CJEU's Euro Tyre BV - Sucursal em Portugal judgment (C-21/16)
Member States cannot refuse the application of the intra-Community supply exemption on the sole ground that the purchaser is neither registered in the VIES system nor falls under a system of taxation of intra-Community acquisition of goods, when there is no sound evidence pointing to the existence of fraud and it is established that the basic conditions of the exemption are fulfilled.
Euro Tyre BV - Sucursal em Porugal (Euro Tyre Portugal) is a Portuguese branch of the Dutch Euro Tyre BV and is engaged in the import, export and marketing of tyres of various brands for retailers based in Portugal and Spain. In the Spanish market it sold products directly and via a distributor, Euro Tyre Distribución de Neumáticos SL (Euro Tyre Spain). At the time of the supplies Euro Tyre Spain was VAT registered in Spain but did not have a VAT identification number for intra-Community transactions and was not registered in VIES (this registration was completed afterwards). On the supplies made to Euro Tyre Spain, Euro Tyre Portugal applied the exemption for intra-Community supplies.
During a tax inspection, the Portuguese tax authorities were of the opinion that Euro Tyre Portugal was not allowed to apply the intra-Community exemption on the supplies made to Euro Tyre Spain. The Portuguese tax authorities referred to national legislation, which stated that in order to apply the exemption, the supply has to be made to a purchaser with a VAT-identification number for intra-Community transactions.
Euro Tyre Portugal contested the view of the Portuguese tax authorities and eventually ended up in the Portuguese Tribunal Arbitral Tributário. This court referred questions to the CJEU whether the application of the exemption for intra-Community supplies may be subject to the condition that the purchaser whose seat is in a Member State other than that in which dispatch or transport of the goods began is registered in that first Member State for intra-Community transactions and appears in the VIES system.
The CJEU starts its judgment with noting that according to the referring Portuguese court, the supplies made by Euro Tyre Portugal to Euro Tyre Spain fall under the material conditions for the exemption for intra-Community supplies. In the case at hand, the only reason for refusing the intra-Community supply exemption was that Euro Tyre Spain was neither registered at the time of the sales for intra-Community transactions in Spain nor entered in the VIES system.
The CJEU continues with considering that the VAT Directive requires Member States to take all measures necessary to identify with an individual number every taxable person or non-taxable legal person who carries out intra-Community supplies. In that context, it is of particular importance that taxable persons carrying out such supplies are registered in the VIES system, as the purpose of that system is - amongst others - to enable taxable persons to obtain the VAT status of the parties they are dealing with. Nevertheless, no ground can be found in EU law to make the registration of the purchaser in this system obligatory in order to apply the intra-Community exemption. Thus, the CJEU considers that neither the acquisition by the purchaser of a VAT identification number valid for the purpose of carrying out intra-Community transactions nor the inclusion of that number in the VIES system constitute substantive conditions for exemption from VAT of an intra-Community supply. The CJEU supports this view by referring to the principle of fiscal neutrality, which requires that a Member State allows the exemption from VAT for an intra-Community supply if the substantive conditions are satisfied, even if the taxable person has failed to comply with some of the formal requirements.
The CJEU makes two exceptions to the above however:
1. When the taxable person applying the exemption has intentionally participated in a tax evasion scheme which has jeopardised the operation of the common system of VAT. If the taxable person concerned knew or should have known that the transaction which it carried out was part of a fraud committed by the purchaser and that the taxable person had not taken every step which could reasonably be asked of it to prevent that fraud from being committed, that person would have to be refused a VAT exemption, and;
2. Non-compliance with a formal requirements may lead to the refusal of an exemption from VAT if that non-compliance would effectively prevent the production of conclusive evidence that the substantive requirements have been satisfied.
In this case, the CJEU has again made it clear that in order to apply the intra-Community exemption it is crucial that the supply meets all the substantive requirements laid down in article 138 VAT Directive. As long as there is no fraud involved and the supplier is able to prove that his supplies meet with all the material requirements, he is able to apply the exemption. This judgement is not very groundbreaking, as the CJEU made similar judgments in its recent case law. An example can be found in the VSTR (C-587/10) case, where the CJEU considered that for the application of the intra-Community supply it is not in all cases necessary that the supplier mentions a valid VAT-identification number on its invoices, as long as the material conditions for the exemption are fulfilled.