The Court of Justice of the European Union («CJEU») ruled on a case8 concerning the applicability of VAT exemption9 also to supply chains involving intermediaries.
This case is of utter importance since, despite regarding bunkers - a relatively niche sector -, it may apply to a wider number of goods that are sold through intermediaries, though falling within the scope of the exemption rules.
The case involves Fast Bunkering Klaipeda («FBK»), a Lithuanian company that supplies bunker to vessels intended for international carriage of passengers and/or goods. The supplied bunker comes from non-EU States and is stored in customs warehouses10 before being loaded directly in- to the vessels’ tanks. The key issue in the case is that FBK did not received orders directly from the vessel operators, but from intermediaries acting in their own name. Nevertheless, FBK applied a zero percent VAT rate to such deliveries of bunker, in accordance with Article 148 (a) of the Di- rective.
After conducting a tax inspection, the Klaipeda tax inspectorate questioned the applicability of the VAT exemption to the transactions conducted by FBK. The Lithuanian Authority argued that such exemption applies only when goods are directly supplied to the operators of seagoing vessels in- tended for international carriage of passengers and/or goods. In the case at issue, instead, the in- termediaries acted in their own name. Thus, according to the tax inspectorate, the transactions in question should not fall within the scope of the exemption.
The CJEU deemed the case law on Article 15(4) of the Sixth Directive11 relevant to the interpreta- tion of Article 148(a). Such case law12 equates the transactions for the fuelling and provisioning of vessels used for navigation on the high seas with exports and, for this reason, exempts them from taxation.
The Court stated that the exemption under Article 15(4) applies only to the final supply of goods. Thus, following this reasoning, also the exemption laid down in Article 148(a) of Directive should apply only to the supply of goods to vessel operators who use such goods for fuelling and provi- sioning, without therefore applying to the supply of goods effected at a previous stage in the commercial chain.
The Court also highlighted another aspect of this issue: if the extension of the exemption were to be allowed, Member States would be under an obligation to supervise and control the actual ulti-mate use of the supplied goods, which would bring an unbearable strain on the administrative sys- tems of all Member States.
According to the literal interpretation of the provision, a supply of bunker made to intermediaries acting in their own name cannot be considered as a supply within the meaning of Article 148(a).
The Court also compared the rules at issue with the ones regarding the supply of aircraft, for which a mechanism is envisaged which enables States to trace the actual use of fuel and exemp- tion applies also to supplies made to the intermediaries. Unfortunately, not all EU States have such mechanisms for the supply of fuel to vessels.
In the case at issue, however, FBK loaded the fuel directly into the vessel’s tanks and only subse- quently invoiced to the intermediaries. Under such circumstances, although the ownership of the fuel was contractually transferred to the intermediaries, the latter were never in a position to dis- pose of the supplied fuel, since the power of disposal already belonged to the operators of the vessel.
Moreover, under Article 14(1) of Directive 2006/112/EC, in order to have a supply of goods, the relevant transaction must have the effect of authorising the party to dispose of the supplied goods. Consequently, in the case under examination, the transactions carried out by FBK should not be considered as a supply of goods to an intermediary but a supply made directly to the operators of the vessel, which, therefore, may benefit from the exemption.
Finally, the Court concluded that «the exemption provided for in that provision [Article 148 (a) of the Directive, Editor’s Note] is not, in principle, applicable to supplies of goods for the fuelling and provisioning to intermediaries acting in their own name»; however, «that exemption may apply if the transfer to those intermediaries of the ownership in the goods concerned […] took place at the earliest at the same time when the operators of vessels […] were actually entitled to dispose of those goods as if they were the owners, a matter which is for the national court to ascertain».
As a consequence of this ruling, the companies involved in supply chains to vessels with interme- diaries might be faced with unexpected VAT costs, taking in due consideration also the fact that Member States may still have different views on exemption. The operators of the sector should bear in mind these possible consequences