VAT refund and request of taxpayer as non-resident
The European Court of Justice, with the decision of 11 June 2020 on the C-242/19 case, made some clarifications on the following points:
1. interpretation of art. 17, paragraph 2, letter g) of the VAT Directive (2006/112/CE);
2. provisions of the art. 2, paragraph 1, and art. 3 of the VAT Refund Directive (2008/9/EC).
This case involved a Belgian company (Alfa), which was buying pallets from Romanian suppliers and other EU players, which were transported from the suppliers’ hubs to a destination in Romania. These pallets were then rented to a company of the same group (Beta). In turn the Beta rented the pallets to Romanian customers, who could send them to Romania, other EU countries or abroad. Finally, the pallets used to transport goods for export were subsequently sent back to Romania to the Beta, which declared them on import and re-invoiced their value and VAT to the Alfa.
The company Alfa applies a VAT refund for the VAT paid to the Romanian supplier and the VAT re-invoiced by the Beta.The refund was denied by the local Financial Administration due to not to be compliant with the mandatory identification to complete the intra-EU purchase in Romania.
The Court of Justice rules that it is not considered an intra-community transfer, according to the art. 17 of the VAT Directive, the transfer by a taxpayer of goods from one Member State to another Member State for a supply of services (rental) if the use of such goods in the destination State is temporary and the same goods have been transported from the EU State where the taxpayer is established.
Therefore, as per art. 17, paragraph 2, letter g) of the VAT Directive (2006/112/EC) it is appropriate to verify:
- the use of the goods transferred has a temporary nature, based on the terms of the rental contracts and the characteristics of the goods (however, the Court does not give precise and useful indications on how to measure temporariness)
- the goods have been transported to a Member State from the EU State where the taxable person is established.
If these conditions are complied wih, there is no intra-EU supply and the obligation of the supplier to identify himself in the Member State of the arrival of the goods, to complete the Intra-EU purchase and pay the reverse-charge tax.
Indeed, the European Court of Justice reiterates that the rule in art. 17, paragraph 2, letter g) of the VAT Directive must be interpreted restrictively.
The decision rules that, according to the VAT Refund Directive No 2008/9/EC, a Member State may not deny to a taxpayer established in another Member State the VAT Refund because that subject is or should be identified for VAT purposes in the so-called “refunding” Member State. According to this, the only conditions required to obtain a VAT Refund has a substantive nature, pursuant to Article 3 of the Directive on VAT Refund (2008/9/EC):
- in the relevant period not have in the Member State neither the place of business nor a permanent establishment from which business transactions were effected, nor, in the absence of such a place of business or the permanent establishment, the domicile or habitual residence;
- during the reporting period not having made supplies of goods or services whose place of supply can be considered in the “refunding” Member State – territorially relevant in that State.
However, no rule links the right to obtain a refund in a Member State to a formal nature condition, such as the obligation to be identified for VAT purposes.
Therefore local Financial Administration of the Member State may not deny to a taxpayer established in another Member State the VAT Refund because that subject is or should be identified for VAT purposes in the so-called “refunding” Member State.
It should be noted that seems to be at least exceeded the rule of the Italian Tax Authority, which would require that the direct identified person and those appointed the fiscal representative apply for a VAT refund as per Article 38 bis of the Presidential Decree of 633/1972, and not through the mechanism of refund as per Article 38 bis2 of the VAT Decree. Clarification on this question is still required from Tax Authority.
Alessandro Filippo Consonni