CJEU agrees with VAT payer claiming tax exemption

W, a Polish company, in their tax returns declared tax-exempt intra-community supplies of apples. According to the waybills, the goods were to be transported and delivered from Poland to Lithuania, and the transport was to be arranged by the customer. However, based on customs documents the Polish tax authorities established that the apples had in fact been exported directly to Belarus, without the supplier’s knowledge. The Polish tax authorities claimed that the supply of goods could not be exempted from tax as a supply of goods to another member state (tax-exempt intra-community supply) and should have been subject to Polish tax. 

The CJEU reiterated that an export of goods takes place and the tax exemption applies if:

• the right to dispose of the goods as their owner was transferred to the customer
• the supplier proves that the goods were dispatched or transported outside the EU
• the goods physically left the EU as a result of the dispatch or transport.
• According to the CJEU, the first criterion was met because the supplier transferred the right to dispose of the apples as their owner to the customer. 

As regards the second criterion, it was important that the objective conditions for the application of the tax exemption for exports of goods were met. The circumstances that the parties had initially agreed on supplying the goods to another member state (which eventually did not take place) and that the supply outside the EU took place without the supplier's knowledge were irrelevant, subjective elements. In the present case, the supply of apples outside the EU was proven beyond dispute, as the tax authorities confirmed this based on customs documents.

As regards the third criterion, according to the CJEU, in the present case it was undisputed that the apples were transported by the buyer outside the EU.

A VAT exemption is intended to ensure that the supplies of goods are taxed at the place where the exported goods are consumed. In the present case, the supplier could not be deemed to have made the supply within Poland, as the apples were not consumed there.

The CJEU further emphasised that when the substantive requirements are met, the principle of fiscal neutrality requires the VAT exemption to be granted even if certain formal requirements were omitted by the taxable persons. It would be disproportional to deny the exemption for exports solely on the grounds that the supplier did not have the correct export documents, where the tax authorities were certain that the goods were exported. 

Given that the substantive criteria for exemption were met, the CJEU held that in the present case it was possible to apply the exemption for exports of goods, as the export in question was confirmed by the tax authorities based on customs documents.