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SAC on VAT deduction: Who can dispose of goods as their owner?

The Supreme Administrative Court has ruled on a case concerning the purchase and subsequent sale of goods that remained in the warehouse of a supplier who had been duly authorised to resell them. The merit of the dispute was whether the taxpayer had acquired the right to dispose of the goods as their owner for VAT purposes. The tax administration believed this was not the case, and denied the claimant’s right to deduct VAT. The SAC confirmed the approach of the tax administration.

The taxpayer had purchased goods from a supplier who kept the goods in a warehouse under the supplier’s control and who also ensured their further resale. The supplier’s employees carried out the resale of the goods based on a power of attorney issued by the taxpayer, who subsequently received monthly reports on purchases and resales from the supplier.

The tax administrator denied the taxpayer’s claim to VAT deduction, stating that they had not acquired the right to dispose of the goods as their owner.  The SAC confirmed the tax administrator’s approach. Referring to the principles adjudicated by the Court of Justice of the European Union (CJEU), the SAC emphasised that for the transfer of the rights to dispose of goods as their owner, it is necessary that the owner can make decisions influencing the legal position of the goods. If the owner does so through an agent, it is still necessary to prove that the owner can at least generally influence the agent’s acts. A pre-condition is the owner knowing what the relevant goods are, having a real possibility to give instructions concerning the goods to the agent, and responding when the agent oversteps their powers. In the opposite case, the agent effectively disposes of the goods as their owner, deciding on the legal situation of the goods entirely of their own volition, even though they are formally acting on behalf of the represented party.

The court came to its conclusion as the taxpayer in fact had no discretion over the legal fate (sale) of the goods. The supplier’s employees resold the goods relatively independently, while the taxpayer was informed only afterwards. 

The SAC thus concluded that the right to dispose of goods as their owner for VAT purposes is not transferred if the acquirer renounces the exercise of the essential rights of the owner, allowing them to decide the legal fate of the goods, in favour of the supplier.

In such cases, the original supplier retains the right to dispose of the goods as their owner for VAT purposes.

We recommend always closely reviewing more complicated business models that enable original owners to continue to dispose of goods as their own or where buyers do not decide on the resale of such goods.