Flashback on ECJ Cases – C-33/16 (A) – VAT exemption not only for lifting services that take place in the final trade phase

On May 4, 2017, the ECJ issued its decision in the case C-33/16 (A).

Reference for a preliminary ruling — Taxation — Value added tax — Directive 2006/112/EC — Article 148(d) — Exemption — Supply of services to meet the direct needs of vessels used for navigation on the high seas — Loading and unloading of cargo by a subcontractor on behalf of an intermediary

Article in the EU VAT Directive

Article 148(d) of the EU VAT Directive 2006/112/EC.

Article 148
Member States shall exempt the following transactions:
(a) the supply of goods for the fuelling and provisioning of vessels used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities, or for rescue or assistance at sea, or for inshore fishing, with the exception, in the case of vessels used for inshore fishing, of ships’ provisions;
(b) the supply of goods for the fuelling and provisioning of fighting ships, falling within the combined nomenclature (CN) code 8906 10 00, leaving their territory and bound for ports or anchorages outside the Member State concerned;
(c) the supply, modification, repair, maintenance, chartering and hiring of the vessels referred to in point (a) and the supply, hiring, repair and maintenance of equipment, including fishing equipment, incorporated or used therein;
(d) the supply of services other than those referred to in point (c), to meet the direct needs of the vessels referred to in point (a) or of their cargoes;

Facts

A is a subsidiary of B Oy. It operates in two ports where it supplies loading and unloading, warehousing, shipping agency and freight forwarding services.
The services supplied by A include the loading and unloading of the cargo of vessels used for navigation on the high seas and for the purposes of a commercial activity. In practice, the loading and unloading is carried out by a subcontractor which invoices those services to A, which re-invoices them to its customers which, depending on the circumstances, may be B Oy, the holder of the goods, the loader, the forwarding company or the ship owner. The details of the vessel and the cargo concerned are sent to the subcontractor and set out both on its invoice and on the invoice issued by A.
A made a request for a tax decision from the Central Tax Board asking whether, in accordance with Paragraph 71(3) of the AVL, the loading and unloading of cargo carried out by subcontractors acting on behalf of its customers are eligible for exemption from VAT.
By decision of 1 October 2014, the Central Tax Board informed A that the services of loading and unloading cargo are not to be regarded as services exempt from VAT under Paragraph 71(3) of the AVL, which transposes Article 148(a), (c) and (d) of the VAT Directive, because the supply of services to vessels operating in international traffic or to their cargoes may be exempt from VAT only if those services are provided at the end of the commercial chain. In the circumstances under consideration in the request, the loading and unloading services are provided at an earlier stage.
A brought an appeal against that decision before the Korkein hallinto-oikeus (Supreme Administrative Court, Finland), on the ground that it was contrary to Article 148(d) of Directive 2006/112, since that provision must be interpreted as meaning that supplies of services which, by their nature, are linked to the direct needs of the cargo of vessels, such as loading and unloading of cargo, must be exempt from VAT, irrespective of the person which sells or buys those services.
In its defence, the Finnish tax administration relied, in particular, on the judgment of the Court of Justice of 14 September 2006, Elmeka (C‑181/04 to C‑183/04, EU:C:2006:563), arguing that the VAT exemption laid down by that provision applies only at the end of the commercial chain of the services concerned.
However, the referring court considers that, where it is clear from the nature of the service concerned that they are supplied to meet the direct needs of the cargo of vessels used for navigation on the high seas and for the purposes of a commercial activity, that judgment does not enable it to answer the question whether it is still necessary for the application of the VAT exemption that those services are directly invoiced to the ship owner.

Questions

Is Article 148(d) of Council Directive 2006/112/EC ¹ to be interpreted as meaning the loading and unloading of cargo onto and off a vessel are supplies of services made to meet the direct needs of the cargo of vessels for the purposes of Article 148(a)?

Given the findings of the Court of Justice in paragraph 24 of the judgment in Joined Cases C-181/04 to C-183/04 Elmeka, according to which the exemption provided for in those rules could not be extended to services supplied at an earlier stage in the commercial chain, is Article 148(d) of Directive 2006/112/EC to be interpreted as meaning that applies also to the services at issue in the case in main proceedings in which the service supplied by A Oy’s subcontractor in the first phase of operations concerns a service which has a direct physical relationship to the cargo, which A Oy invoices to the forwarding or transport company?

In light of the findings of the Court of Justice in paragraph 24 of the judgment in Elmeka, according to which the exemption provided for by the rules in question apply only to services which are supplied to the ship owner, is Article 148(d) of VAT Directive 2006/112/EC to be interpreted as meaning that that exemption cannot apply if the service is supplied to the cargo owner such as the exporter or importer of the cargo concerned?

AG Opinion

Article 148(d) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the concept of the supply of services to meet the direct needs of the vessels referred to in Article 148(a) of that directive or of their cargoes includes the services of loading and unloading cargo onto and off a ship.

Article 148(d) of the VAT Directive must be interpreted as meaning that the exemption provided for in that provision includes the services of loading and unloading cargo onto and off a ship, where those services are supplied by a subcontractor acting on behalf of an economic operator which is itself linked not to the shipowner but to a freight forwarder, carrier or forwarding agent, or to the holder of the cargo concerned.

Decision

1. Article 148(d) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that loading and unloading of cargo are services supplied for the direct needs of the cargo of the vessels referred to in Article 148(a) thereof.

2. In those circumstances, the answer to the second and third questions is that Article 148(d) of Directive 2006/112 must be interpreted as meaning that, first, not only supplies of services concerning loading or unloading cargo onto or from a vessel covered by Article 148(a) of that directive which take place at the end of the commercial chain of such a service may be exempt, but also supplies of services made at an earlier stage, such as services supplied by a subcontractor to an economic operator which then re-invoices them to a freight forwarder or transporter and, second, services for loading and unloading of cargo supplied to the holders of that cargo, such as the exporter or importer may also be exempt.

Summary

Article 148(d) of the VAT Directive must be interpreted as meaning that hoisting services consisting in the loading and unloading of a ship are services performed for the direct needs of the cargo of the cargo specified in Article 148(a) of the VAT Directive ships.

Article 148(d) of the VAT Directive must be interpreted as meaning that not only lifting services consisting in the loading and unloading of a ship as referred to in Article 148(a) of the VAT Directive which take place in the final trade stage of such a service may be exempted, but also services provided at an earlier stage, such as a service provided by a subcontractor for an entrepreneur who subsequently charges it on to a transit or transport company, and that also lifting services consisting of the loading and unloading of a ship performed for the person in charge of this cargo, such as the exporter or its importer, may be exempted.

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