CJEU: application of the 0% VAT rate despite noncompliance with formal requirements
CJEU: application of the 0% VAT rate despite noncompliance with formal requirements
Do you engage in crossborder supplies of goods for which you apply the 0% VAT rate? If so, it is important to carefully collect and retain all evidence demonstrating that the goods were actually dispatched or transported to another EU Member State.
This article discusses the Flo Veneer case and the judgment of the Court of Justice of the European Union (CJEU).
The central question referred to the CJEU was whether the absence of certain documents automatically leads to a refusal of the 0% VAT rate, even when the tax authorities do not dispute that the goods were transported from Croatia to Slovenia.
The Court ruled that the application of the 0% VAT rate cannot be refused solely because formal evidence requirements were not fully met, provided that it is established - through other available documentation - that an intraCommunity supply did indeed take place.
The Court stressed that tax authorities must assess all submitted evidence to determine whether the goods were genuinely supplied intraCommunity. The principle of fiscal neutrality requires that the 0% VAT rate must be granted when the substantive conditions are fulfilled, even if certain formalities were not complied with.
For businesses performing intraCommunity supplies, it remains crucial to carefully gather documents demonstrating that goods were indeed dispatched or transported to another Member State. Although the absence of certain formal documents does not automatically disqualify the 0% VAT rate, it is still essential to have sufficient alternative evidence in the administration to substantiate its application.
Companies are therefore advised to review their internal processes to ensure that as much supporting documentation as possible is gathered, such as transport documents and written statements from customers.
This article discusses the Flo Veneer case and the judgment of the Court of Justice of the European Union (CJEU).
Case summary
The case concerned Flo Veneer, a Croatian company that sold oak logs to a customer in Slovenia. Although the Croatian tax authorities did not dispute that the goods had in fact been transported to another EU Member State, they argued that the documents submitted by Flo Veneer - such as invoices, CMR consignment notes and written statements from the customer - did not meet the formal evidence requirements for applying the 0% VAT rate. You can read in our earlier article in which situations the 0% VAT rate may be applied.The central question referred to the CJEU was whether the absence of certain documents automatically leads to a refusal of the 0% VAT rate, even when the tax authorities do not dispute that the goods were transported from Croatia to Slovenia.
The Court ruled that the application of the 0% VAT rate cannot be refused solely because formal evidence requirements were not fully met, provided that it is established - through other available documentation - that an intraCommunity supply did indeed take place.
The Court stressed that tax authorities must assess all submitted evidence to determine whether the goods were genuinely supplied intraCommunity. The principle of fiscal neutrality requires that the 0% VAT rate must be granted when the substantive conditions are fulfilled, even if certain formalities were not complied with.
What does it mean in practice?
From this case, we conclude that Member States cannot simply deny the application of the 0% VAT rate for intraCommunity supplies when the substantive conditions are met but some formalities are lacking. All available evidence must be reviewed to establish whether an intraCommunity supply took place and whether the 0% VAT rate may be applied.For businesses performing intraCommunity supplies, it remains crucial to carefully gather documents demonstrating that goods were indeed dispatched or transported to another Member State. Although the absence of certain formal documents does not automatically disqualify the 0% VAT rate, it is still essential to have sufficient alternative evidence in the administration to substantiate its application.
Companies are therefore advised to review their internal processes to ensure that as much supporting documentation as possible is gathered, such as transport documents and written statements from customers.
