VAT on services connected with import and export of goods

Services connected with the export of goods
According to the GFD, the exemption of services directly connected with the export of goods shall only apply to services rendered to the person that actually supplies the goods, where such supply is an exempt export of goods. Usually, this is the owner, the seller, or the exporter stated in the customs declaration. Only services rendered to this person can be exempt. This means that the exemption cannot be applied for sub-supplies of such services. When applying the exemption, the service provider shall take into account all information from the customer that may be indicated, e.g., by a customs declaration, a tax document (invoice), or a recipient’s declaration that a tax-exempt export of goods was effected. The recipient of services directly connected with the export of goods is obliged to notify the service provider of the fact that they are to apply VAT exemption upon the export of the goods to a third country. If they fail to notify the service provider of this fact and the service provider then (‘wrongly’) applies VAT to the services, the customer’s entitlement to deduction will not be accepted, according to the GFD.

Services connected with the import of goods 
Services directly connected with the import of goods may be exempt in two cases. 

In the first case, it is necessary for the services to be directly connected with the import of goods and, at the same time, to be rendered directly to the importer of the goods (similarly as for exports).

In the second case, the prerequisite for applying a tax exemption is that the value of the services shall be included in the tax base of the goods being imported, in accordance with the VAT Act. It is not relevant whether the value of the service has been or will be included in the tax base by the importer. This means that to meet this condition the value of the service may be exempt even where the service provider is in the position of a sub-supplier (i.e. the service is not rendered directly to the importer of the goods).

In both described cases, it must still be made sure that the goods have been/will be imported (i.e. released to a free circulation in the EU, not another customs regime, such as transit, etc.).

The Coordination Committee’s conclusions also allow for the possibility of services being exempt under other provisions of the VAT Act – for instance Section 68 of the VAT Act, concerning supplies to ships or airplanes.

The GFD interpretation contained in the Coordination Committee’s conclusions will make the practical application of VAT rather complicated, in particular for logistics companies. Obviously, situations will occur where the transportation of cargo between two identical points will be tax exempt in some cases, and not in others. In view of the possibility of the service recipient’s entitlement to deduction being challenged by the tax administrators, we expect increased calls on taxpayers to correct already issued tax documents, and to obtain additional evidence to support crucial facts.

If this situation concerns you, we recommend reviewing the relevant services in terms of procedures applied and documentation available.