The CFE has issued an Opinion Statement prepared by the CFE Indirect Taxes Subcommittee on the VAT treatment of chain transactions involving imports into the EU.
Import chain transactions are amongst the most commonly occurring business transactions for the EU as an outward looking union of important economies trading with the rest of the world. It is therefore of paramount importance that the VAT treatment of these types of transactions should be clear and certain throughout the EU.
Council Directive 2006/112/EC (“VAT Directive”) does not currently offer explicit rules to establish the VAT place of supply in relation to chain transactions involving imports into the EU (“import chain transactions”). The case law of the Court of Justice of the European Union (CJEU) equally does not provide guidance on this specific topic. The resulting uncertainty has led some Member States to proactively introduce rules in this area. This in turn has heightened the level of uncertainty in other Member States. Further, as chain transactions can involve more than one Member State after import of the goods into the EU, this legal landscape is prone to lead to frictions between Member States, double taxation or non-taxation.
Unilateral regulations by single Member States are a warning sign that the system is not working properly in this area and should not be ignored. To support trade, businesses must have an environment of legal certainty. They cannot be left guessing their VAT position or left having to VAT register in multiple countries for no evident reason.
Our opinion seeks to outline the issue and offer a resolution, which we hope will be considered favourably by the EU Commission. The suggested change to the Council Implementing Regulation (EU) No 282/2011 could be an effective and legally economical way of instating legal certainty for import chain transactions, thereby helping the development of the EU economy. Alternatively having clear guidance at a European Union level would be of assistance.
We invite you to read the Opinion Statement and remain available for any queries you may have.