ECJ C-696/20 (Dyrektor Izby Skarbowej w W.) – Judgment – A “double tax” can not be levied in the event of erroneous taxation of intra-Community acquisition of goods

On July 7, 2022, the ECJ issued the decision in the case C-696/20 (Dyrektor Izby Skarbowej w W.)

Reference for a preliminary ruling – VAT Directive – Article 41 – Applicability – Non-exempt intra-Community supply – Reclassification of a transaction within a chain of transactions by the tax authority – Obligation to pay value added tax (VAT) on the transaction incorrectly classified as a domestic transaction by a party – Principle of proportionality

Articles in the EU VAT Directive

Article 41 of the EU VAT Directive 2006/112/EC.

Article 41 (Place of Supply – Intra Community Acquisitions)
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.

Facts

Company B (hereinafter: the company) is a VAT registered person in Poland and acted as an intermediary between the supplier and the recipient in two chain transactions.
The supplier (BOP) has a Polish VAT number, the recipient has always had an EU VAT number.
The director of the tax audit office (hereinafter: authority) identified the first delivery with regard to BOP as ILG (intra-Community supplies of goods) and with regard to the company as IVG (intra-Community acquisition of goods). The authority has ruled that the company’s conduct, which treated the supplies to its contractors within the Union as VAT-zero VAT taxed ILGs, was incorrect and found that those transactions should be taxed in the territory of the Member States of destination of the goods (outside Poland). The transactions in the supply chain are subject to VAT and the tax has been paid at every stage of trade. The essence of the authorities’ position is that the company nevertheless did so incorrectly as a result of its identification of the transaction.
The company has appealed to the court of first instance against the decision of the authority.
The court of first instance rejected the appeal and agreed with the authority’s position regarding the company’s incorrect identification of the course of the chain deliveries, including the transaction that should be classified as “movable” supplies.
The company appealed this to the referring court. including the transaction that should be classified as a “movable” delivery. The company appealed this to the referring court. including the transaction that should be classified as a “movable” delivery. The company appealed this to the referring court.

Consideration:

The referring court considers that a judgment of the Court of Justice is required in order to assess some of the grounds of the appeal in cassation lodged by the company, namely with regard to the interpretation and method of application of Article 41 of the VAT Directive in the light of the principles of proportionality and neutrality.

Source Minbuza.nl

Questions

Do Article 41 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and the principles of proportionality and neutrality preclude the application, in a situation such as that at issue in the main proceedings, of a national provision such as Article 25(2) of the ustawa z dnia 11 marca 2004 r. o podatku od towarów i usług (Law of 11 March 2004 on Value Added Tax) to an intra-Community acquisition of goods by a taxable person

– if that acquisition has already been taxed in the territory of the Member State in which dispatch ends, by the persons acquiring the goods from that taxable person

– where it has been established that the taxable person’s actions did not involve any tax fraud, but that they were the result of an incorrect designation of supplies in chain transactions and that that taxable person’s Polish VAT identification number was provided for the purposes of a domestic rather than an intra-Community supply?

AG Opinion

I suggest that the Court respond to the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) as follows:

Article 41 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and the principles of neutrality and proportionality do not preclude the application of Article 25(2) of the ustawa z dnia 11 marca 2004 r. o podatku od towarów i usług (Law on the tax on goods and services of 11 March 2004; ‘the Law on VAT’) to an intra-Community acquisition of goods by a taxable person where the persons acquiring the goods from that taxable person applied value added tax (VAT) on the acquisition of those goods in the territory of the Member State in which the transport ends.

However, Article 41 of Directive 2006/112 and the principle of proportionality preclude the application of Article 25(2) of the Law on VAT to an intra-Community acquisition of goods where that acquisition resulted from an intra-Community supply which, upon verification, which it is for the referring court to carry out, was not treated as exempt.

Decision (unofficial translation)

Article 41 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax is to be interpreted as not precluding legislation of a Member State under which an intra-Community acquisition of goods is regarded as having been made within the territory of that Member State, where that acquisition, which constitutes the first stage in a chain of successive transactions has been wrongly classified as a domestic transaction by the taxable persons involved, who have used their VAT (value added tax) identification number allocated by that Member State for that purpose, and the subsequent transaction, which has been wrongly classified as an intra-Community transaction, has been subject to VAT as an intra-Community acquisition of goods by the purchasers of the goods in the Member State in which the transport of the goods ends. However, that provision, read in the light of the principles of proportionality and fiscal neutrality, precludes such legislation of a Member State where the intra-Community acquisition of goods which is regarded as having been effected within the territory of that Member State results from an intra-Community supply of goods which has not been treated as an exempt transaction in that Member State.

Source