If goods are re-exported as non-Community goods, no VAT is due once those goods have not been removed from the customs arrangement of which they are under, provided that the customs duties only become due on the basis of not fulfilling formal criteria.
Based on the EU VAT Directive, VAT upon importation of goods into the European Union ("EU") becomes due at the moment of import of those goods into the EU. Based on this provision and previous case law of the Court of Justice of the European Union ("ECJ"), it was always assumed that the levy of customs duties and import VAT would arise from the same fact of importation of goods into the EU. This is also called the "parallel nature" between the levy of customs duties and import VAT (ECJ 11 July 2013, Harry Winston, C‑273/12, cons. 41). From the Eurogate Distribution II case of 2 June 2016 (joined cases C‑226/14 and C‑228/14) it follows that this "parallel nature" does not apply in all situations.
Eurogate has been authorized to operate a customs warehouse. As a warehouse keeper, Eurogate took into its customs warehouse non-Community goods from its customers. The purpose of this was to re-export these goods out of the EU. At the time of removal of the goods from the Eurogate's customs warehouse, customs declarations for re-exportation of the goods were drawn up.
During a customs inspection by the German customs authorities, it was discovered that the removals of the goods were not entered in the stock records until 11 to 126 days after the removals took place. However, the goods were re-exported before this non-fulfilment took place. As a result, the goods were recorded late for the purpose of article 105 of the Community Customs Code (CCC) and articles 529(1) and 530(3) of the Community Customs Implementing Code (CCIC). In the Eurogate Distribution I case of 6 September 2012 (C-28/11), the ECJ ruled that customs duties become due in case of non-fulfilment of the obligation to enter the removal of the goods from the customs warehouse in the appropriate stock records, at the latest when the goods leave the customs warehouse.
The German tax authorities also took the position that besides the levy of customs duties, also VAT had become due on the basis that the European and German VAT legislation refer to the Customs legislation. Eurogate did not agree on the basis that, irrespective of the incurrence of the customs debt, the conditions for levying VAT upon importation were not satisfied, as the goods did not enter the free circulation of the EU.
The case was brought before the German Court and, as the German Court was not sure how to rule on this case, it referred the case to the ECJ. The German Court asked whether it is possible to levy import VAT on goods which have been re-exported as non-Community goods but for which customs duties have become due to the application of article 204 of the CCC.
The ECJ emphasizes that the importation of goods and the supply of goods and services for consideration within an EU Member State by a VAT taxable person are subject to VAT. Importation takes place if goods are coming from a non-EU country and are brought into one of the EU Member States. Importation does however not take place if goods are placed under a customs arrangement, such as warehousing arrangements and inward processing arrangements (see also ECJ 8 November 2012 Profitube, C-165/11).
The goods at issue were placed under a customs warehousing arrangement and were planned to be re-exported out of the EU. As such, no customs duties and no import VAT should become due. It should also be noted that, in case of an export supply, a 0 percent VAT would in principle be applicable. However, as mentioned above, the ECJ ruled in the Eurogate Distribution I ruling that the customs duties became due on the basis of article 204 CCC, even though the goods had de facto been exported out of the customs territory of the EU (see also ECJ 6 September 2012, Döhler Neuenkirchen, C-262/10, cons. 36-37). This raises the question whether also VAT on importation should be levied.
For this judgment, the ECJ took the following into account:
- it was established by the referring court that the goods had already been re-exported before the act non-compliance took place;
- as a result of this, the goods were covered by a customs warehouse procedure until re-exportation; and
- as such, there was no risk of the goods entering into the "economic network" of the EU.
Since the goods had already left the territory of the EU when the act of non-compliance took place, the ECJ ruled that no taxable event for VAT on importation could have taken place and thus, no VAT on importation could be levied. This means that VAT on importation can only be levied with regard to goods which are present in the territory of the EU at the moment when the taxable event takes place (see in this sense ECJ 15 May 2014, X, C-480/12).
The ECJ emphasized that the conclusion that no import VAT is due could be different if there would any risk that the goods would enter the economic network of the EU. Market operators which use customs procedures in one of the EU Member States and are re-exporting those goods in a later stage to countries outside of the EU, should make sure that there is no risk for those goods entering into the economic network of the EU in order to prevent that import VAT to becomes due.