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Flashback on ECJ Cases C-78/12 (Evita K EOOD) – Acquisition of a right of ownership of the goods concerned and right to deduct VAT

04 January 2021
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10 min read

On July 18, 2013, the ECJissued its decision in the case C-78/12 Evita K EOOD on the Acquisition of a right of ownership of the goods concerned and right to deduct VAT.

 

Article in the EU VAT Directive

Articles 185(1), 226(6), 242 of the EU VAT Directive 2006/112/EC

Article 185 (Right to deduct VAT – Adjustments)
1. Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.

 

Article 226 (Invoice requirements)
Without prejudice to the particular provisions laid down in this Directive, only the following
details are required for VAT purposes on invoices issued pursuant to Articles 220 and 221:

(6) the quantity and nature of the goods supplied or the extent and nature of the services rendered;

 

Article 242

Every taxable person shall keep accounts in sufficient detail for VAT to be applied and its application checked by the tax authorities.

Facts

  • Evita‑K is a company incorporated under Bulgarian law, the main economic activity of which is the trade in animals.
  • That company declared nine invoices concerning the supply of calves for slaughter, issued during the months of September and October 2007 by ‘Ekspertis‑7’ EOOD (‘Ekspertis‑7’), in order to obtain, in the form of a tax credit, the deduction of the VAT relating to those invoices.
  • In addition, Evita‑K declared that it had exported live calves to Albania during those same months and provided proof of their purchase by those invoices and by producing customs declarations, veterinary certificates indicating the animals’ ear tags and veterinary certificates for the transportation of the animals on national territory.
  • In order to provide proof of the acquisition of the animals at issue, in addition to the nine invoices issued by Ekspertis‑7, Evita‑K produced weight certificates, bank statements relating to payment of those invoices and the contract concluded with Ekspertis‑7 for the supply of calves.
  • Evita‑K was subject to a tax investigation covering the months of September and October 2007. On that occasion, the Bulgarian tax authorities requested Ekspertis‑7 to provide information on the supplies which it had invoiced to Evita‑K.
  • As the answers given by Ekspertis‑7 had, according to those authorities, revealed certain gaps in its accounting and in its compliance with the veterinary formalities relating, in particular, to titles of ownership of the animals and to their ear tags, those authorities took the view that it had not been proved that those supplies had in fact been carried out and that, consequently, Evita‑K was not entitled to claim a right to deduction of the VAT relating to those supplies.
  • Accordingly, by a tax assessment decision of 26 November 2009, the Bulgarian tax authorities denied Evita‑K the right to deduct, in the form of a tax credit, the VAT relating to the invoices issued by Ekspertis‑7.
  • Evita‑K lodged an administrative appeal against that decision refusing the deduction with the Direktor, who, by a decision of 29 April 2010, confirmed that decision.
  • Evita‑K then appealed against the tax assessment decision of 26 November 2009 to the referring court. In particular, it claimed before that court that the information which it had communicated was sufficient to prove that the supplies invoiced by Ekspertis‑7 had indeed been carried out, that, irrespective of any irregularities which may have been committed by Ekspertis‑7, Evita‑K had to be considered to be a bona fide purchaser under Bulgarian law, and that the question of the right to deduct VAT was independent of the question as to the ownership of and the origin of the goods acquired.

Questions

Is the concept of ‘supply of goods’ within the meaning of Article 14(1) of Council Directive 2006/112/EC  of 28 November 2006 on the common system of value added tax in conjunction with Article 345 of the Treaty on the Functioning of the European Union to be interpreted as meaning that, in the circumstances of the main proceedings, it allows the person to whom a supply is made to acquire the right to dispose of the goods (movable property specified only by type) by acquiring the ownership of those goods from a non owner through bona fide possession acquired for consideration, which is permissible under the national law of the Member State, although it should be borne in mind that, under that law, the right of ownership of such property is transferred by delivery?
Does proof of effecting a ‘supply of goods’ within the meaning of Article 14(1) of Directive 2006/112 with respect to a specific invoice in connection with the exercise of the right under Article 178(a) of the Directive to deduct the tax actually paid and shown in that invoice presuppose that the person to whom the supply is made demonstrates the supplier’s rights of ownership where the supply relates to movable property specified according to its type and under the national law of the Member State the right of ownership of such property is transferred by delivery, although under that law the acquisition of the right of ownership of such property by bona fide possession acquired for consideration from a non owner is also permitted?
Is a ‘supply of goods’ for the purposes of deduction of input tax within the meaning of the Directive to be regarded as proved where, in the circumstances of the main proceedings, the person to whom the supply is made has effected a subsequent supply of the same goods (animals subject to compulsory identification) by exportation with the submission of a customs declaration and there is no evidence of rights of third parties in those goods?
For the purposes of demonstrating that a ‘supply of goods’ within the meaning of Article 14(1) of Directive 2006/112 has been effected with respect to a specific invoice in connection with the exercise of the right under Article 178(a) of the Directive to deduct the tax actually paid and shown in that invoice, must it be assumed that the supplier and the person to whom the supply is made, who are not agricultural producers, are acting in bad faith where, on receipt of the goods, no document mentioning the animals’ ear tags in accordance with the requirements of European Union veterinary legislation was provided by the previous owner, and the animals’ ear tags are not mentioned in the veterinary certificate which was issued by an administrative authority and which accompanies the animals during transport in order to effect the specific supply?
Where the supplier and the person to whom the supply is made have independently made lists of the ear tags, must it then be assumed that they have complied with the requirements of that European Union veterinary legislation if the administrative authority has not shown the animals’ ear tags in the veterinary certificate which accompanies the animals during their shipment?
Are the supplier and the person to whom the supply is made in the main proceedings, who are not agricultural producers, required under Article 242 of Directive 2006/112 to show the goods supplied (animals subject to compulsory identification or ‘biological assets’) in their accounts pursuant to International Accounting Standard 41, Agriculture, and to prove control of the assets in accordance with that standard?
Does Article 226(6) of Directive 2006/112 require the ear tags of the animals, which are subject to compulsory identification under the European Union veterinary legislation and are the goods supplied, also to be shown in VAT invoices such as those at issue in the main proceedings where the national law of the Member State does not expressly lay down such a requirement for the transfer of the right of ownership of such animals and the persons involved in the supply are not agricultural producers?
Is it permissible under Article 185(1) of Directive 2006/112, on the basis of a national provision such as that in the main proceedings, to adjust the deduction of input tax on account of the conclusion that the supplier’s right of ownership of the goods which are the content of the supply was not proved, where the supply was not cancelled by any of the persons involved in it, the person to whom the supply was made effected a subsequent supply of the same goods, there is no evidence of rights claimed by third parties in those goods (animals subject to compulsory identification), no bad faith on the part of the person to whom the supply was made is alleged and under the law of the Member State the right of ownership of such goods specified only according to their type is transferred by delivery?

AG Opinion

None

Decision

1.      Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that, in the context of the exercise of the right to deduct value added tax, the concept of ‘supply of goods’ for the purposes of that directive and evidence that such a supply has in fact been carried out are not linked to the form of the acquisition of a right of ownership of the goods concerned. It is for the referring court to carry out, in accordance with the national rules relating to evidence, an overall assessment of all the facts and circumstances of the dispute before it in order to determine whether the supplies of goods at issue in the main proceedings were actually carried out and whether, as the case may be, a right to deduct may be exercised on the basis of those supplies.

2.      Article 242 of Directive 2006/112 must be interpreted as meaning that it does not require taxable persons who are not agricultural producers to show in their accounts the subject-matter of the supplies of goods which they make, when animals are concerned, and to prove that those animals were subject to control in accordance with International Accounting Standard 41 ‘Agriculture’.

3.      Article 226(6) of Directive 2006/112 must be interpreted as meaning that it does not require a taxable person who carries out supplies of goods concerning animals, which are subject to the identification and registration system established by Regulation (EC) No 1760/2000 of the European Parliament and of the Council of 17 July 2000 establishing a system for the identification and registration of bovine animals and regarding the labelling of beef and beef products and repealing Council Regulation (EC) No 820/97, as amended by Council Regulation (EC) No 1791/2006 of 20 November 2006, to mention the ear tags of those animals on the invoices relating to those supplies.

4.      Article 185(1) of Directive 2006/112 must be interpreted as allowing a deduction of value added tax to be adjusted only if the taxable person concerned previously benefitted from a right to deduct that tax under the conditions laid down in Article 168(a) of that directive.

Summary

  • Invoice issued does not allow to determine the form of transfer of legal title of the goods supplied.
  • The answers given by Ekspertis‑7 (supplier) had revealed certain gaps in its accounting and in its compliance with the veterinary formalities relating, in particular, to titles of ownership of the animals and to their ear tags, the authorities took the view that it had not been proved that those supplies had in fact been carried out and that, consequently, Evita‑K was not entitled to claim a right to deduction of the VAT relating to those supplies.

Source

 

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