The CJEU noted, however, that if the company provided the requisite proof and acted in good faith, it cannot reuse the VAT exemption on the ground that the purchaser did not transport the goods to a destination outside the EU Member State of dispatch. Mecsek-Gabona Kft v. Nemzeti Adó- és Vámhivatal Dél-dunántúli Regionális Adó Foigazgatósága, C-273/11 (6 September 2012)
Background
Under the VAT Directive, the sale in an EU Member State of goods dispatched or transported to a destination in another Member State, for a purchaser which is itself liable for VAT in a Member State other than that in which dispatch or transport of the goods began, is exempt from VAT in the country of sale. In such cases, it is the purchaser which is liable for VAT in the country of destination.
A Hungarian company engaged in the wholesale supply of cereals, tobacco, seeds, and fodder in August 2009 sold to an Italian company (which, at the time, had a VAT identification number) 1,000 tons of rapeseed which, under the contract of sale, the purchaser had to transport to another EU Member State.
The goods were handed over to the purchaser at premises in Hungary and, from a postal address in Italy, the Italian purchasing company returned to the vendor a number of consignment notes proving that the rapeseed had been transported to a destination outside Hungary.
The Hungarian company issued two invoices in respect of that transaction. In the belief that the operation was an intra- Community transaction exempt from VAT in Hungary, the company did not invoice the VAT to the purchaser and did not pay it to the Hungarian tax authority.
However, the Italian tax authority discovered that the purchasing company could not be located, and that it had never paid VAT in Italy. Consequently, in January 2010, the Italian company’s VAT identification number was removed from the register with retroactive effect from 17 April 2009.
The Hungarian tax authority then determined that the rapeseed had never been transported to another Member State and that, as a consequence, the transaction in question was not a VAT-exempt intra-Community supply of goods. The Hungarian tax authority ordered the Hungarian company to pay the VAT in respect of that transaction and imposed on it a fine and a late-payment penalty.
The Hungarian company contested the tax assessment before a Hungarian court which, in turn, asked the CJEU to determine (1) what constitutes satisfactory evidence that a tax-exempt supply of goods has taken place, and (2) to what extent the vendor, if not arranging transport itself, is responsible for the purchaser’s conduct if it is not established that the sold goods in fact arrived in the Member State of destination.
Judgment
The CJEU first noted—court release no. 111/12 [PDF 92 KB]—that three conditions must be satisfied if a VAT exemption is to be granted for an intra-Community supply of goods:
- The right to dispose of the goods as owner must have been transferred to the purchaser (found to be satisfied in this case)
- The vendor must establish that the goods have been dispatched or transported to another Member State
- As a result of that dispatch or transport, the goods must have physically left the territory of the Member State of supply
Concerning the second criterion, the court turned to consider what requirements the vendor must satisfy as proof that the goods have been dispatched or transported to another Member State.
The CJEU explained that, absent any specific provision in the VAT Directive as to the evidence capable of establishing that an intra-Community supply of goods has been carried out, it is for the Member States to determine what constitutes satisfactory evidence—in accordance with the general principles of EU law, such as the principles of legal certainty and proportionality.
The court found the requirements with regard to such evidence must be determined in the light of national law and in accordance with the general practice established in respect of similar transactions. However, a Member State may not require the taxable person to provide conclusive proof that the goods have physically left its territory.
The Court also observed that, in respect of an intra-Community supply, the VAT Directive enables Member States to refuse to grant a vendor the right to the VAT exemption when that vendor has failed to fulfill its obligations regarding evidence.
Thus, the CJEU concluded that the Hungarian court must determine whether the Hungarian company met its obligations regarding evidence in light of Hungarian law and general practice. Lastly, the court found that the Hungarian company cannot be refused a VAT exemption simply because the purchaser’s Italian VAT identification number has been revoked retroactively.