Advocate General comments on VAT treatment of tooling
The Advocate General of the Court of Justice of the European Union (CJEU) has confirmed the current approach to the VAT treatment of the sale of tooling (moulds), whereby it is a supply of goods without transport and therefore a taxable supply at the place of supply. The case is still to be considered by the CJEU Chamber, which is expected to deliver its judgment during the summer.
Moulds are typically supplied in the automotive industry. The supplier of the parts makes the moulds to measure and sells them to the customer before commencing the production of the parts. However, the moulds are kept on the supplier's premises throughout the production and can only be used by the supplier at that specific location to produce specific products.
In the case at hand, the supplier (IME Bulgaria) sold the moulds not directly to the buyer of the parts (Brose SK), but first to Brose DE, another company within the group. To purchase and then sell the moulds to Brose SK, Brose DE used its Bulgarian VAT number and applied Bulgarian VAT on the sale. Brose SK claimed a refund of this tax, which was rejected by the Bulgarian tax authorities: In their opinion, it was an ancillary supply to the supply of parts by IME Bulgaria and should therefore have been tax exempt as an intra-community supply. Hence, the tax authorities believed the invoicing to Brose DE to be artificial.
The dispute appeared before the CJEU with the referred question of whether, if parts are manufactured using a special tool that are then supplied to another member state, the supply of that tool should be subject to the same VAT treatment as the supplied products. The issue was therefore whether there had been a single, complex supply or a main and an ancillary supply.
In the Advocate General's opinion, the sale of tools cannot, by its substance, be exempt from VAT because the condition of transportation is not fulfilled. The obligation to comply with this condition would only not apply if there had been a complex or ancillary supply, which was not the case here, according to the Advocate General.
In the first place, according to the Advocate General, there is no single economic aim, and therefore there are two different supplies. In the present case, the aim of the acquisition of the tool is not the acquisition of the parts, but ensuring that, in the event of the supplier's insolvency, another supplier can be found under similar conditions who can quickly resume production without interrupting supply chains.
Furthermore, it is not possible for an ancillary supply to be provided by a person independent of the person providing the main supply, unless there is an artificial splitting of the transaction by the supplier between two persons under their control.
The Advocate General then concluded that the tools (moulds) and the parts are separable and cannot form a single, complex supply. In the present case, the purchase of the tools cannot be treated as a supply dependent on the supply of the parts, therefore Bulgarian VAT was correctly applied by Brose DE.
Finally, the Advocate General noted that should the CJEU regard the supply of moulds as an ancillary or complex supply, the question of the VAT exemption of supplies of goods not transported to another member state and the entitlement to VAT deduction on the related acquisition would have to be answered