CJEU on cumulative intra-Community acquisitions
The CJEU has ruled (7.7.2022, C-696/20, Dyrektor Izby Skarbowej w W) that, in general, a cumulative intra-Community acquisition of goods can also occur in the Member State in which the transport began if the acquirer uses a VAT ID number of that Member State. However, there is no cumulative intra-Community acquisition of goods if the intra-Community supply of goods has already been subject to VAT and no right to input VAT deduction applied and there was no fraud involved. Otherwise, the VAT would become a cost factor twice.
Circumstances
The CJEU ruling concerns chain transactions, which were originally treated incorrectly, between the supplier (“BOP”, which used a Polish VAT ID number), the acquirer (“B”, which also used a Polish VAT ID number), and a recipient (“C”) registered for VAT purposes in another EU Member State than Poland.
The supplies of goods by BOP to B were categorised as domestic supplies of goods in Poland and 23% VAT was applied. B treated its own supplies of goods to recipient C as VAT-exempt intra-Community supplies of goods in Poland. Recipient C declared the intra-Community acquisition of goods properly in the Member State in which the transport ended.
However, the Polish tax authority concluded that the transport should not be ascribed to the second supply of goods in the chain but to the first. Consequently, BOP was deemed to have carried out intra-Community supplies of goods in Poland. However, the intra-Community supplies of goods were not treated as VAT-exempt by the Polish tax authority, meaning that VAT at a rate of 23% had to be paid. B was refused the right to deduct the VAT paid as input VAT.
Due to the different ascription of the transport, the Polish tax authority deemed B to have carried out intra-Community acquisitions of goods in the Member State in which the transport ended. Furthermore, in the view of the Polish tax authority, B was deemed to have carried out intra-Community acquisitions of goods in Poland in accordance with Article 41 VAT Directive (which corresponds to Art 3 para 8 second sentence Austrian VAT Act) due to the use of a Polish VAT ID number.
Decision of the CJEU
The CJEU has concluded that Article 41 of the VAT Directive generally applies in cases in which, due to incorrect treatment of the chain transaction, the acquirer of the goods uses the VAT ID number of the Member State in which the transport began rather than the VAT ID number of the Member State in which the transport ended. Initial incorrect ascription of the transport in a chain transaction can therefore lead to a cumulative intra-Community acquisition of goods in the Member State which issued the VAT ID number that was used by the acquirer for the intra-Community acquisition of goods.
According to the CJEU, it is irrelevant whether the Member State which issued the VAT ID number is also the Member State in which the transport began, because this case is also covered by the wording and the objectives pursued by Article 41 VAT Directive.
Furthermore, the fact that the recipients (here the final recipients in the chain) paid VAT on the acquisitions, which were incorrectly treated as intra-Community acquisitions of goods, in the Member State in which the transport ended, is irrelevant for the application of Article 41 VAT Directive, as the VAT paid by them relates to a separate transaction (second supply in the chain).
However, when interpreting Article 41 of the VAT Directive, the context and objectives pursued by these rules should also be considered. In the present case, VAT was applied to the intra-Community supplies of goods, while the acquirer, company B, was prevented from deducting input VAT. The intra-Community supplies of goods were therefore not treated as VAT-exempt. According to the CJEU, there is no reason to assume potential tax avoidance in the Member State in which transport began, which means that the taxation of a second intra-Community acquisition of goods on the basis of Article 41 VAT Directive contradicts the purpose of these rules (ensuring the taxation of an intra-Community acquisition and prevention of double taxation).
The application of Article 41 VAT Directive (taxation of a cumulative intra-Community acquisition of goods without input VAT deduction) is therefore incompatible with the principles of proportionality and fiscal neutrality.
Conclusion
This ruling represents the first case law at EU level confirming that a transaction should be taxed as a cumulative intra-Community acquisition of goods if the acquirer uses a VAT ID number of the Member State in which the transport begins. This confirms the existing view of the Austrian tax authorities, as presented in item 3777 of the Austrian VAT Guidelines (UStR). Previously, this stance was frequently questioned in the specialist literature, and the Austrian Federal Tax Court (BFG) (2.6.2016, RV/2101353/2014) decided that a cumulative intra-Community acquisition of goods was not possible in the Member State of origin. However, BFG case law is not entirely consistent. In a separate BFG decision (19.5.2021, RV 2100149/2019), the court concluded that a cumulative intra-Community acquisition of goods in the Member State of origin was possible. It should also be noted that an appeal against this BFG decision has been brought before the Austrian Supreme Administrative Court (VwGH), which is still pending (Ro 2021/15/0034).
The CJEU has also stated that double application of VAT without input VAT deduction (to an intra-Community supply of goods and a cumulative intra-Community acquisition of goods) is incompatible with EU VAT law. However, in circumstances such as these, the VAT becomes a cost factor once, which can only be changed by subsequent correction (normally, by VAT registration in the Member State of destination). Nevertheless, the CJEU does not address options for tax resolution.
