On July 15, 20215, the ECJ issued its Order in the case C-159/14 (Koela-N). This case related to a chain transaction whereby the middleman did not take ownership of the goods and whether he had the right the deduct VAT.
Article in the EU VAT Directive
Article 14(1) the EU VAT Directive 2006/112/EC.
Article 14 (Taxable transaction)
1. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.
Facts
The applicant is a VAT registered company; it produces packaging and bottles of refined sunflower oil. The case concerns invoices in the period May – August 2011 in which she deducts input tax on 27 invoices for sunflower oil. A suspicion of fraud arises when FINaut checks both the applicant’s and its supplier’s books. Further research is being carried out at the freight carriers and at the company that supplies the means of transport (and so the carousel continues for a while). The applicant therefore receives an additional assessment based on the conclusion of the authorities that invoices are drawn up without delivery taking place.
In particular, there is a dispute between the parties as to whether there has been a transfer of ownership of the invoiced goods. Statements on this issue are not uniform and contradictory in BUL.
Questions
Is Article 14(1) of Council Directive 2006/112/EC 1 of 28 November 2006 on the common system of value added tax to be interpreted as meaning that the ability to dispose of tangible property as owner also includes the right to instruct a carrier to deliver the goods to a third person other than the intended recipient stated on the invoice, and, on that basis, the receipt of the goods by that person on its own constitutes proof of previously effected supplies of goods?
Is Article 14(1) of Directive 2006/112 to be interpreted as meaning that the fact that the goods are not actually in the possession of the direct supplier — regardless of whether the buyer has received the goods — means that the conditions for the existence of a supply under the directive are not satisfied?
Do the fact that the upstream suppliers in the supply chain have not assisted the tax authorities and the non-loading of the goods constitute objective grounds from which it may be inferred that the taxable person knew, or ought to have known, that the transaction relied on as a basis for the right to deduct is connected with tax fraud?
AG Opinion
None
Decision/Order
(1) Article 14 (1) of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding the tax administration of a Member State from finding that no delivery of goods, as a consequence of which there is an obstacle for the buyer to deduct the value added tax paid at the time of purchase, on the grounds that the buyer did not receive the purchased goods but sent them directly to a third party to whom he resold them, or on the grounds that the buyer’s direct supplier did not receive the goods purchased by him, but sent them directly to the buyer.
(2) The non-cooperation of the tax authorities by the previous taxable person’s suppliers in the supply chain and the lack of transhipment of the goods in question do not in themselves constitute objective data sufficient to conclude that that taxable person knew or was he should have known that the transaction justifying the right to deduct value added tax was part of a tax fraud. However, these two circumstances are objective data that can be taken into account in the overall assessment of all the evidence and factual circumstances in order to determine whether the taxable person knew or should have known that the transaction justifying the right to deduct was part of a tax fraud.
Summary
The tax authorities should not assume that a supply of goods has not taken place (with the consequence that the VAT borne by the acquirer cannot be deducted when it is acquired) on the ground that the latter did not receive the goods purchased by him, but shipped it directly to a third party to whom he resold it, or on the ground that the direct supplier of this acquirer did not receive the good he purchased, but shipped it directly to him.
The fact that the previous suppliers of a taxable person in the supply chain do not cooperate with the tax authorities and that the goods in question have not been handled do not in themselves constitute sufficient objective evidence to conclude that that taxable person knew or should have known that the transaction to which he was entitled deduction of tax on the value, was part of a tax fraud. Those two circumstances are nonetheless objective data which can be taken into account in a comprehensive assessment of all the data and facts in order to determine whether that taxable person knew or should have known that the transaction on which he bases his right to deduct was part of a tax fraud.
Source
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