In cases recently decided by the German Federal Tax Court, the requirements for evidence for VAT exemption of intra-Community supplies have been interpreted more restrictively again.
In recent years, it was understood from European Court of Justice (ECJ) case law ( Collée, Teleos; and Twoh International ) that VAT exemption for intra-Community supplies must not be rejected when the supplied goods undoubtedly have been transported to a different EU Member State. Transposing their according submissions, the German Federal Tax Court ruled that formal requirements pertaining to the transport documentation must not be regarded as a material requirement for the VAT exemption and that the VAT exemption must be granted when the cross-border supply is undisputed. Accordingly, it was widely understood that taxable persons could basically provide any kind of evidence which clearly confirms the good’s arrival in another EU Member State (ultimately to the full persuasion of the tax court).
Indeed it was not recommend to rely on this interpretation by neglecting the documentation for cross-border supplies. But the case law was at least perceived as an appropriate way to defend the VAT exemption also on the basis of different documentation.
Recently, this liberal approach has been put to test in front of the German Federal Tax Court in several matters, all of which have been decided very restrictively.
In particular, the court decided that the required evidence cannot be furnished in the form of witnesses regardless of how convincing their statement may be (V R 14/14 from 19 March 2015). The court refers to German secondary legislation, which by default demands evidence in the form of documentation (we disagree on the basis of both European and German law; we have recently published our arguments in the German VAT literature).
In a different case (V B 40/15 from 8 December 2015), the court ruled that a court did not have to consider a plaintiff’s application to consider information from a foreign car registry as evidence ‒ although the court had conceded that this would perhaps prove the cross-border supply. The court argued taxable persons were allowed to furnish evidence deviating from the default documentation only if it was objectively not possible for them to obtain the strict kind of evidence required under secondary legislation.
It is currently under dispute whether these decisions contradict the groundbreaking ECJ cases or whether the ECJ cases had been misinterpreted before. Ultimately, the German Federal Tax Court restrained the judges’ free appraisal of all available evidence for an IC-supply and thus indirectly equated the "mere formal evidence" with the "real" material requirements of the VAT exemption for a cross-border supply.
We assume there will be many defense cases in the future, where the taxpayer has alternative evidence. In financially serious cases, the issue should in our view be related again to the ECoJ (the German Federal Tax Court had clearly acted incorrectly in not submitting the aforementioned cases to the ECoJ).