The transfer and the transfer document
For VAT purposes, the transfer from one Member State to another by a taxable party of an article that belongs to its company is on a par with an (exempted) intra-Community delivery in the Member State of origin and with a (taxed) intra-Community purchase in the Member State of destination. It must here be noted that the idea of ‘transfer’ is only applicable within the territory of the EU. If such a movement is from outside the EU or vice versa, then it is still an import or export transaction.The exemption of the equivalent intra-Community delivery in the Member State is subject to a number of formal conditions, such as the creation of a ‘document’, the transfer document. Certain things must be stated on that document.
The Court of Justice has recently ruled that the drafting of such a document where no VAT identification number from the Member State of origin is listed cannot lead to the refusal of the exemption in the Member State of origin for the intra-Community transfer treated as the supply of goods.
The dispute: transfer of a car, but not in accordance with the rules
Plöckl has a sole tradership in Germany. In the course of 2006 he purchased a car for the purposes of the activities of his business. Later that year he sent the vehicle to a car dealer based in Spain (physically sent it, he did not sell it!) with the intention of selling that car in Spain. The transportation of the car from Germany to Spain is perfectly documented in a CMR bill of lading (also called consignment note), which means there is no debate about the transporting of the car from Germany to Spain. During 2007 the vehicle was effectively sold to a Spanish company by Plöckl.
Plöckl did not register the sale of the car in Germany. In 2007 he did however report an exempted intra-Community supply of goods. During a VAT audit the German tax authorities were of the opinion that Plöckl did not comply with the conditions for an exempted intra-Community supply of goods and that it was one that had to be taxed in Germany. In the first instance the courts rejected this claim, because it found that, at the time of sale, the vehicle was already in Spain.
After that the German tax authorities changed tack by adopting the view that the act of transferring the vehicle to Spain was subject to German VAT (and that the exemption was not applicable) because Plöckl had not reported a VAT identification number in Spain, and had consequently not provided the required proof.
In Germany the exemption for the transfer (treated as an intra-Community supply of goods) is subject to the formal condition that the VAT identification number of the taxable party is reported on the transfer document in the Member State of destination/arrival.
It was this latter point that, after much peregrinations, was presented to the Court of Justice for a ruling.
Court of Justice: substance over form?
The Court of Justice started by recalling that the principle of fiscal neutrality requires that VAT exemption must be granted when the substantive conditions for the exemption are met, even if the taxable party has not complied with certain formal requirements (such as the obligation to state the VAT identification number for the exemption of an intra-Community supply of goods). The same holds with respect to the obligation to list the VAT identification number of the taxable party allocated by the Member State of destination for an intra-Community transfer. If the VAT identification number is recorded this acts as proof that the transfer was performed for the purposes of the economic activity of the taxable party and that that party acts as such in the Member State of destination. The Court reasoned that the capacity of the taxable party is not dependent on whether or not the party concerned has a VAT identification number. The Court consequently found that the provision of the VAT identification number does not constitute a substantive condition for the VAT exemption of the intra-Community transfer…
But is this always the case?
The consequence of this logic pursued by the Court of Justice is that VAT exemption for an intra-Community transfer cannot in principle be refused on the grounds that the taxable party did not provide the VAT identification number allocated to it by the Member State of destination. However, this argument is not applicable in the event of the taxable party deliberately participating in tax evasion and thus jeopardising the operation of the common system of VAT or when noncompliance with a formal requirement prevents the production of proof that the substantive conditions were satisfied.
In another context, the Court of Justice has previously already ruled that the VAT exemption for intra-Community transfers cannot be refused when the supplier, acting in good faith and after having done all that can reasonably be expected of it, is still unable to furnish the VAT identification number of the buyer. So does that mean that exemption can still be refused if a taxable party has not taken all steps that can reasonably be expected of it?
In response to this the Court of Justice stated that the preceding cannot be considered as a general rule. It is only under a situation where it must be determined whether a taxable party invoking VAT exemption, but is unable to (fully) formally prove such, has or has not participated in tax evasion, that these grounds must be taken into account. The Court reiterated that if, such as in the present case, it is ruled out that the taxable party participated in tax evasion, the VAT exemption cannot be refused, including on the grounds that the taxable party did not do everything that could reasonably be expected in order to comply with the formal VAT obligations, such as the furnishing of the VAT identification number allocated by the Member State of destination!
How does the ruling affect Belgian disputes?
The case that was brought before the Court of Justice concerned a dispute involving German formalities for the transfer of goods.
The condition that underlay the dispute in Germany is strictly speaking also applicable in Belgium, because the taxable party that transfers goods from Belgium must also compile a ‘document’ for that purpose. This document, which is required to contain the same statements as an invoice, must contain the following information: ‘…when transfers are at issue as referred to in article 39bis, section 1.4 of the Code … the company name, the address and the VAT identification number that is allocated to the taxable party in the Member State of destination of the goods’.
This ruling consequently provides reasons for avoiding an additional Belgian tax assessment should the VAT number of the Member State of destination not be stated on the transfer document.