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VAT Exemption Export

Recently the European Court of Justice has answered the question whether the exemption for export is applicable if a time limit has passed.

Hungarian Company supplied goods to customers. The customers collected goods at the premises of the Hungarian company (incoterms 2000 ex-works) and transported these goods physically outside the EU. The Hungarian tax law requires that goods are physically exported within 90 days of the supply. In this case the customers did bring the goods outside the EU, but not within the time limit of 90 days. Therefore the Hungarian tax authorities did not allow the VAT exemption and imposed a VAT assessment on the supplier, including penalties.

The subsequent lawsuit resulted in a ruling of the European Court of Justice. In simple words the court ruled as follows: when the ex-works supplied goods were intended for export, and the goods actually have left the EU, it must be possible for the supplier to apply the exemption for export. This applies also when the/an applicable time limit (in this case in Hungary) has passed and the exemption could not be applied in first instance. The supplier should then be able to apply the exemption in second instance if he can prove the goods actually left the EU.

In practice goods supplied ex-works intended for export (to a non-EU country) are not always immediately picked up and transported to their destination. Sometimes goods remain at the premises of the supplier for some time. This case law provides an argument to apply the exemption for export (and possibly the exemption for exempt intra-community supplies) in such situations. Please be aware that from a VAT point of view there can be two supplies, one actual supply and one fictitious supply (by the customers) which could mean the supplier cannot apply the exemption for export. When you have similar situations and/or have doubts regarding the VAT exemption for export, you can contact Pincvision.

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