| REVENUE — Value added tax — Intra-Community acquisition and supply — Whether supply only if physical movement of goods between Member States — Whether innocent supplier liable for VAT if fraudulent non-transfer of goods between States — Sixth VAT Council Directive 77/388/EEC (as amended by Council Directive 91/680/EEC; “the Sixth Directive”), arts 28a, 28c(A)(a)
R (Teleos and others) v Customs and Excise Commissioners (Case C-409/04)
ECJ: President of Chamber Rosas, Judges Borg Barthet, Malenovský, Lõhmus and Ó Caoimh: 27 September 2007
There could only be an intra-Community acquisition and supply of goods if the goods actually left the territory of the Member State of supply, but where the goods were fraudulently retained in that State, the supplier could not be made liable for VAT if he was unaware of the fraud and had taken all reasonable steps to ensure that he was not participating in tax evasion.
The Third Chamber of the Court of Justice of the European Communities so held, inter alia, on a reference for a preliminary ruling by the High Court, Queen’s Bench Division (Administrative Court).
Contracts for the sale by the applicants of mobile telephones required the applicants to deliver the telephones to a warehouse in the United Kingdom and the purchaser, a Spanish company, to arrange for their transportation from there to destinations in France and Spain, but after an enquiry the respondent commissioners concluded that no telephones had ever left the UK, and assessed the applicants to VAT. The applicants maintained that the transactions were exempt as intra-Community supplies under art 28c(A)(a) of the Sixth Directive and brought proceedings in which it was found that the applicants did not know of and could not reasonably have known of the fraud. The High Court sought a preliminary ruling on whether the physical movement of the goods out of the country was a necessary condition for an intra-Community supply and whether, even if it was, suppliers in the position of the applicants could be made subject to VAT.
Art 28a(1) of the Sixth Directive provides that VAT is payable on “intra-Community acquisitions of goods”, defined in para (3) as the right to dispose as owner of goods “dispatched or transported to the person acquiring the goods … to a member state other than” the dispatching state. Art 28c(A)(a) requires member states to exempt “supplies of goods … dispatched or transported … out of the territory” of the member state.
THE COURT said that the applicants submitted that it was sufficient for art 28a if the supplier placed the goods at the purchaser’s disposal and intended them to be transported to another member state. However, although art 28a was not free from ambiguity, art 28c(A)(a) clearly referred to the goods actually leaving the supplying member state, and in view of the close relationship between those provisions, “dispatched” was to be given the same meaning in both, and the supplier’s intentions were irrelevant. Accordingly, the two articles were only applicable if the goods physically left the territory of the member state of supply. However, a supplier who had acted in good faith and provided evidence prima facie establishing his right to exemption could not be required to account for VAT where that evidence was found to be false, without the supplier’s involvement in the fraud being established, provided the supplier had taken all reasonable measures to ensure that his supply did not lead to his participation in tax evasion.
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