Flashback on ECJ Cases – C-446/13 (Fonderie 2A) – Shipment of goods to customer does not start until goods are ready

On October 2, 2014, the ECJ issued its decision in the case C-446/13 (Fonderie 2A).

Context: Reference for a preliminary ruling — Sixth VAT Directive — Article 8(1)(a) — Determination of the place of supply of goods — Supplier established in a Member State other than the Member State in which the person to whom the goods are supplied is established — Processing of the goods in the Member State where the person to whom the goods are supplied is established

Article in the EU VAT Directive

Article 8(1)(a) of the Sixth VAT Directive (Article 32 and 36 of the EU VAT Directive 2006/112/EC)

Article 8 of the Sixth Directive, pursuant to which the place of taxable transactions is determined, provides in paragraph 1(a) that, in the case of goods dispatched or transported either by the supplier or by the person to whom they are supplied or by a third person, the place of supply of the goods is to be deemed to be the place where the goods are at the time when dispatch or transport to the person to whom they are supplied begins.

Facts

In 2001 the applicant in the main proceedings manufactured metal parts in Italy which it sold to Atral, a company whose registered office is in France.
Before those parts were supplied to Atral, the applicant in the main proceedings dispatched them, on its own behalf, to another French company, Saunier-Plumaz, in order for it to carry out finishing work on them, that is to say, painting work, and then forward them directly to the final purchaser.
The sale price for the parts on Fonderie 2A’s invoice to Atral included the finishing work. The service provider, that is to say, Saunier-Plumaz, invoiced Fonderie 2A in respect of the finishing work, for an amount which also included VAT on that work.
Fonderie 2A applied to the French tax authorities, on the basis of the national provisions implementing the Eighth Directive, for a refund of the VAT which it had thereby been charged.
That application was refused on the ground that, under the national provisions implementing the Sixth Directive, the place of supply of the goods was in France.
Fonderie 2A brought an action challenging that refusal before the tribunal administratif de Paris (Administrative Court, Paris), which dismissed the action by a judgment dated 3 July 2008. After the appeal lodged by it was also dismissed, by the cour administrative d’appel de Paris (Administrative Court of Appeal, Paris) in a judgment of 21 October 2010, the applicant in the main proceedings appealed on a point of law to the Conseil d’État (Council of State).
In the appeal on a point of law, the applicant in the main proceedings contends that the provisions of the CGI adopted to transpose the Sixth Directive into French law were misconstrued by the cour administrative d’appel de Paris. It submits that it made an intra-Community supply from Italy and did not carry out any taxable transaction in France, so that the person to whom the goods were supplied is liable for the VAT on that intra-Community acquisition.

Questions

Do the provisions of the Sixth Directive [77/388/EEC] for defining the place of an intra-Community supply mean that the supply of goods by a company to a customer in another country of the European Union, after the goods have, on the vendor’s behalf, undergone processing at the place of business of another company in the country of the customer is a supply between the country of the vendor and the country of the final recipient or a supply within the territory of the country of the final recipient, from the place of business of the processor?

AG Opinion

The first sentence of Article 8(1)(a) of the Sixth Directive must be interpreted as meaning that transport or dispatch of goods to the person to whom they are supplied cannot begin until the goods are in the condition stipulated by the contract. In the situation at issue in the main proceedings, the place of supply of the metal parts for the purposes of value added tax is therefore in France.

Decision

Article 8 (1) (a) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform tax base, as amended by Council Directive 95/7/EC of 10 April 1995, means that the place of delivery of goods sold by a company established in one Member State to a consignee established in another Member State, and on which the seller has entrusted finishing work to a supplier established in the second Member State;

Summary

The place of supply of a good that a company established in one Member State sells to a buyer established in another Member State and which, on the instructions of the seller, is completed by a service provider established in that other Member State in order to prepare the good for delivery before it is sent by that service provider to the customer must be considered to be located in the customer’s Member State of establishment.

Source: