CJEU again ruled on transport in chains of transactions
In its February decision (C-628/16), the Court of Justice of the European Union (CJEU) again dealt with how to attribute transport or dispatch to two successive intra-community supplies. According to the CJEU, transport may not be ascribed to the first supply in a chain of transactions if the second transfer of the right to dispose of the goods as owner took place before the intra-community transport occurred. Moreover, the CJEU also opined on the question of claiming the entitlement to VAT deduction based on an incorrectly issued invoice.
Company A seated and identified for VAT in Germany sold crude oil products to Company B identified for VAT in Austria. Company B received all necessary documentation from Company A and committed itself to ensure the transportation of products from Germany to Austria.
Subsequently, Company B sold the goods to Company C and agreed with Company C that it would ensure transportation. Company A did not know about the second supply and assumed that the delivery of goods to Company B represented an exempt intra-community supply. Company B then issued an invoice to Company C including Austrian VAT. Company C paid this tax and subsequently claimed it on input, whereas Company B never paid tax to the state. After a tax inspection by the tax authority, Company B rectified invoices and issued them excluding VAT but never refunded the received tax to Company C.
The CJEU held that since Company C had disposed of the goods as owner earlier than the intra-community transport took place, the transport cannot be ascribed to the supply between Company A and Company B. It is clear from the above that only the second supply, i.e. the delivery between Company B and C could have been treated as exempt from VAT. The delivery between Company A and B should have been liable to German VAT.
Following its conclusions, the CJEU also had to give its opinion on whether Company C was entitled to claim the Austrian tax paid on input. It was no surprise that the court emphasised that the entitlement to deduct VAT is only limited to taxes that are actually due and payable and cannot be extended to overpaid input VAT. The fact that VAT is included in an invoice does not give rise to the entitlement to VAT deduction.
The CJEU’s decision again points out that ascribing transport to the correct sale in a chain of transactions between EU member states is vital for determining the VAT regime. Corporations engaged in this type of business should pay attention to this issue, especially where the responsibility for the transport of sold goods lies with somebody else.