ECJ rules that a vendor cannot be required to pay VAT for the supply of a new means of transport if it is not established that VAT will be paid by the purchaser.

Based on the VAT Directive a VAT exemption applies to the supply of new means of transport which means of transport are dispatched or transported, by or on behalf of the seller or purchaser, to the purchaser outside their respective territory but within the EU.

With respect to this VAT exemption the European Court of Justice (ECJ) delivered its judgement in the case “Santogal” (C-26/16).

The ECJ ruled that the VAT Directive precludes national provisions from making the benefit of the exemption subject to the requirement that the purchaser must be established or domiciled in the Member State of destination of the means of transport.

Second, the exemption cannot be refused on the sole ground that the means of transport has been granted only temporary registration in the Member State of destination.

Furthermore, according to the ECJ the VAT Directive precludes provisions that require the vendor to pay VAT at a later stage when it is not established that the temporary registration regime has ended and VAT has or will be paid in the Member State of destination.

Finally, the VAT Directive as well as the principles of legal certainty, proportionality and protection of legitimate expectations preclude the vendor from being required to pay VAT at a later stage in the event of tax evasion by the purchaser, unless it has been established, that that vendor knew or ought to have known that the transaction was part of a fraud committed by the purchaser and he did not take all reasonable steps within his power to avoid participating in that fraud.