Flashback on ECJ Cases – C-184/05 (Twoh International) – No obligation to request information from the authorities of the Member State of the buyer

ECJ C-184/05 (Twoh International) – Exemption

On September, 27, 2007, the ECJ issued its decision in the case C-184/05 (Twoh International).

Context: Sixth VAT Directive – Article 28c(A)(a), first subparagraph – Intra-Community supplies – Exemption – No obligation on the tax authorities to gather evidence – Directive 77/799/EEC – Mutual assistance between the competent authorities of the Member States in the area of direct and indirect taxation – Regulation (EEC) No 218/92 – Administrative cooperation in the area of indirect taxation

Article in the EU VAT Directive

Artcile 28c(A)(a), first subparagraph of the Sixth Directive (Article 138 of the EU VAT Directive 2006/112/EC).

Article 28c(A)(a) (Exemption for Intra-Community supplies of goods)

‘Without prejudice to other Community provisions and subject to conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions provided for below and preventing any evasion, avoidance or abuse, Member States shall exempt:

(a) supplies of goods, as defined in Article 5, dispatched or transported by or on behalf of the vendor or the person acquiring the goods out of the territory referred to in Article 3 but within the Community, effected for another taxable person or a non-taxable legal person acting as such in a Member State other than that of the departure of the dispatch or transport of the goods.’

Facts

During 1996, Twoh, a Netherlands company, supplied computer parts to undertakings established in Italy. According to the sales contracts, the parties were to use the ‘ex-works’ (EXW) delivery method, which is one of the international commercial clauses (‘Incoterms 2000’) drawn up by the International Chamber of Commerce. Use of that clause meant that Twoh was required only to place the goods at the buyers’ disposal at a warehouse situated in the Netherlands, responsibility for transport to Italy being a matter for the buyers.
No declaration concerning those deliveries, such as required by Netherlands tax law and intended to establish the intra-Community nature of the deliveries of goods so as to exempt them from VAT in the Netherlands, was sent to Twoh by its Italian customers. Twoh nevertheless took the view at all times that the deliveries it had made were intra-Community deliveries, to which the nil rate of VAT was applicable. It therefore issued invoices which did not include the amount of VAT and, consequently, did not pay VAT in respect of those deliveries.
Following an accounting enquiry, the Netherlands tax authorities took the view that it had not been demonstrated that the goods had been dispatched or transported to another Member State, and that, therefore, it was wrong that no VAT had been paid. They therefore notified Twoh of an additional assessment to VAT for the period from 1 January to 31 December 1996 in the amount of NLG 1 466 629 in respect of the tax alone, increased by a further 100% of that amount.
Twoh lodged an objection against that additional assessment to VAT, expressly requesting the Netherlands tax authorities to gather from the competent Italian authority, pursuant to the mutual assistance directive and the administrative cooperation regulation, information capable of establishing the intra-Community nature of those supplies. The Netherlands authorities decided not to accede to that request, and to maintain the additional assessment to VAT.
Twoh brought an action against that decision before the Gerechtshof te Arnhem (Regional Court of Appeal, Arnhem), which, after production by the applicant of certain evidence concerning the supplies in question, annulled it in relation to three deliveries and reduced the amount of the additional assessment to VAT. That court nevertheless took the view that the Netherlands tax authorities were not required to request the competent Italian authority to undertake an enquiry in the destination Member State in order to check whether the goods in question had in fact been sent there. Twoh appealed on a point of law to the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) against the judgment of the Gerechtshof te Arnhem.

Questions

Is Article 28c A (a) of the Sixth Directive 1 – in conjunction with the mutual assistance directive 2 and the Regulation 3 – to be interpreted as meaning that, if no relevant information has been provided voluntarily by the Member State of arrival, the Member State of the dispatch or transport of the goods must request the alleged Member State of arrival of those goods to provide information and must take the results of that request into account when examining the evidence of the dispatch or transport of the goods?

AG Opinion

Persons seeking the exemption of an intra-community supply under Article 28c (A)(a) 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 must prove that the person acquiring the goods has obtained the right to deal as owner with the goods supplied, which are dispatched or transported to another Member State, and that the goods have consequently physically left the Member State of origin.

The tax authorities of the State of origin are not obliged to request information from the tax authorities of the State of destination under Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct and indirect taxation and Council Regulation (EEC) No 218/92 of 27 January 1992 on administrative cooperation in the field of indirect taxation (VAT) where the taxable person himself has not been able to adduce evidence of the dispatch or transportation of the goods.

Decision

The first subparagraph of Article 28c(A)(a) of 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, as amended by Council Directive 95/7/EC of 10 April 1995, read in conjunction with Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct and indirect taxation, as amended by Council Directive 92/12/EEC of 25 February 1992, and with Council Regulation (EEC) No 218/92 of 27 January 1992 on administrative cooperation in the field of indirect taxation, does not require the tax authorities of the Member State of dispatch or transport on an intra-Community supply of goods to request information from the authorities of the destination Member State alleged by the supplier.

Summary

The tax authorities of the Member State from which goods are dispatched or transported in the context of an intra-Community supply are not obliged to request information from the authorities of the Member State for which the goods are claimed by the supplier.

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