Flashback on ECJ cases C-185/89 (Velker International Oil Company) – Exemption for deliveries of goods intended for provisioning of ships

On June 26, 1990, the ECJ issued its decision in the case C-185/89 (Velker International Oil Company)

Context: Tax provisions – Harmonization of laws – Turnover taxes – Common system of value-added tax – Exemptions provided for in the Sixth Directive – Exemption of the supply of goods for the fuelling and provisioning of vessels – Conditions

Article in the EU VAT Directive

Article 15(4) of the Sixth VAT Directive (Articles 148 and 150 of the EU VAT Directive 2006/112/EC).

Article 148 (Exemptions related to international transport)
Member States shall exempt the following transactions:
(a) the supply of goods for the fuelling and provisioning of vessels used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities, or for rescue or assistance at sea, or for inshore fishing, with the exception, in the case of vessels used for inshore fishing, of ships’ provisions;
(b) the supply of goods for the fuelling and provisioning of fighting ships, falling within the combined nomenclature (CN) code 8906 10 00, leaving their territory and bound for ports or anchorages outside the Member State concerned;
(c) the supply, modification, repair, maintenance, chartering and hiring of the vessels referred to in point (a), and the supply, hiring, repair and maintenance of equipment, including fishing equipment, incorporated or used therein;
(d) the supply of services other than those referred to in point (c), to meet the direct needs of the vessels referred to in point (a) or of their cargoes;
(e) the supply of goods for the fuelling and provisioning of aircraft used by airlines operating for reward chiefly on international routes;
(f) the supply, modification, repair, maintenance, chartering and hiring of the aircraft referred to in point (e), and the supply, hiring, repair and maintenance of equipment incorporated or used therein;
(g) the supply of services, other than those referred to in point (f), to meet the direct needs of the aircraft referred to in point (e) or of their cargoes.
Article 150
1. The Commission shall, where appropriate, as soon as possible, present to the Council proposals designed to delimit the scope of the exemptions provided for in Article 148 and to lay down the detailed rules for their implementation.
2. Pending the entry into force of the provisions referred to in paragraph 1, Member States may limit the scope of the exemptions provided for in points (a) and (b) of Article 148.

Facts

By judgment of 24 May 1989, which was received at the Court on 29 May 1989, the Hoge Raad der Nederlanden ( Supreme Court of the Netherlands ) referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions concerning the interpretation of Article 15 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 basis of assessment ( Official Journal 1977, L 145, p . 1 ).
The questions were raised in the course of proceedings between the Staatssecretaris van Financiën ( Netherlands State Secretary for Finance ) and Velker International Oil Company Ltd NV, Rotterdam, ( hereinafter referred to as “Velker “) following an additional assessment in respect of turnover tax issued on Velker .
The documents in the case show that Velker sold to Forsythe International BV, The Hague, ( hereinafter referred to as “Forsythe “) two consignments of bunker oil, the invoices for which were dated 14 November 1983 and 16 November 1983 .
The consignments of oil had been acquired by Velker from Handelmaatschappij Verhoeven BV, Rotterdam, ( hereinafter referred to as “Verhoeven “) which had itself bought one of the consignments from Olie Verwerking Amsterdam BV ( hereinafter referred to as “OVA “).
On Forsythe’ s instructions, the two consignments were delivered, by OVA on 5 November 1983 and by Verhoeven on 11 November 1983, to tanks rented by Forsythe from a company called De Nieuwe Matex, and then loaded on to sea-going vessels on 6, 7 and 8 November 1983 and 17 and 18 November 1983 .
The invoice raised by OVA on Verhoeven did not include any turnover tax . The invoices raised by Verhoeven on Velker were marked “VAT-0 rate “. In turn Velker applied a zero VAT rate to the two sales invoiced to Forsythe .
The Netherlands tax authorities considered that the supplies of oil made by Velker to Forsythe did not qualify for VAT exemption and issued an additional turnover tax assessment notice for 1983 on Velker .
The case came before the Gerechtshof ( Court of Appeal ), The Hague, which annulled the assessment notice, taking the view that the oil supplied by Velker was for the fuelling and provisioning of sea-going vessels and that such supply ought to be exempt from VAT by virtue of the combined provisions of Article 9(2 ), first subparagraph and ( b ), of the Wet op de Omzetbelasting ( Netherlands Law on Turnover Tax ) and the first subparagraph of Heading 4(a ) of Table II annexed to that law .
The Netherlands State Secretary for Finance appealed to the Hoge Raad against that judgment of the Gerechtshof . He maintained that only the supply of goods coinciding with the fuelling and provisioning of vessels and followed by exportation of those goods could be considered to be a supply of goods for the fuelling and provisioning of vessels within the meaning of the aforesaid provisions of the Netherlands legislation .
In its judgment of 24 May 1989 referring questions to the Court, the Hoge Raad explained that when it adopted the legislation the Netherlands legislature had intended to implement the provisions of Article 15(4 ) of the Sixth Directive and that consequently the term “for the fuelling and provisioning of vessels” which appears in the Netherlands legislation must be given a meaning identical to that of the same term which appears in the Community directive .

Questions

( 1 ) Must Article 15(4 ) of the Sixth Directive be construed as meaning that only supplies which coincide with fuelling and provisioning can be regarded as supplies of goods for the fuelling and provisioning of the vessels defined in that provision?

( 2 ) If that provision of the Sixth Directive does not have a meaning which is as restrictive as that defined in Question 1, must the following also be regarded as supplies within the meaning of that provision :

only the supply of goods to an undertaking which will later use them for fuelling and provisioning vessels,

or also goods supplied in a previous transaction, that is to say, to an undertaking which does not itself use the goods for fuelling and provisioning vessels but supplies them to another undertaking which does use them for that purpose?

AG Opinion

Article 15(4 ) of the Sixth Value-Added Tax Directive should be interpreted as meaning that the supply of goods to an undertaking which uses the goods subsequently to fuel and provision vessels is to be regarded as the supply of goods for the fuelling and provisioning of the vessels described in the provision. It is not necessary for the supply to coincide with fuelling and provisioning, that is to say, for delivery to be made directly on to the vessel.

Decision

Article 15(4 ) of the Sixth Council Directive 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 basis of assessment ( 77/388/EEC ) must be construed to the effect that only supplies to a vessel operator of goods to be used by that operator for fuelling and provisioning are to be regarded as supplies of goods for the fuelling and provisioning of vessels, but there is no requirement that the goods should be actually loaded on board the vessels at the time of their supply to the operator .

Summary

Exemption for deliveries of goods intended for provisioning of ships

Only deliveries to the entrepreneur who will use the goods as ship’s stores can be regarded as supplies of goods intended for the provisioning of ships, whereby the bringing of the goods on board does not necessarily have to coincide with the delivery to the entrepreneur.

Source