisions cited in the preceding paragraph. As set out in the order for reference, it was not established that the goods in question were dispatched or transported directly to customers established in Spain as part of the transactions referred to in paragraph 14 of this judgment.
- As he took the view that X had acquired the goods in question within the terms of Article 17a of the Law on turnover tax, the Inspecteur van de Belastingdienst (Inspector of Taxes, ‘the Inspector’) imposed on the party concerned, in respect of the abovementioned period, an additional assessment to VAT. He took the view that X had acquired those goods in the Netherlands pursuant to Article 17b of that law and Article 28b(A)(2) of the Sixth Directive. Following an objection lodged by X against that decision, the Inspector upheld the imposition and in addition found that X had no right of deduction in respect of those intra-Community acquisitions.
- X appealed to the Gerechtshof te ’s-Gravenhage (Regional Court of Appeal, The Hague) against that decision. By judgment of 22 April 2005, that court declared the appeal to be well founded, set aside the contested decision and reduced the amount of the additional assessment. The Staatssecretaris appealed in cassation against that judgment to the Hoge Raad der Nederlanden (Supreme Court of the Netherlands).
- Facet, a single taxable unit established in the Netherlands, markets computer parts. In the period from 1 December 2000 to 30 September 2001, it purchased goods of that kind from undertakings in Germany and Italy (‘the suppliers’) and sold them on to customers who were established in Cyprus (‘the customers’) and had a tax representative established in Greece. The goods were transferred directly from Germany and Italy to Spain.
- The suppliers did not include any VAT in the invoices. They did, however, refer on those invoices to Facet’s Netherlands VAT identification number. Facet also did not include any VAT in the invoices which it forwarded to its Cypriot customers. However, it referred on those invoices to the Greek identification number notified to it by the customers.
- In its tax return in the Netherlands, Facet mentioned the VAT due in respect of intra-Community acquisitions and deducted that VAT. It also referred to the supplies to the customers as intra-Community supplies for the purposes of Article 37a of the Law on turnover tax and the final subparagraph of Article 22(6)(b) of the Sixth Directive, referring to the Greek VAT identification numbers of the customers or their tax representatives. However, neither the tax representatives nor the customers themselves filled out declarations of intra‑Community acquisitions with respect to the relevant purchases. Nor was any notification given of intra-Community supplies or any ‘recapitulative statement’, within the meaning of the final subparagraph of Article 22(6)(b) of the Sixth Directive, submitted. Furthermore, the customers were not registered in Spain for VAT purposes and did not fill out any declarations of intra-Community acquisitions in that country.
- The Inspector took the view that Facet had made intra-Community acquisitions and that it was not entitled to deduct the VAT. In those circumstances, he imposed an additional assessment.
- Facet appealed to the Gerechtshof te Amsterdam (Regional Court of Appeal, Amsterdam) against the Inspector’s decision. By judgment of 27 February 2006, that court declared the appeal to be well founded, set aside the contested decision and reduced the amount of the additional assessment. The Staatssecretaris appealed in cassation against that judgment to the Hoge Raad der Nederlanden.
Articles 17(2) and (3) and 28b(A)(2) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 92/111/EEC of 14 December 1992, must be interpreted as meaning that a taxable person coming within the situation referred to in the first subparagraph of Article 28b(A)(2) does not have the right immediately to deduct the input value added tax charged on an intra-Community acquisition.
Similar ECJ cases
Reference to the case in the EU Member States
- Netherlands: Customer VAT identification number not required for zero-rate intra-Community supplies (BTW Jurisprudentie)
- Germany: BFH: intra-community acquisitions put to the test – no input tax deduction when using an incorrect VAT ID number (Deloitte)
- HMRC internal manual: VAT Fraud
- Austria: Chain Transactions – Apparently simple facts extensive effects (Deloitte)
- UK – Bloomsburry Professional