CJEU: Imports of goods from third countries without the right to deduct VAT?
In the case of Weindel Logistik Service (C-621/19), a company providing repacking services to its customers, the Court of Justice of the European Union (CJEU) confirmed the conclusions of the financial administration and denied the right to deduct import VAT. The CJEU argued that there was no direct link between the VAT payable on import and the service provided.
Weindel's main activity is to repack goods for customers, making the packaging better suited to the various intended markets. The case before the court involved a Swiss customer’s goods which were released for free circulation in Slovakia. Weindel was stated as an importer, therefore a person liable for import VAT, and claimed the deduction of import VAT.
Weindel repacked the goods in Slovakia and sent them back to the Swiss customer (who remained the owner of the goods for the entire time), to another member state or to a third country. Weindel charged the customer only for the repacking of the goods.
The Slovak tax authorities challenged and subsequently denied Weindel’s right to deduct import VAT on the grounds that Weindel never owned the goods, and did not use them in any way for their economic activity. Weindel argued that without the goods they could never have provided the repacking services, their main economic activity.
In the case in question, the CJEU sided with the Slovak tax authorities: in the court’s opinion, Weindel acted only as a service provider, without it being evident that they acquired the imported goods or bore the import costs. Based on this argument, the CJEU concluded that there was no direct link between the VAT payable on import and the services provided.
The CJEU’s decision is to be understood to the effect that an importer who imports goods but does not become their owner (the right to dispose of the goods as their owner is not transferred to them) does not have the right to deduct import VAT. However, this should not apply where the cost of importing the goods is included in the price of downstream supplies to customers.
Therefore, if you import goods for a customer without the ownership being transferred to you, there is a risk that the deduction of VAT on import may be challenged by tax authorities. If you identify such a risk, do not hesitate to contact us, we will be happy to help you eliminate it.