For our previous posts about this case, click HERE.
Articles in EU VAT Directive
Article 168(e) of Council Directive 2006/112/EC
Facts (simplified)
- Weindel is a company active in particular in the field of reconditioning services.
- Weindel imported goods from Switzerland, Hong Kong and China into Slovakia in order to recondition them.
- Once repackaged on Slovak territory, the goods were delivered to other Member States or exported to third countries.
- The repackaging service was billed to the customer, namely a Swiss company which remained the owner of the goods concerned throughout the period in question.
- The invoices issued by Weindel therefore only related to repackaging services, and not to imported goods.
Questions referred
- Is recovery of import VAT conditional on a right of ownership in respect of the imported goods or on the right to dispose of the imported goods as owner?
- Is recovery of import VAT only allowed if the imported goods are used for the purposes of the taxable person’s taxable transactions in the form of the sale of the goods in the national territory or the supply of the goods to another Member State or the export of the goods to a third country?
- In such circumstances, is the condition that there be a direct and immediate link between the goods purchased and the output transaction satisfied if the cost components are reflected in the price of the output supply?
Order
On 8 October, the ECJ released an order about this case (source: Curia). Currently, the text is not available in English (the following is an unofficial summary).
- When a question referred for a preliminary ruling is identical to a question on which the Court has already ruled, when the answer to such a question can be clearly deduced from the case law or when the answer to the question referred for a preliminary ruling leaves no room for any reasonable doubt, the Court may at any time, on a proposal from the judge-rapporteur, after hearing the Advocate General, decide to give a ruling by reasoned order.
- Article 168 of Directive 2006/112 provides that a taxable person may deduct from the amount of VAT for which he is liable the tax due on imported goods where those goods are used for the purposes of his taxable transactions.
- However, according to settled case-law, the application of Article 168 of Directive 2006/112 requires, as a general rule, that the input transactions have a direct and immediate link with the output transactions.
- The existence of a direct and immediate link between a particular input transaction and one or more output transactions giving rise to a right of deduction is, in principle, necessary.
- This presupposes that the expenditure incurred to acquire the goods or services forms part of the price of the taxable output transactions giving rise to the right to deduct.
- A right of deduction is, however, also allowed in favour of the taxable person, even where there is no direct and immediate link between a particular upstream transaction and one or more downstream transactions giving rise to a right of deduction, where the costs of the services in question form part of the latter’s overheads and are, as such, constituent elements of the price of the goods or services he supplies.
- Such costs have a direct and immediate link with the taxable person’s entire economic activity.
- The national court points out that Weindel intervenes only as a supplier of services, without having acquired the imported goods or borne the cost of importation, which suggests that, in the main proceedings, the link between the payment of the VAT resulting from the importation and the price of the services provided by Weindel is lacking. Consequently, it will in any event be for the national court to ascertain whether that is the case in the present case.
- A right to deduct exists only to the extent that the imported goods are used for the purposes of the taxable person’s taxable transactions. According to the case law on the right to deduct VAT on the acquisition of goods or services, this condition is only met when the cost of the input supplies is incorporated in the price of the particular output transactions or in the price of the goods or services supplied by the taxable person in the course of his economic activities.
- By finding that the value of the goods transported does not form part of the costs constituting the prices charged by a carrier whose activity is limited to transporting those goods for remuneration, the conditions are not satisfied, the Court specified that persons who import goods without being the owners of the goods are not in a position to benefit from the right to deduct VAT, unless they can establish that the cost of the import is incorporated in the price of the particular output transactions or in the price of the goods or services supplied by the taxable person in the course of his economic activities.
- The VAT Committee has adopted a concordant approach through its guidelines. According to these guidelines, a taxable person designated as liable for the payment of import VAT is not entitled to deduct VAT when two conditions are met, namely, on the one hand, when the taxable person does not obtain the right to dispose of the goods as owner and, on the other hand, when the cost of the goods does not have a direct and immediate link with his economic activity. Although those guidelines have no binding value, they nevertheless constitute an aid to the interpretation of Directive 2006/112.
Decision
- Article 168 (e) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it precludes the ” granting a right to deduct value added tax (VAT) to an importer when he does not have the goods like an owner and when the costs of upstream importation are non-existent or are not incorporated in the price of specific downstream transactions, or in the price of goods and services supplied by the taxable person in the course of his economic activities.
- Directive 2006/112 must be interpreted as precluding the right to deduct VAT to an importer where he does not dispose of the goods in the same way as an owner and where the input import costs are non-existent or are not incorporated in the price of the particular output transactions or in the price of the goods and services supplied by the taxable person in the course of his economic activities.
Source
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