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Chain transactions – Classifying the movement of goods for VAT purposes

The European Court of Justice (ECJ) currently has to deal with the question of which transaction in a cross-border supply chain with multiple transactions should be regarded as the exempt intra-Community supply if there is only one physical movement of goods.

The request from the Czech Republic for a preliminary ruling concerned a company that carries on business, in particular, in the field of road transport and owns several filling stations. Using its own vehicles, it transported fuel from suppliers in other Member States (Austria, Germany, Slovakia and Slovenia) to the destination (Czech Republic). In the course of this, the goods were repeatedly sold on. However, they were transported only once by the claimant to the end customer in the Czech Republic.

In many cases the claimant itself acted as the end buyer of the fuel, which it purchased from suppliers registered for VAT purposes in the Czech Republic. In such cases the claimant was at the end of the supply chain. In other cases the claimant sold on fuel to its own customers; it was thus in the middle of the supply chain. The claimant collected the fuel directly from refineries in other Member States and transported it to the Czech Republic. After crossing the border the customs clearance was carried out. The claimant continued the journey to the place of unloading (either its own filling stations or those of its customers). The local tax office did not permit the company to deduct the input tax because it assumed that this constituted an exempt intra-Community supply.

However, in her opinion statement from 3.10.2019, Kokott, the Advocate General in charge of case C‑401/18, took the view that the crucial factor was who bears the risk for accidental loss during the cross-border transport of the goods. The exempt intra-Community supply would then be the one whose place was where the transport began. Preceding deliveries in the supply chain will be liable to tax in the member state of dispatch while subsequent deliveries in the supply chain will be liable to tax in the Member State of the destination of the supply. Ownership in civil law during the transport is immaterial here.

Please note: We will have to wait to see what the outcome of the proceedings will be, in particular, whether or not the ECJ will establish clear and easily identifiable criteria for determining the active delivery in a chain transaction.

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