The Supreme Administrative Court recently dealt with this very topic and based on its examination issued a judgment 5 Afs 202/2021, which again proves the importance of the ability of a supplier of goods to another Member State to prove its entitlement to exemption from value-added tax pursuant to Section 64 of Act No. 235/2004 Sb. (Collection of Laws) on Value Added Tax.
The essence of the case under examination was whether or not there was a right to deduct value-added tax and whether there was sufficient evidence that the conditions for exemption were met when a new means of transport was supplied to another EU Member State in accordance with the aforementioned Section.
Pursuant to Section 64(2) of the VAT Act, “the supply of a new means of transport to another Member State by a taxpayer to a person in another Member State, which is shipped or transported from the domestic territory by the taxpayer or by the person acquiring the new means of transport or by an authorized third party, is exempt from tax with an entitlement to tax deduction”.
It follows from this case law that in order for a transaction to qualify as a supply of a new means of transport to another Member State of the European Union and thus qualify for exemption under Section 64(2) of the VAT Act, there must be:
- on the one hand, a transfer of the right to dispose as owner of the vehicle in question,
- on the other hand, the shipping or transport of the vehicle by the seller or the acquirer himself or by a third party on their behalf to a Member State other than that from which the goods are shipped.
The essential feature of an intra-Community transaction is the physical movement of goods from the Member State of supply to another Member State, i.e., their actual transfer between Member States.
The onus is on the taxable person to prove that the conditions for exemption are met in the case of intra-Community supplies of goods and it is up to the taxable person to prove the delivery of the goods to another Member State. Pursuant to Article 64(5) of the VAT Act, “the supply of goods to another Member State may be proved, inter alia, by a written declaration by the acquirer or an authorized third party that the goods have been transported to another Member State or by other means of proof.” Other means of proof showing that the vehicles in question have been transported by the supplier, the acquirer or an authorized third party to another Member State may be e.g., CMR notes, travel orders, driver's reports on vehicle movements, etc. The Supreme Administrative Court also mentions possibilities such as interviews with the persons who took over or transported the vehicles.
What specifically was at issue in the judgment?
The Czech company VSP Auto, s.r.o. delivered 50 new trucks purchased from the Czech company Mercedes-Benz Česká republika s.r.o. to the German company DUVENBECK Logistics GmbH under Section 64(2) of the VAT Act. The tax administrator assessed value-added tax against VSP Auto, s.r.o. on the ground that the company was not entitled to exemption from tax because it failed to prove that the vehicles had been physically transported by it, the purchaser or an authorized third party from the Czech Republic to another Member State.
Although the complainant submitted a large number of documents in order to prove that the conditions were met, none of these documents, nor all of them taken together, were considered by the tax authorities, the Regional Court and subsequently the Supreme Administrative Court to be evidence proving that the conditions for tax exemption were met for the supply of new means of transport to another Member State, since none of these documents alone proved that the complainant, the acquirer or an authorized person had transported the vehicles in question to the Federal Republic of Germany. The individual supporting documents were so contradictory as to who transported the vehicles, from where and to where, and when the transport took place, that it could not be proved that the transport actually took place.
Merely as regards the company that supposedly carried out the transport, there are significant differences:
- The handover reports show that the vehicles were handed over to Duvenbeck Logistics GmbH
- The purchase contract shows that the transport was to be provided by VSP auto, s.r.o.
- In the statement made by Thomas Duvenbeck Holding GmbH we learn hat the vehicles were received by employees of this company.
- From an e-mail from Duvenbeck Logistik s.r.o., however, we read that the vehicles were received by employees of this company and then transported to the Federal Republic Germany by driving them.
Although these companies belong to the same group, each of these companies is a separate entity and thus the statement of one entity cannot be considered as a statement of another.
Unfortunately, this is not the first case where the company has not been able to prove that it meets all the conditions for tax exemption under Section 64(2) of the VAT Act. The Supreme Administrative Court also dealt with a similar situation in its judgment of 13 October 2021, ref. No. 10 Afs 92/2021-67.
It is therefore appropriate to pay great attention to and review all documents and to ensure that, not only for tax-exempt transactions with an entitlement to tax deduction, you have a good deal of evidence.
