Under existing EU VAT law, goods which are sent or taken to a destination outside of the EU following their sale may be sold with no VAT applied. Various documentary requirements must be fulfilled in order to apply this treatment, and national law in many EU Member States stipulates that the goods must be removed from the EU within a period of 90 days. Failure to adhere to this may render the sale taxable at the applicable VAT rate.
Whilst this national law exists, the 90 day condition has recently been examined in light of a judgment concerning a Hungarian company. In this case, the Hungarian company had sold goods which were to be transported outside of the EU by the customer, however this was not completed within the 90 day period. Subsequently, the Hungarian tax authorities deemed that VAT was due on the supply, and also levied penalties and interest.
Following the decision, the Hungarian taxpayer appealed, citing the fact that Hungarian national law differed from EU law which does not give a time limit. It was argued that zero rating should be permitted as EU law takes precedence.
The Hungarian tax authorities sought the opinion of the ECJ who found that whilst each Member State may implement time limits and other such measures to ensure tax is properly accounted for, the Hungarian provisions went beyond what is necessary in order to attain the objective of preventing tax evasion and avoidance.