On December 19, 2013, the ECJ issued its decision in the case C-563/12 (BDV Hungary Trading)
Context: Article 146 – Exemptions on exportation – Article 131– Conditions laid down by Member States – National legislation requiring that property intended to be exported leave the customs territory of the European Union within a fixed period of 90 days after supply
Article in the EU VAT Directive
Articles 131, 146(1) of the EU VAT Directive 2006/112/EC
Article 131 (Esemption – General provision)
The exemptions provided for in Chapters 2 to 9 shall apply without prejudice to other Community provisions and in accordance with conditions which the Member States shall lay down for the purposes of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse.
Article 146 (exemption on importation)
1. Member States shall exempt the following transactions:
(a) the supply of goods dispatched or transported to a destination outside the Community by or on behalf of the vendor;
(b) the supply of goods dispatched or transported to a destination outside the Community by or on behalf of a customer not established within their respective territory, with the exception of goods transported by the customer himself for the equipping, fuelling and provisioning of pleasure boats and private aircraft or any other means of transport for private use;
(c) the supply of goods to approved bodies which export them out of the Community as part of their humanitarian, charitable or teaching activities outside the
Community;
(d) the supply of services consisting in work on movable property acquired or imported for the purpose of undergoing such work within the Community, and dispatched or transported out of the Community by the supplier, by the customer if not established within their respective territory or on behalf of either of them;
(e) the supply of services, including transport and ancillary transactions, but excluding the supply of services exempted in accordance with Articles 132 and 135, where these are directly connected with the exportation or importation of goods covered by Article 61 and Article 157(1)(a).
Facts
- In 2007 and 2008, BDV was engaged in wholesale trade in tinned food. In the course of its business, that undertaking sold the goods it manufactured in Hungary in third countries. The contracts concluded with purchasers established outside the customs area of the European Union contained one of the international commercial terms drawn up by the International Chamber of Commerce (so-called ‘Incoterms 2000’), namely the ‘ex-works’ or EXW clause, meaning that the purchaser collects the goods at the gates of the vendor’s premises.
- During a tax inspection of BDV, relating to the period from 1 January 2007 until 31 December 2009, excluding the period from 1 July 2007 until 31 March 2008, the tax authorities found that, in its VAT accounts and in its VAT returns relating to the inspection period, that undertaking had classified certain of its transactions as export sales, although the goods to be exported had left the customs territory of the European Union after expiry of the time-limit laid down, in that regard, in Article 11(1) of the old VAT law and, since 1 January 2008, in Article 98(1) of the new VAT law.
- By decision of 22 October 2010, the Nemzeti Adó- és Vámhivatal Közép-magyarországi Regionális Adó Főigazgatósága ordered BDV to pay additional tax by way of a tax adjustment and a fine and late payment penalty, on the ground that the goods were dispatched to the third countries after expiry of the time-limit laid down in the national legislation.
- BDV brought an action against that decision, claiming that those provisions of the old and new VAT laws were contrary to both the Sixth Directive and Directive 2006/112. In its action, it maintained that all the supplies covered by that decision were in fact dispatched outside of the European Union. Moreover, under the ‘ex‑works’ contract term, the purchasers are responsible for the transport of the goods. Therefore, by regularly reminding the purchasers of the need to transport the goods outside of the European Union within the requisite periods, it demonstrated the required diligence.
- The Budapest Környéki Törvényszék (Regional Court, Budapest) upheld BDV’s action. That court held that the time-limit for the goods to leave the European Union provided for by the Hungarian legislation cannot be applied where it has been established that the goods have in fact been exported. The conditions that the Member States may set for the application of the exemption on exportation, according to the Court’s case-law, should neither exceed what is necessary to attain the objectives defined by the Sixth Directive and Directive 2006/112 nor undermine VAT neutrality.
- The defendant at first instance brought an appeal against that judgment before the Kúria (Supreme Court). It claimed that, in accordance with national legislation, a sale may be classified as an exempt supply of goods for export only where the goods leave the territory of the European Union within the time-limit defined by that legislation.
- The Kúria held, in that regard, that that time-limit for export is not a procedural time-limit, a so-called ‘technical time-limit’, which may be subject to correction, but a ‘substantive limitation period’. Accordingly, if the tax authorities find that that time-limit has been exceeded, the financial transactions concerned cannot be classified as ‘exempt supplies of goods for export’ and are, therefore, taxable.
Questions
- May Article 15 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (‘old VAT Directive’) and Article 146 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘new VAT Directive’) be interpreted as meaning that the transport outside Community territory of goods intended for export must take place within a defined period in order to qualify as an exempt supply of goods for export?
- Do the conditions of supply: whether the seller, the buyer or the supplier acted in good or bad faith, with due care or negligently; the period for declaration; or the fact that the goods are actually exported after the time-limit but within the limitation period for charging the tax have any effect on the answer to question 1?
- Is it compatible with the principles of tax neutrality, legal certainty and proportionality for the rules of a Member State to provide for additional conditions to the provisions of the Directives, and to make qualification as an exempt supply for export subject to a combination of several objective conditions that do not appear in the Directives?
- May Article 15 of the old VAT Directive and Articles 131 and 273 of the new VAT Directive be interpreted as meaning that, in the interests of preventing tax evasion, abuse and avoidance and of the correct charging and collection of tax, the Member State may also attach the conditions that are contained in Paragraph 11(1) of Law LXXIV of 1992 on Value Added Tax and in Paragraph 98(1) of Law CXXVII of 2007 on Value Added Tax to exempt exports?
- Is it consistent with the fundamental principles of Union law and the provisions of the Directives for the tax authority, in cases where such conditions, which do not appear in Articles 15 and 146 of the Directives, are not met, to alter the classification of an exempt export and order the taxpayer to pay tax? If so, in what circumstances is this possible?
AG Opinion
None
Decision
Articles 146(1) and 131 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national legislation under which, in the context of a supply for export, goods intended to be exported from the European Union must have left the territory of the European Union within a fixed period of three months or 90 days following the date of supply, where merely exceeding that time‑limit results in the definitive loss for the taxable person of the right to exemption in relation to that supply.
Summary
National legislation according to which the exported goods must have left the customs territory of the EU within a fixed period of 90 days after delivery is not permitted, if the mere exceeding of that period results in the taxable person being definitively denied the exemption for that supply.
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