Case C‑656/19
BAKATI PLUS Kereskedelmi és Szolgáltató Kft.
v
Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága
(Request for a preliminary ruling from the Szegedi Közigazgatási és Munkaügyi Bíróság)
Judgment of the Court (Fifth Chamber), 17 December 2020
(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Exemptions on exportation – Article 146(1)(b) – Goods dispatched or transported outside the European Union by a customer not established within the territory of the Member State concerned – Article 147 – ‘Goods to be carried in the personal luggage of travellers’ not established within the European Union – Concept – Goods which have actually left the territory of the European Union – Proof – Refusal of the exemption on exportation – Principles of fiscal neutrality and proportionality – Tax evasion)
1.        Questions referred for a preliminary ruling – Reference to the Court – Determination of the questions to be referred – Exclusive jurisdiction of the national court – Whether possible for the parties to change the wording of the questions – Not possible
(Art. 267 TFEU; Statute of the Court of Justice, Art. 23)
(see paras 32, 33)
2.        Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Exemptions on exportation – Goods to be carried in the personal luggage of travellers – Concept – Independent and uniform interpretation
(Council Directive 2006/112, Art. 147)
(see para. 38)
3.        Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Exemptions on exportation – Supplies of goods dispatched or transported outside the European Union – Concept of goods to be carried in the personal luggage of travellers not established within the European Union – Goods carried by such a traveller with a view to their resale in a third State – Precluded
(Council Directive 2006/112, Arts 146(1)(b) and 147)
(see paras 42-53, operative part 1)
4.        Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Laying down of conditions – Power of the Member States – Limits – Compliance with the general principles of EU law – Formal obligations and substantive conditions – Effect of a failure to comply with formal requirements – No effect – Exceptions
(Council Directive 2006/112, Arts 131, 146, 147 and 273)
(see paras 69-74)
5.        Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Exemptions on exportation – Supplies of goods dispatched or transported outside the European Union – Rules on proof that the goods were exported – Detailed evidential rules – Limits – Observance of the principle of proportionality – Formal obligations and substantive conditions
(Council Directive 2006/112, Art. 146(1)(b))
(see paras 75-79)
6.        Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Exemptions on exportation – Supplies of goods dispatched or transported outside the European Union – Principles of fiscal neutrality and proportionality – Goods which have undeniably left the territory of the European Union – National practice automatically refusing the benefit of the exemption in the event of bad faith on the part of the taxable person – Not permissible – Exceptions
(Council Directive 2006/112, Arts 131, 146(1)(b), 147 and 273)
(see paras 80, 82, 84, 86-89, operative part 3)
7.        Harmonisation of fiscal legislation – Common system of value added tax – Exemptions – Exemptions on exportation – Supplies of goods dispatched or transported outside the European Union – Goods to be carried in the personal luggage of travellers – Actual transport outside the European Union – Obligation on the tax authority to examine whether the exemption is applicable – Whether permissible – Non-compliance with customs formalities applicable to exportation – Intention to secure application of the exemption for goods to be carried in luggage – No effect
(Council Directive 2006/112, Arts 146(1)(b) and 147)
(see paras 62-64, operative part 2)
Résumé
The applicant in the main proceedings, BAKATI PLUS (‘Bakati’), is an undertaking incorporated under Hungarian law whose annual turnover, as from 2015, rose from 50 million Hungarian forints (HUF) (approximately EUR 140 000) to HUF one billion (approximately EUR 2 784 000). In 2016, its business essentially consisted in deliveries of large quantities of food products, cosmetics and cleaning products to twenty individuals.
The purchasers of the goods transported them to Serbia, by private car, as personal luggage from a warehouse which they had leased in Hungary close to the border with Serbia, in which the invoices and VAT refund application forms for foreign travellers, drawn up by Bakati, were handed over to the purchasers with the goods concerned in return for the purchase price.
Under the Hungarian VAT Law, supplies of goods dispatched or transported from Hungary to a third country outside the European Union are exempt from VAT, subject to certain conditions. Supplies of goods to be carried in the personal luggage of foreign travellers are specifically exempt from VAT.
The customers took advantage of that latter exemption by returning to Bakati the VAT refund application form stamped by the customs office of exit, stating that the goods had left the territory of the European Union. On receipt of that form, Bakati refunded to the customers the VAT which they had paid at the time of purchase. In its VAT returns for 2016, Bakati included as the sum to be deducted from the tax payable the VAT refunded to those customers, in a total amount of HUF 339 788 000 (approximately EUR 946 000).
During a tax inspection, the tax authority found that the purchases in question exceeded the customers’ individual and family needs and that they had been made with a view to the resale of the goods purchased, which meant that those goods could not constitute personal luggage within the meaning of the Hungarian VAT Law. The tax authority also took the view that Bakati could not benefit from the exemption on any other basis under that law, since it had not completed the customs formalities and did not have the documents necessary for that purpose. The tax authority accordingly required Bakati, by decision of 27 June 2018, to pay the VAT difference, together with a tax penalty and default interest.
That decision was upheld by decision of the Appeals Directorate of the tax administration, following which Bakati brought an action before the Szegedi Közigazgatási és Munkaügyi Bíróság (Administrative and Labour Court, Szeged, Hungary) seeking annulment of the decision of the Appeals Directorate.
For the purposes of the application of the Hungarian VAT Law, the provisions of which relating to exemptions from VAT on export correspond, in essence, to Articles 146 and 147 of the VAT Directive, (1) the referring court submitted several questions to the Court of Justice for a preliminary ruling on the interpretation of those provisions.
Findings of the Court
In the first place, the Court examines whether goods which an individual who is not established within the European Union carries with him or her outside the European Union for commercial purposes, with a view to their resale in a third State, are covered by the exemption provided for in Article 147 of the VAT Directive for ‘goods to be carried in the personal luggage of travellers’.
In that regard, while pointing out that the exemptions provided for by the VAT Directive constitute independent concepts of EU law, the Court finds that the abovementioned terms, in their usual meaning, refer to goods, generally small in size or quantity, which individuals take with them or acquire during a journey, which they need during that journey and which are for their private use or for use by their family.
Examining the context in which those terms are used, the Court infers from the conditions for the application of the exemption provided for in Article 147 of the VAT Directive that the potential beneficiary of that exemption is a natural person, not acting as an economic operator, which indicates that the exemption cannot apply to exports of a commercial nature. Since VAT exemptions must be interpreted strictly, and having regard, moreover, to the specific objective of promoting tourism pursued by that article and the legislative evolution of the provision now contained in that article, the Court concludes that the exemption for goods to be carried in the personal luggage of travellers does not apply to goods which an individual who is not established within the European Union takes with him or her outside the European Union for commercial purposes, with a view to their resale in a third State.
In the second place, the Court rules that Article 146(1)(b) and Article 147 of the VAT Directive do not preclude national case-law under which, in the case where the conditions for the VAT exemption for goods to be carried in the personal luggage of travellers are not satisfied, but the goods concerned have actually been transported outside the European Union by the purchaser, the tax authority is obliged to examine whether the VAT exemption provided for in Article 146(1)(b) applies to the supply at issue, even though the applicable customs formalities have not been carried out and even though, at time of the purchase, the purchaser did not intend to have that exemption applied.
A transaction such as that at issue in the main proceedings constitutes a supply of goods, within the meaning of Article 146(1)(b) of the VAT Directive, provided that it satisfies the objective criteria defining such a supply, namely that the right to dispose of the goods as owner has been transferred to the purchaser, that the supplier establishes that those goods have been dispatched or transported outside the European Union and that, as a result of that dispatch or transport, the goods have physically left the territory of the European Union. Compliance with the customs formalities applicable to exports or the fact that the purchaser’s intention, at the time of purchase, was to secure application, not of the exemption provided for in Article 146(1)(b), but of the exemption in Article 147 of the VAT Directive, have no bearing on the classification as a supply of goods for export.
Lastly, the Court examines whether the abovementioned provisions of the VAT Directive, and the principles of fiscal neutrality and proportionality, preclude the tax authorities from automatically refusing to grant a taxable person the VAT exemption provided for in those provisions where it finds that that taxable person has, in bad faith, issued the form on the basis of which the purchaser relied on the exemption provided for in Article 147, although it is established that the goods concerned have left the territory of the European Union,
The Court points out that failure to comply with a formal requirement can result in loss of entitlement to a VAT exemption only in two situations: (1) where the infringement of a formal requirement prevents the production of conclusive evidence that the substantive requirements governing the application of that exemption have been satisfied, or (2) where it is established that the taxable person knew or should have known that the transaction in question was involved in fraudulent activity jeopardising the functioning of the common system of VAT.
In the present case, the non-compliance with customs formalities cannot lead to the loss of entitlement to the VAT exemption provided for in Article 146(1)(b) of the VAT Directive. First, it is common ground that the goods were actually exported, as evidenced by a stamp affixed by the customs office of exit to the forms submitted, even though those forms were intended for the application of the exemption provided for in Article 147, and that the supply therefore satisfies, by virtue of its objective characteristics, the conditions for the exemption provided for in Article 146(1)(b) of the VAT Directive.
Second, the fact that Bakati participated in the infringement of Article 147(1) of the VAT Directive does not entail a loss of tax revenue for the European Union and cannot be regarded as jeopardising the functioning of the common system of VAT. Without excluding the possibility that such an infringement may be subject to proportionate administrative penalties under national law, it cannot be penalised by the refusal to grant a VAT exemption for exports that have actually taken place.
1      Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’).