Is it essential to communicate the VAT number of the country of destination to apply the exemption in a deemed intracommunity supply? Judgment of the ECJ of October 20th, 2016. Josef Plöckl
The European Court of Justice (ECJ) decides again about the obligation to communicate or identify through the VAT number of the Member State of destination as an essential requirement to be entitled to apply the exemption from VAT in the Member State of origin on a deemed intracommunity supply, also known as “transfer of goods”.
First of all, we must remember that for VAT purposes, the EU Directive assimilates to a supply of goods for consideration the transfer by a taxable person of a good of his company with destination to another Member State, to be allocated to his business needs in the Member State of destination. Thus, in the same terms that an exemption for intra-Community supplies of goods is granted, this also applies to the transfer of goods from one Member State to another, provided the material requirements are fulfilled.
The main proceedings relates to a transfer of a vehicle, affected to a company, by a German entrepreneur to another Member State. This expedition was accredited. However, the Tax Administration in Germany considered that the transfer was not VAT exempted since the taxpayer did not indicate the VAT number assigned by the Member State of destination. Before the appeal filed by the German entrepreneur, the national Court does ask if the exemption may apply since, although the entrepreneur not adopted all them reasonable measures to indicate the VAT number of the Member State of destination, there are no signs that can lead to the existence of a tax fraud (in addition the Tax Administration excludes such fraud) and there is only a mistake in accountancy of the transaction, registered as an intracommunity supply of goods rather than as a transfer of goods. In definitive, it questions to the ECJ if despite not have fulfilled all formal requirements in respect to the communication of the VAT number the exemption can apply since there are no signs of tax fraud.
ECJ recalls that in order to determine the requirements of the exemption in the transfers of goods should go to the requirements of intra-Community deliveries, so they are set in that:
(a) the goods must be dispatched or transported,
(b) by the taxable person or for his account,
(c) outside the territory of the Member State but within the EU,
(d) for the same taxable person in a Member State other than the expedition one.
Therefore, mentions the Court that to transfer the goods for the needs of the company entails that such transfer is performed for the same taxable person acting as such, which means that it performs transactions in the frame of its taxable activity. In this sense, in the main proceedings has been confirmed that the goods continued to be used for a professional purpose.
However, regarding the use of the VAT number of destination, while the Directive empowers to the Member States for establishing measures that avoid the fraud, such measures cannot go beyond what is necessary for achieving this target, so questioning the neutrality of the VAT. As already has happened in other resolutions of the ECJ the same sets that the breach of formal requirements cannot limit the application of an exemption of the VAT without considering the compliance of the material requirements, thus must be considered the objective facts of the transactions to determine if the material requirements are fulfilled and the VAT exemption applicable.
In conclusion, remembers the ECJ that the obligation to communicate the VAT in intra-Community deliveries, and also in a transfer of goods, is therefore a formal requirement and that it helps to prove the status of taxable person of the recipient but this test cannot rely solely on communicating the number. Given that this communication is not a material requirement, it should not affect the exemption of the transfer.
There are only two scenarios in which the breach of a formal requirement can limit the right to the exemption: the deliberate participation in a tax fraud and when the breach has as effect to prevent the contribution of the material requirements compliance. However, if the Administration has information allowing to confirm the compliance of the material requirements, non-compliance with a formal requirement cannot limit the exemption from VAT, thus the ECJ considers that the EU Directive is opposed to a provision of a Member State that deny the exemption from VAT in a transfer of goods because the taxable person has not communicated the VAT number in the Member State of destination of the goods, when there is no indication of tax fraud and the material requirements of the exemption are met.
Attached is a copy of the Judgment with case number C-24/15 of October 20th, 2016.