ECJ C-234/24 (Brose Prievidza) – AG Opinion – Tooling supply is taxable in Bulgaria, not exempt

On May 22, 2025, the ECJ issued the AG Opinion in the case C-234/24 (Brose Prievidza).

Context: Reference for a preliminary ruling – Common system of value added tax – Directive 2006/112/EC – Refunding of input tax to taxable persons established abroad pursuant to Directive 2008/9/EC – ‘Tooling’ – Taxable or non-taxable supply of a tool which remains on site – Independent transaction or supply ancillary to an exempt intra-Community supply of the components manufactured by that tool – Independent transactions or a single, complex intra-Community supply – Artificial splitting of the transactions – Single intra-Community supply without transportation of that tool?

Summary

Case Background: The case involves Brose Prievidza, a Slovak company, seeking a VAT refund on tools purchased from Brose DE (Germany) that remained in Bulgaria for manufacturing components. The Bulgarian tax authorities denied the refund, classifying the transaction as exempt intra-Community supply.
Questions to the Court: The key question referred to the Court was whether Directive 2008/9 allows for a VAT refund for tooling that has not left Bulgaria and whether the supply of the tooling can be considered separate from the exempt intra-Community supply of components.
Decision of Advocate General: Advocate General Kokott concluded that the transfer of the special tool constitutes a taxable supply in Bulgaria, as it does not qualify for exemption under the VAT Directive since the tool remained in the same Member State and was not dispatched to another.
Justification for the Decision: The opinion emphasized that each supply must be treated independently, and the lack of physical transport of the tool means it cannot be classified as an exempt intra-Community supply. Additionally, the existence of an artificial splitting of the transactions was not substantiated as there was no clear tax advantage.
Implications: The opinion clarifies that VAT must be paid on the supply of the tooling, reinforcing the principle that intra-Community supplies must involve the movement of goods across borders to qualify for tax exemptions, and it affirms Brose SK’s right to claim a VAT refund based on the taxable nature of the tool supply.

Articles in the EU VAT Directive

– Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax: Article 138(1)(a) and (b) and Articles 168 to 171;

– Council Directive 2008/9/EC of 12 February 2008 laying down detailed rules for the refund of value added tax provided for in Directive 2006/112/EC to taxable persons resident not in the Member State of refund but in another Member State: Articles 3 and 4.

Facts & Background

The applicant is the company ‘Brose Prievidza spol.’, which produces window controls, door modules and lifting devices. The applicant purchases parts of the Bulgarian company Integrated Micro-Electronics Bulgaria (hereinafter: IME) for its activities. IME was commissioned by the German company ‘Brose Coburg’ to manufacture special equipment (tooling) for the production of parts that would be supplied to the requesting party. Brose Coburg transferred ownership of the equipment to the requesting party, with the corresponding invoice from IME. The applicant paid this and at a later time requested a refund of the paid VAT stated on the invoice. This request has been rejected.

Consideration:

Under Directive 2008/9, the applicant is entitled to a VAT refund, but according to the tax authority, these arrangements do not apply to VAT amounts that have been declared unlawfully, such as the intra-Community supply of goods in this case. The request was rejected because the supply of the equipment and the deliveries of the end products constitute an economically indivisible supply, whereby the equipment (tooling) has lost its economic significance after the manufacture of the end product. The referring court doubts whether it can be assumed that the supply of equipment as an additional supply is or can be exempt from VAT if it is established with certainty that the delivered goods have not left the supplier’s country.

Source ecer.minbuza.nl

Questions

Based on Directive 2008/9, is there a right to a refund of the paid value-added tax (VAT) requested by the recipient of equipment (tooling) when the delivered goods have not left the territory of the supplier’s Member State and the supply of the equipment has been artificially separated from the intra-community supplies of products manufactured with this equipment to the same recipient?

AG Opinion

Where the recipient of components, supplied as an exempt intra-Community supply, which are manufactured by a subcontractor using a special tool located in Bulgaria, purchases that special tool from the owner (a third party established abroad) and continues to use it to manufacture the components in Bulgaria, there is a taxable supply in Bulgaria. The transfer of the right to dispose of the special tool does not itself constitute an exempt intra-Community supply and it is not to be regarded as a supply dependent on the exempt intra-Community supply of the subcontractor’s manufactured components or as part of an exempt single, complex intra-Community supply. Therefore, Article 4 of Directive 2008/9 does not exclude a right to obtain a refund of the VAT paid.

Source