ECJ C-676/22 (B2 Energy) – Judgment – No exemption on intra-EU supplies if it can not proven that the recipient is a taxable person

On February 29, 2024, the ECJ issued its judgement in the case C-676/22 (B2 Energy).

Context: Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 138(1) — Exemption of intra-Community supplies of goods — Refusal to claim exemption — Evidence — Supplier of goods who fails to prove the delivery of the goods to the recipient specified in the tax documents – the Supplier who submits additional information proving the status of the actual recipient as a person liable for tax

Article in the EU VAT Directive

Article 138(1) in the EU VAT Directive 2006/112/EC.

Article 138 (Exemption of Intra-Community supplies of goods)
1. Member States shall exempt the supply of goods dispatched or transported to a destination outside their respective territory but within the Community, by or on behalf of the vendor or the person acquiring the goods, where the following conditions are met:
(a) the goods are supplied to another taxable person, or to a non-taxable legal person acting as such in a Member State other than that in which dispatch or transport of the goods begins;
(b) the taxable person or non-taxable legal person for whom the supply is made is identified for VAT purposes in a Member State other than that in which the dispatch or transport of the goods begins and has indicated this VAT identification number to the supplier.

Facts

The applicant is a Czech trading company. On 15 July 2015, the tax authorities initiated a tax inspection of the applicant for the taxable periods of February, March, April, and May 2015. On the basis of that inspection, it concluded that the applicant had failed to document compliance with the conditions for a claim to a value added tax (‘VAT’) exemption upon the supply of goods to another European Union (‘EU’) Member State lodged on the basis of a tax document in which the following entities were listed as the recipients of the goods: the cooperative OOV- Družstvo Malinovo and the company BICOTEC LIMITED (‘the recipients of the goods’). The documents submitted pertained to deliveries of rapeseed oil to another EU Member State. The applicant presented to the tax authorities tax documents pertaining to the performance provided, inclusive of their annexes in the form of purchase orders, delivery documents, international consignment notes, weighbridge tickets, certificates of the measurement of the quality of the goods, as well as framework purchase agreements, a framework agreements for the carriage of goods, and bank account statements.
The tax authorities did not question that the carriage of the goods to another Member State did actually take place; however, they maintained that the applicant had failed to document its claims, as it had failed to document that it had transferred the right to dispose of the goods to the persons specified as the recipients of the goods in the documents submitted (the cooperative OOVDružstvo Malinovo and the company BICOTEC LIMITED), or that the goods were supplied to a person registered for tax in another Member State. Thus, it failed to comply with the conditions for claiming a right to tax exemption. The recipients of the goods from the applicant failed to report the acquisition of goods from the Czech Republic or the delivery of goods within the EU in the form of a trilateral transaction and failed to pay the tax on the acquisition of the goods purchased from another Member State. The supply of the goods was also not certified in relation to the companies DRAGSTAL and WRATISLAVIA-BIO, even though the applicant claimed that they were to be its actual end customers. In B2 ENERGY some of the CMR documents and weighbridge tickets, the company WRATISLAVIA-BIO was stated as the owner of the goods, but the confirming signature and stamp belonged to a different entity, the company WratislaviaBiodiesel, meaning that the complainant has failed to prove supply of the goods to the company WRATISLAVIA-BIO. The fact that the recipients paid for the rapeseed oil does not, in itself, document that they acquired the right to dispose of the goods as their owners. Some of the international consignment notes submitted with the invoices issued to the recipients of the goods were not confirmed, not even by the final recipients, or were confirmed by totally different entities. The actual hand-over of the goods to the declared recipients in another EU Member State has also not been confirmed by witnesses.
The tax authorities thus increased the value added tax claimed in payment assessments dated 6 October 2017, assessing the applicant for VAT of CZK 66,323 in respect of the taxable period of February 2015, CZK 68,490 in respect of March 2015, CZK 74,359 in respect of April 2015, and CZK 8,486 in respect of May 2015.
The defendant dismissed the appeal challenging the payment assessments in a decision dated 21 November 2019 […]. The decision of the defendant was challenged by the applicant before the Městský soud v Praze (Prague City Court) (‘City Court’). The City Court dismissed the application challenging the decision of the defendant, in its judgment dated 18 August 2021, ref. no 14 Af 4/2020-48. According to the City Court, it was not the production of tax documents (compliance with formal requirements) or the carriage of the goods to another Member State that were questionable, but both the tax authorities as well as the defendants questioned the supply of the goods to the declared recipients.
The City Court inferred from case-law of the Court of Justice of the European Union, primarily from the judgment dated 27 September 2007, in Case C-409/04, Teleos plc and Others, EU:C:2007:548, that the applicant failed to prove supply of the goods to its final recipients through the declared recipients. It was not apparent from the documents produced who accepted the goods on behalf of the recipients or to which recipient the goods were delivered, which was moreover not even confirmed by the witnesses heard. Hence, it is not clear who was entitled to exercise ownership rights to the goods (rapeseed oil). The City Court emphasised that the defendant did not accuse the applicant of involvement in tax fraud but for its failure to substantiate its tax claims. Given the facts of the case, the applicant was thus not acting in good faith as concerns the de facto transfer of the right to dispose of the rapeseed oil, as the owner to the declared recipients of the goods.
The applicant (complainant) lodged an administrative complaint on a point of law challenging the judgment of the City Court, asserting that it had proven compliance with conditions for claiming a tax exemption upon the supply of goods to another EU Member State. As concerns the assessment of the time when the right to dispose of the goods as the owner arose, the complainant first asserted that, even if it failed to prove supply of the goods to the declared recipients, it had, nevertheless, met all three conditions for being entitled to claim a VAT exemption upon the supply of goods to another EU Member State. The identity of the actual recipient, to which the right to dispose of the goods as their owner has been transferred, can be ascertained from the evidence produced. That evidence has convincingly proven the de facto acceptance of the goods in the city of Wrocław, Poland, by its end recipients – companies other than those entities declared in the relevant tax documents.

Questions

Must Article 138(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax be interpreted in accordance with the judgment of the Court of Justice of the European Union of 9 December 2021 in Case C-154/20, Kemwater ProChemie, EU:C:2021:989, such that the making of a claim for exemption from value added tax (VAT) upon the supply of goods to another EU Member State must be denied, without the tax authorities needing to prove that the supplier of the goods was involved in VAT fraud, if the supplier has failed to prove supply of goods to a specific recipient in another EU Member State having the status of the taxable person specified in the tax documents, even though, with a view to the facts of the case and the information provided by the taxable person, there is data available to verify that the actual recipient in the other EU Member State did indeed have that status?

AG Opinion

None

Decision

Article 138(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

must be construed to mean that

a supplier established in a Member State who has supplied goods to another Member State must be denied the right to exemption from value added tax, unless this supplier has demonstrated that the goods were supplied to a recipient who has the status of a taxable person in the latter Member State, and if, with regard to the factual circumstances and the information provided by the supplier, the data necessary to verify that this recipient had this status is not available.

Summary

Article 138(1) of Council Directive 2006/112/EC states that a supplier in one EU member state cannot claim exemption from value added tax when supplying goods to another member state unless they can prove that the recipient is a taxable person in the latter member state, and if the necessary data to verify the recipient’s status is not available.

Source