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Important judgment of CJEU for practical international trade

2015-02-11

Taxable persons effecting supplies to other countries should consider tax consequences of having services performed abroad on the goods sold. In accordance with a judgment of the Court of Justice of the European Union given on 2 October 2014 in Case C 446/13 Fonderie 2A versus Ministre de l’Économie et des Finances, the place of supply of goods sold by a company established in a Member State to a person established in another Member State, and on which the vendor has had finishing work carried out by a service provider established in that other Member State, before having them dispatched by the service provider to the person to whom they are being supplied, must be deemed to be in the Member State where the latter is established.

As emphasised by the Court, by dispatching the goods to the service provider, the producer does not transfer the right to dispose of the goods as owner to the purchaser. And the place of supply of the goods depends on the place where the goods compliant with the contract between the parties are. It means that by moving the goods to another Member State where finishing work is subsequently carried out on such goods, and only afterwards domestic sale in another Member State takes place, the producer should register for that purpose in the Member State of the sale in order to account for VAT properly.

Barbara Otrzonek, our expert and tax consultant at ATA TAX, commented on the judgment of CJEU by saying that “Although the judgment relates to the legal regime prevailing in 2001 and is based on the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax, it is significant also for the interpretation of legal regulations as currently applicable. Taking into account the resolution from the commented judgment of CJEU, a Polish taxable person planning a transaction of supply of goods to another EU country, combined with processing of the goods in that country, should remember that it may necessitate the registration for VAT purposes in the country where the goods are being processed”.

You are encouraged to read the facts and the judgment of CJEU in Case C-446/13 Fonderie 2A versus Ministre de l`Économie et des Finances, which may be found on the InfoCuria website with case law of the Court of Justice.