(Case C-587/10 Vogtländische Straßen-Tief und Rohrleitungsbau GmbH Rodewisch "VSTR”)

The case concerns two successive supplies of goods between three companies, with a single intra-Community transport of goods.

Specifically, VSTR (a company established and registered for VAT purposes in Germany) sold goods to an US company (not registered for VAT purposes in the European Union) for their onwards supply to a Finnish customer (a company established and registered for VAT purposes in Finland). The goods were delivered directly from Germany to Finland.

VSTR applied the VAT exemption for intra-Community supplies based on the VAT ID number of the end customer in Finland.

One of the conditions imposed by the European VAT Principal Directive (Directive 2006/112/EC) for applying the VAT exemption for intra-Community supplies is that the supply is made to a taxable person.

According to AG, indicating the VAT ID number of the buyer of goods is not a substance requirement for applying the VAT exemption, being merely an instrument of proof used in determining the buyer’s status of taxable person.

The buyer's status of taxable person can be proved by objective means and does not exclusively rely on assigning a VAT ID number (although indicating the VAT ID number is normally a mean that facilitates control of intra-Community transactions).

Therefore, failure to comply with the requirement of stating the VAT ID number of the customer from another Member State (while complying with the substance requirements) cannot trigger denial of VAT exemption at the level of the supplier. Denying application of VAT exemption would breach the principle of fiscal neutrality (either by double taxation of the transaction or by redistribution of taxation competence between Member States).

Also, according to AG’s opinion, the applicability of the VAT exemption by the supplier cannot be made conditional on whether the transaction was reported as intra-Community acquisition by the customer in the Member State of arrival.

The Romanian VAT legislation currently restricts applying the VAT exemption for intra-Community supplies of goods on indicating the valid VAT ID number of the customer, assigned by the tax authorities in another Member State.

If the CJEU follows the AG’s opinion, the Romanian tax authorities will most probably have to amend the current provisions of law. It will be of interest which instruments will be used by them in order to control intra-Community transactions from the perspective of fighting against tax evasion and fraud.

By Venkatesh Srinivasan, Partner – Head of Tax and Legal, Ernst & Young Romania

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