Customer’s lack of registration as an EU VAT taxable person is not conclusive for impossibility to apply the 0% rate in the case of intra-Community supply of goods
A judgment given on 9 February 2017 in Case C-21/16 Euro Tyre BV – Sucursal em Portugal v Autoridade Tributaria e Aduaneira, although it concerns a Portuguese company, may be of significance also for Polish taxable persons. According to the CJEU, tax authorities may not refuse the entity the right to apply the 0% rate in the case of intra-Community supply of goods on the sole ground that its contracting party is not registered in the VIES system, containing information about taxable persons registered for the purposes of VAT in individual Member States.
The case concerned a Portuguese branch of a company incorporated under Netherlands law, engaged in the import, export and marketing of tyres for retailers based in Portugal and Spain. In the Spanish market, it sold in part through a distributor whom the Spanish tax authorities granted the status of intra-Community operator only in 2013 with effect from 1 July 2012. The Spanish tax authorities refused the right to apply the 0% rate to intra-Community supplies of goods under transactions effected in the years 2010-2012, arguing that at the time of the transactions the distributor was neither registered for intra-Community transactions in Spain nor registered in the VIES system.
The CJEU did not agree with that position, noting that neither Council Directive 2016/112/CE (Article 138(1)) nor the CJEU case law indicates, as one of the substantive conditions for intra-Community supply, the obligation for the purchaser to have a VAT identification number nor, a fortiori, the obligation for the purchaser to be registered for the purpose of carrying out intra-Community transactions and to be registered in the VIES system. Those are merely formal requirements which cannot undermine the vendor’s entitlement to exemption from VAT if the substantive conditions for intra-Community supply have been satisfied. The CJEU also reminded that the definition of taxable person included in the Directive does not make the capacity of taxable person either subject to that person possessing a VAT identification number, specific for carrying out intra-Community transactions, or subject to that person being registered in the VIES system.
In our opinion, this judgment is of significance also for Polish taxable persons effecting intra-Community supplies of goods. The Polish legislator stated, among the conditions for application of the 0% rate in the case of intra-Community supply of goods, among others that the supply by a taxable person is to be made to a purchaser holding an appropriate and valid identification number for intra-Community transactions, granted by a Member State competent for the purchaser, containing a two-letter value added tax code (Article 42.1.1 of the Polish VAT Act). However, such requirement does not follow from the provisions of the Directive.
So, if material conditions under the Directive for the application of the 0% rate are satisfied and there is no tax fraud, tax authorities (also Polish authorities) have no grounds to refuse the taxable person to apply the 0% rate for intra-Community supply of goods. Failure to satisfy a formal condition consisting in the registration of the contracting party as an EU VAT taxable person (and registration in the VIES system) should not result automatically in the deprivation of the right to a preferential VAT rate.