CJEU: Member states not obliged to act in concert
Transportation of goods sold to another member state in form of distance selling can be considered effected by the supplier or on its behalf also when the transport agreement with the carrier is concluded by the customer and the supplier plays an important role in concluding the agreement, e.g. by recommending specific carriers.
The Court of Justice of the European Union (CJEU) decided on the case of the Polish company KrakVet Marek Batko (C-276/18) which supplied products for animals to non-business customers (non-taxable persons) on the Hungarian market. It offered these products through its websites registered on a Hungarian domain, and the goods were shipped from Poland. The customers could opt for a carrier recommended by the supplier, hire another carrier or collect the goods in Poland in person.
In respect of this transaction, KrakVet was not sure of the place of supply, as in the case of distance selling the transport of goods has to be arranged by the supplier or on its behalf. In this particular case, the agreement with the carrier had been concluded by the customer, not by KrakVet. Upon the request of KrakVet, the Polish tax authorities determined Poland to be the place of supply, and therefore the company applied Polish VAT on its supplies of goods to Hungary. In contrast, based on their own investigation, the Hungarian tax authorities concluded that the place of supply in respect of these products was Hungary and assessed additional VAT, including penalties and interest.
The CJEU pointed out that while a system for the exchange of information between member states is in place, member states do not have to act in concert when using the information from this system. If individual member states assess the same situation differently, a preliminary question shall be referred to the CJEU that will decide which assessment is correct. The member state which applied the wrong VAT treatment must allow for a correction and a refund of the wrongfully collected VAT.
If during transactions customers may choose the manner of transportation themselves and suppliers do not know until the very last moment the customers’ choice, it is essential to determine whether the transportation was arranged on behalf of the supplier.
According to the CJEU, it must be assessed whether the supplier played an important role in arranging the transportation, e.g. if a customer selected a carrier recommended by the supplier. If so, transportation should be considered as having been arranged by the supplier or on their behalf, in spite of the contract with the carrier having been concluded by the customer.