On the 9 February 2017, the CJEU ruled on the case C-21/16 Euro Tyre BV.
Euro Tyre is a Portuguese branch of a Dutch Company, Euro Tyre BV. The dispute concerned multiple intra-community supplies made by Euro Tyre between 2010 and 2012 to a group company, Euro Tyre Distribución de Neumáticos (Spanish established company). At the time of those supplies Euro Tyre Distribución de Neumáticos was only registered as a taxable person for the purposes of VAT in Spain, it was not yet registered on the system of taxation on intra-community acquisitions or registered in the VAT Information Exchange System (the ‘VIES system’). In March 2013 the Spanish tax authorities granted Euro Tyre Distribución de Neumáticos the status of intra-community operator with retrospective effect from 1 July 2012 (Euro Tyre expected to have achieved retrospective effect to 2010). Euro Tyre treated these supplies as being exempt with credit (the UK equivalent of zero rated).
Following a tax audit in Portugal, the Tax Authority, for the periods from 2010 to June 2012, declared that the conditions for exemption has not been met as the customer had not been registered as intra-community operator in Spain. Following this, the Tax Authority issued an assessment plus interest for output tax which in their view should have been payable. The Tax Authority did not consider their to be any fraud in this instance.
Euro Tyre appealed the assessments on the basis that the condition to be registered as an intra-community trader does not appear in Article 138 of the EU VAT Directive and is only a formal requirement imposed by Portugal. Consequently, it met the conditions to exempt its supplies.
The CJEU upheld Euro Tyre’s position with its ruling by stating:
Article 131 and Article 138(1) of the Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, must be interpreted as precluding the tax authority of a Member State from refusing to exempt an intra-community supply from value added tax on the sole ground that, at the time of that supply, the purchaser domiciled in the territory of the Member State of destination and who was in possession of a valid identification number for the purposes of value added tax in that Member State is neither registered in the Value Added Tax Information Exchange System nor comes under a system of taxation on intra-community acquisitions of goods, where there is no sound evidence pointing to the existence of fraud and it is established that the basic conditions of the exemption are fulfilled………
This ruling is a positive outcome for businesses as it reinforces the conditions that must be met for exemption to apply when an intra-community supply of goods takes place.
Companies trading cross border in countries which require a separate registration on VIES or as an intra-community trader should always look to fulfil local registration requirements. Doing this will help to prevent misunderstanding and disputes with the tax authorities. However, the case does reinforce the point that in instances where these technical conditions are not met then the tests laid out in Article 138 will still have preference and hence exemption can be applied to genuine intra-community transaction.