VAT exemption from loading and unloading services to vessels engaged in deep sea shipping. Judgment of ECJ of May 4th, 2017. A Oy


Like the VAT Law provides for an exemption for exports of goods, it is also considered an exemption for so-called transactions deemed to exports and related services. This exemption is based on Article 148 (c) and (d) of Directive 2006/112 / EC, according to which “Member States shall exempt the following transactions:

(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;”

That is to say, the aforementioned exemption applies to services provided, inter alia, to vessels engaged in international maritime shipping, in order to promote international traffic in goods and passengers. However, a company in Finland submitted a binding tax ruling before the corresponding Body to confirm whether this exemption was extended to loading and unloading services of vessels intended for navigation on the high seas engaged in a commercial activity in the case where the service is rendered by a subcontractor, who bills it to the company who in turn bills it to his client.

The issue is the subcontracting of the service, since at the discretion of the Finnish tax body the services are exempt only if they are carried out at the final stage of provision thereof and not at an earlier stage such as the present case. Against this decision, the competent court finally referred to the Court of Justice in order to determine whether Article 148 (d) of the Directive should be interpreted as meaning that the loading and unloading services of a ship constitute services made for the direct needs of the cargo and if the exemption for the case in which the service is subcontracted is applicable.

With regard to the first question, the purpose is to ascertain what the concept of “direct needs of a ship and its cargo” is, which must be interpreted in the context of Article 148 and, according to the Court, means the existence of a link between the provision of services performed and the business exploitation of the vessel, in which case the loading and unloading services comply with this requirement since it is the transport of cargo that is one of the ways in which the vessel is operated, and such cargo is loaded and unloaded at the respective ports.

As regards the extension of the exemption to subcontracted services, the Court first mentions that the wording of the article does not refer to the fact that the services are provided at a specific stage of their supply chain or to whom they should be invoiced. Therefore, is necessary to consider whether a possible exclusion would arise from the context of Article 148, which, according to Article 131 of the Directive, must be capable of being applied by the Member States in a correct and simple manner and in such a way as to avoid any possible fraud.

In this case, loading and unloading services can be considered true from the moment they are provided, without altering their nature by the introduction of intermediaries. In addition, the provision of a service provider acting in its own name means that the operator has received and performed the services in question, therefore in this context the exemption must be applied to the service regardless of the phase of the supply chain. Since the cost is finally passed on to the cargo holders, it must be considered that the provision of such services to the cargo holder is part of the supply chain, with VAT being exempted from these services.

A copy of the judgment with case number C-33/16 is attached.

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ECJ C33 16

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