Briefing document & Podcast: ECJ C-495/17 (Cartrans) – Specific documents cannot be imposed for proof of goods transport

Briefing Document: VAT Exemptions for Export-Related Transport Services (Cartrans Spedition SRL Case)

This briefing document summarises the key themes, ideas, and facts from the provided sources concerning VAT exemptions for transport and intermediary services directly connected with the exportation of goods, as clarified by the Court of Justice of the European Union (CJEU) in the Cartrans Spedition SRL case (C‑495/17).

1. Central Issue and Relevant EU Legislation

The core issue in the Cartrans Spedition SRL case was whether Value Added Tax (VAT) exemptions should be granted for road transport operations and intermediary services directly connected with the exportation of goods, particularly when a customs export declaration cannot be provided as the sole proof of export.

The primary EU Directives at the heart of this dispute were:

• Article 146(1)(e) of Council Directive 2006/112/EC (the VAT Directive): This article mandates Member States to “exempt the supply of services, including transport and ancillary transactions, but excluding the supply of services exempted in accordance with Articles 132 and 135, where these are directly connected with the exportation or importation of goods.”
• Article 153 of the VAT Directive: This article extends the exemption to “the supply of services by intermediaries, acting in the name and on behalf of another person, where they take part in the transactions referred to in Chapters 6, 7 and 8, or in transactions carried out outside the [European Union].” Chapter 6 includes the export exemptions under Article 146.

These exemptions are designed to “ensure that the supply of services concerned is taxed at the place of destination of those services, that is to say, the place where the exported products are consumed.”

2. Distinction Between Export Transactions and Transport Services

The Court clarified that while the supply of transport services (Article 146(1)(e)) is distinct from the export transaction of the goods themselves (Article 146(1)(a)), the transport service is exempt only because it is “ancillary to the transaction of exporting goods, which it supplements, and to the actual performance of which it contributes.” Therefore, for the transport service to be exempt, “it is in principle necessary that goods in question have in fact been exported, namely that the goods have been delivered outside the European Union, the reality of which must be established to the satisfaction of the competent tax authorities.” This actual exportation constitutes a “substantive condition.”

3. Proof of Export: Customs Export Declaration vs. TIR Carnet

Customs Export Declaration:

• Role: According to the Customs Code, a “Customs declaration” is “the act whereby a person indicates in the prescribed form and manner a wish to place goods under a given customs procedure” (Article 4(17)). A “Customs Export Declaration” is a specific type required for goods leaving the customs territory of the EU under the export procedure.
• Responsibility: The obligation to lodge a customs export declaration “falls under the customs procedure which applies specifically to the export transaction itself, and not to the supply of transport services under cover of a TIR carnet”. This duty “does not devolve upon the transporter or the intermediary… which, for their part, are responsible for transporting the goods by crossing the external border of the European Union and for delivering those goods to their destination in the third country and which, consequently, are not necessarily deemed to have that declaration.”

TIR Carnet:

• Function: The TIR carnet is a “standardised international customs document” used for the transport of goods under the TIR procedure (TIR Convention). It allows goods to “transit through multiple countries without requiring payment or deposit of import or export duties and taxes at intermediate customs offices.” It “acts as a customs declaration for the transport of goods and provides proof of a guarantee.”
• Information Provided: A TIR carnet “must be presented, together with the vehicle used to transport the goods concerned, to the customs offices of departure, transit and destination, and must be certified by those offices”. When “duly certified, in particular by the customs authorities of the third country of destination, constitutes an official document which, in principle, shows that the goods in question, by crossing the European Union’s external borders, have physically moved from the European Union to that third country and reached the latter.”
• Probative Value: The Court concluded that a TIR carnet, “in the absence of precise grounds capable of casting doubt on the authenticity or reliability of that carnet and its contents, is particularly relevant in the specific context of the recognition of the right to the exemption in respect of that supply of transport services.” Tax authorities “must therefore take proper account of such a document, just as, moreover… they must take account of all of the information available to them.” This also extends to documents like CMR consignment notes.

4. Principles of Proportionality and Legal Certainty

The Cartrans Spedition SRL case challenged the Romanian tax authorities’ refusal of VAT exemption based on Cartrans’ inability to provide a customs export declaration, despite having TIR carnets and CMR consignment notes. Cartrans argued that Romanian law did not exclusively mandate a customs export declaration as proof.

The CJEU emphasised that when Member States lay down conditions for VAT exemptions (as allowed by Article 131 of the VAT Directive), they “must observe the general principles of law which form part of the European Union legal order,” specifically:

• Principle of Proportionality: A national measure “goes further than is necessary to ensure the correct collection of the tax if, in essence, it makes the right to exemption from VAT subject to compliance with formal obligations, without any account being taken of the substantive requirements and, in particular, without any consideration being given as to whether those requirements have been satisfied.” The Court ruled that “demanding a customs export declaration as the exclusive form of proof for export is disproportionate.” The “mere fact that a transporter or an intermediary taking part in a transport transaction is unable to produce an export declaration does not mean that such exportation has not in fact taken place.”
• Principle of Legal Certainty: This principle requires that “rules of law must be clear and precise and… their application must be foreseeable by those who are subject to them.” It also dictates that “taxable persons should be aware, before concluding a transaction, of their tax obligations.” The Court found that the Romanian tax practice did not comply with this principle because the national legislation “only broadly required ‘documents showing that the goods transported have been exported,’ not exclusively a customs export declaration, making the tax authorities’ strict requirement unforeseeable.”

5. Exceptions to Loss of Exemption for Formal Non-Compliance

The Court’s case-law outlines two situations where a failure to meet a formal requirement may lead to the loss of entitlement to a VAT exemption:

1. Intentional Participation in Tax Evasion: If the taxable person “has intentionally participated in tax evasion jeopardising the operation of the common system of VAT,” or “knew or should have known that the transaction which it had carried out was part of a fraud.”
2. Prevention of Conclusive Evidence: If “non-compliance with a formal requirement… would effectively prevent the production of conclusive evidence that the substantive requirements have been satisfied.”

The Court noted that in the Cartrans case, there was no indication that the company “intentionally participated in tax evasion” or that their failure to produce an export declaration “prevented the competent authorities from establishing whether the substantive conditions governing the exemption have been met.”

6. Conclusion of the Court

The CJEU ruled that Article 146(1)(e) and, if applicable, Article 153 of the VAT Directive, “must be interpreted as precluding a tax practice of a Member State under which the exemption from value added tax for, respectively, the supply of transport services directly connected with the exportation of goods and the supply of services by intermediaries taking part in those supplies of transport services is subject to production by the taxable person of a customs export declaration in respect of the goods concerned.”

Instead, it is incumbent on “the competent authorities, for the purposes of granting those exemptions, to examine whether compliance with the condition relating to the exportation of the goods concerned can be inferred, with a sufficiently high degree of probability, from all of the information that may be available to those authorities.” This explicitly includes a “TIR carnet which is certified by the customs offices of the third country of destination of the goods and which is produced by the taxable person” as evidence that “in principle, those authorities must duly take into account, unless they have specific reasons to doubt the authenticity or reliability of that document.”