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Export of goods and application of a 0% rate - does determining the actual buyer matter?


 “If the goods were exported to a destination outside the European Union and where, following their exportation, the tax authorities found that the person acquiring those goods was not the person stated on the invoice issued by the taxable person, but another entity which has not been identified -in such circumstances, the VAT exemption provided for in Article 146(1)(a) and (b) of that Directive must be refused if the failure to identify the person actually acquiring the goods prevents it from being proved that the transaction at issue constitutes a supply of goods within the meaning of that provision or if it is established that that taxable person knew or ought to have known that that transaction was part of a fraud committed to the detriment of the common system of VAT”  - the Court of Justice of the European Union (CJEU) so ruled in its judgement of October 17, 2019, in the case C-653/18 Unitel Sp. z o.o. against the Head of the Tax Chamber in Warsaw.

The dispute concerned the export of goods outside the European Union carried out in 2007 by Unitel Sp. z o.o. with its registered office in Poland. The Company sold mobile phones to two Ukrainian entities – which were indicated as purchasers on invoices. During the audit proceedings, it turned out, however, that the details placed on the documents did not reflect the actual buyers, and the goods had been transferred to other, undetermined entities. Therefore, Polish tax authorities stated that there is no delivery of goods and the Company is not entitled to apply a 0% VAT rate – such standpoint was taken by both the Head of the Tax Chamber and the Voivodship Administrative Court in Warsaw.

Following a cassation  brought by Unitel Sp. z o.o., in the course of the NSA's analysis of the issue, the following doubts arose, which became the subject of the questions referred for a preliminary ruling:

  • Can exports of goods be subject to a 0% rate despite the fact that the details of the buyer indicated on the invoice do not reflect the actual buyer of the goods?
  • If the tax authorities determine that there was no delivery entitling to an exemption, should the domestic rate be applied to such delivery?

In the opinion of the CJEU,  the mere fact of a discrepancy between the actual buyer and the one indicated on an invoice does not preclude the application of a preferential rate. The following additional conditions must be for the VAT exemption to be questioned, namely:

  • Supplier is unable to prove that goods have physically left the Union borders, or
  • The tax payer has deliberately participated in a tax offence,

because in remaining cases, the taxpayer cannot be liable for the actions of third parties. However, where it has been proved that exports did not take place – the domestic rate will not apply. It should then be deemed that the transaction in question does not constitute a taxable transaction and therefore does not entail an entitlement to deduct input VAT.

The judgement of the CJEU, despite being undoubtedly in favour of all businesses conducting supply of goods outside the EU, does not exempt exporters from their duty of care (due diligence). for even in the case of unintentional participation in a tax offence, it will be their responsibility to prove their innocence.


Natalia Szymocha, Tax Consultant, ATA Tax Sp. z o.o.

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