CJEU again on conditions of exempt intra-community supplies of goods

In the case in question (C-386/16), a Lithuanian VAT payer imported frozen fish from Kazakhstan and subsequently supplied the fish to a customer identified for VAT in Estonia who informed the Lithuanian supplier beforehand that the fish would be supplied to customers in other member states within thirty days of its acquisition. The supplier thus first delivered the goods to a processing plant in Lithuania from which – after sorting, glazing and packaging – the customer identified for VAT in Estonia supplied the goods to customers in other EU member states directly from Lithuania.

Both parts of the transaction – from the supplier to the customer and from the customer to end customers – were reported as exempt intra-community supplies. However, the Lithuanian tax administrator argued that the first part of the transaction only involved a local supply since the goods were only transported for processing in the territory of Lithuania. Two requests for a preliminary ruling were therefore filed with the CJEU.

The first question was whether the supply of goods by the supplier was exempt from VAT if, before the supply itself, the customer had expressed their intent to resell the goods to other member states. The second question was whether the processing of the goods on the customer’s behest prior to their being transported to other member states had any effect on the exemption of the supply from VAT.

Pursuant to CJEU case law, three conditions must cumulatively be met to claim entitlement to an intra-community supply exemption: goods must be delivered to an entity registered for VAT in another member state; goods must be dispatched or transported to another member state; and the transport must be ensured by the payer or the acquirer or a third person authorised by the payer or the acquirer. Simultaneously, where individual supplies follow one another forming a chain, the intra-community transport must only be attributed to one of the two supplies, which then will be exempt from VAT. 

In the case in question, the first transaction actually involved a supplier effecting a local supply of goods to a processing plant, which means that the supply was not exempt from VAT, irrespective of where (in what member state) the contracting parties were registered for VAT. The CJEU also confirmed that during the second transaction the customer did not acquire the right to dispose of the goods as their owner since the goods were directly dispatched from the processing plant in Lithuania to end customers in other member states.

The CJEU concluded that if the customer seated in another member state informs the supplier that the goods will be immediately resold and dispatched directly to another member state before leaving the supplier’s member state, the supply effected by the supplier cannot be exempt from VAT. Any processing of the goods based on the customer’s order before delivery to end customers does not have any effect on this conclusion.