Exceptions to the deemed intra-EU supply of own goods must be interpreted strictly | Deloitte Netherlands

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Exceptions to the deemed intra-EU supply of own goods must be interpreted strictly

On June 11, 2020, the Court of Justice of the European Union (“CJEU”) ruled in the CHEP Equipment Pooling NV case with respect to the deemed intra EU supply of own goods.

17 June 2020

The outcome of this case is that the exceptions to the deemed intra EU supply of own goods must be interpreted strictly. This will impact companies that have pan-European operations and ship goods cross-border as part of their business activities.

Background

In the CHEP Equipment Pooling NV case (C-242/19), CHEP transported pallets from several EU Member States to Romania. In Romania, CHEP leased the pallets to a taxable person established and registered for VAT purposes in Romania. The pallets were sub-leased to other taxable persons who used the pallets to transport products to and from Romania.

Based on the above facts and circumstances, Romania requested the CJEU if the transport of pallets from one EU Member State to another could be considered as an exception to the deemed intra EU supply of own goods.

The CJEU ruled that the exception to the deemed intra-EU supply of own goods must be interpreted strictly, similar to the VAT exemptions. There is an exception in case the following two conditions are met:

  1. The goods are transported temporary in order to render services in the country of arrival; and
  2. The goods are dispatched or transported from the EU Member State where the taxable person is established.

Practical impact

In order to assess the temporary nature, the concluded contracts and characteristics of the goods are essential. The second condition is in principle clear, when goods are transported from an EU Member State other than the EU Member State where the taxable person is established, the exception does not apply.

The strict explanation of the second condition may have a huge practical impact. For example, a taxable person established in the Netherlands who temporarily transfers goods to render services from both the Netherlands and other EU Member States to another EU Member State could only apply the exception for the deemed intra-EU supply of own goods in the Netherlands. This will in principle trigger VAT registration and VAT compliance obligations in all other countries of departure and destination.

In addition, and this is not how EU Member States currently apply this exception, companies that are established outside the EU cannot apply the exceptions to the deemed intra-EU supply of own goods. After all, they are not established in the EU. As a result, the non-EU company in principle has VAT registration and VAT compliance obligations in all involved EU Member States. Appointing a fiscal representative does not resolve this.

Finally

If you have any questions regarding the above, please contact your VAT advisor.

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