On June 1, 2017 the Court of Justice of the European Union (CJEU) judged in Case C-571/15, Wallenborn Transports SA versus Hauptzollamt Gießen (ECLI:EU:C:2017:417).

The request for a preliminary ruling concerns the interpretation of the first paragraph of Article 61 and Article 71(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2007/75/EC of 20 December 2007 (‘the VAT Directive’), and of Articles 203(1) and 204(1)(a) of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Council Regulation (EC) No 1791/2006 of 20 November 2006 (‘the Customs Code’).

 

The request has been made in proceedings between Wallenborn Transports SA (‘Wallenborn’) and Hauptzollamt Gießen (Giessen customs office, Germany) concerning Wallenborn’s obligation to pay the value added tax (VAT) arising as a consequence of the incurrence of a customs debt.

 

The dispute in the main proceedings and the questions referred for a preliminary ruling

·   On 11 June 2009, goods which had been brought into the customs territory of the European Union and presented on the previous day at the airport in Frankfurt am Main (Germany), after having been placed in temporary storage for a short period, were declared under the external Community transit procedure.

 

·   The consignee of those goods was an undertaking established in the free port of Hamburg (Germany), which, at the material time, was a free zone of control type I within the meaning of Article 799 of the implementing regulation, the limits of which were under customs supervision. The transit procedure was to be completed by 17 June 2009.

 

·   Wallenborn, as the designated carrier, transported the goods in question by heavy goods vehicle to the free port of Hamburg, where they were unloaded on 11 June 2009 after the customs seal had been broken. However, the goods were not presented at the customs office of destination. During their time spent in the free zone, the goods in question were not released into free circulation, consumed or used.

 

·   On 16 June 2009, the goods in question were loaded into a container and transported by ship to Finland, where they were placed under the customs warehousing procedure prior to being transported to Russia.

 

·   On 2 September 2010, the Giessen customs office issued a notice of assessment of customs duty and import turnover tax both to the principal, which, as the consignor, had declared the goods in question under the transit procedure, and to Wallenborn, as the carrier.

 

·   Payment, however, was sought only from the sole applicant in the main proceedings, on the ground that the principal had demonstrated that the goods in question and the transit document had been duly handed over, whereas Wallenborn had failed to conclude the transit procedure correctly. The consignee of those goods indicated that it had assumed that the goods had undergone customs clearance, and it also stated that the transit accompanying document had not been provided to it at the time of delivery.

 

·   In support of its action before the referring court, Wallenborn acknowledges that a customs debt was incurred when the heavy goods vehicle transporting the goods in question was unloaded and the customs seal was broken. However, it claims that the free port of Hamburg, as a free zone, was not part of German national territory within the meaning of the Law on turnover tax. Wallenborn infers from this that the chargeable event in respect of the customs debt, within the meaning of Article 203(1) of the Customs Code, took place outside the fiscal territory of Germany and that accordingly there was no taxable transaction.

 

·   The applicant in the main proceedings adds that, although customs duties and import turnover tax are different types of taxes, the customs debt and the debt relating to import turnover tax cannot be incurred on different dates. Likewise, the import turnover tax cannot be incurred on the basis of a chargeable event which differs from the chargeable event which gave rise to the customs debt.

 

·   For its part, the Giessen customs office contends that the import turnover tax under Article 203(1) of the Customs Code became chargeable at the same time as the customs debt, irrespective of the fact that the chargeable event for the customs debt took place on the site of the free port of Hamburg. It maintains, furthermore, that it is irrelevant that the goods in question were shipped to Finland, and subsequently exported.

 

·   Taking the view that the dispute in the main proceedings raises questions concerning the interpretation of EU law, the Hessisches Finanzgericht (Finance Court, Hesse) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘1.   Is the VAT rule of a Member State which states that free zones of control type I (free ports) do not form part of the territory of the country one of the situations referred to in Article 156 as specified in the first paragraph of Article 61 and in the first subparagraph of Article 71(1) of the VAT Directive?

 

If that question is answered in the affirmative:

 

2.   Where goods are subject to customs duties, does the chargeable event also occur and VAT also become chargeable in accordance with the second subparagraph of Article 71(1) of the VAT Directive when the chargeable event in respect of those duties occurs and those duties become chargeable, if the chargeable event in respect of those duties and the chargeability of those duties occur within a free zone of control type I and the VAT legislation of the Member State to which the free zone belongs provides that free zones of control type I (free ports) do not form part of the territory of the country?

 

If Question 2 is answered in the negative:

 

3.   Where goods transported under the external transit procedure without that procedure ending in a free zone of control type I are removed from customs supervision in the free zone so that a customs debt is incurred in respect of the goods under Article 203(1) of the Customs Code, does the chargeable event occur and VAT become chargeable in respect of goods at the same time in accordance with another chargeable event, namely under Article 204(1)(a) of the Customs Code, because, prior to the act by means of which the goods were removed from customs supervision, the goods were not presented to customs at one of the customs offices competent in respect of the free zone situated within the territory of the country and the transit procedure was not ended there?’

 

Judgment

The CJEU ruled as follows:

1.   The first paragraph of Article 61 and the first subparagraph of Article 71(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2007/75/EC of 20 December 2007, must be interpreted as meaning that the reference to ‘one of the arrangements or situations referred to’ in Article 156 of that directive includes free zones.

 

2.   Article 71(1) of Directive 2006/112, as amended by Directive 2007/75, must be interpreted as meaning that the removal of goods from customs supervision in a free zone does not give rise to the chargeable event or make import value added tax chargeable if those goods did not enter the economic network of the European Union, this being a matter for the referring court to determine.

 

3.   The second subparagraph of Article 71(1) of Directive 2006/112, as amended by Directive 2007/75, must be interpreted as meaning that, when a customs debt arises by virtue of Article 203 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code, as amended by Council Regulation (EC) No 1791/2006 of 20 November 2006, and no value added tax debt is consequently incurred, on account of the circumstances of the dispute in the main proceedings, Article 204 of the latter regulation may not be applied for the sole purpose of providing a basis for charging value added tax.

 

From the considerations of the Court

 

The first question

·   By its first question, the referring court asks, in essence, whether the first paragraph of Article 61 and the first subparagraph of Article 71(1) of the VAT Directive must be interpreted as meaning that goods located inside a free zone may be regarded as coming within the scope of ‘one of the situations referred to in Article 156’ of that directive when, by virtue of a provision of national legislation of the Member State concerned, free zones are not part of national territory for purposes of the imposition of VAT.

 

·   As a preliminary point, it must be noted that the referring court appears to take the view that a positive reply to that question is subject to the condition that such a national provision may be regarded as introducing a tax exemption within the meaning of Article 156 of the VAT Directive. According to the Hessisches Finanzgericht (Finance Court, Hesse), a provision by virtue of which free zones are, in regard to VAT, excluded from national territory does not itself constitute such an exemption.

 

·   However, it must be noted, as observed by the Advocate General in points 50 and 51 of his Opinion, that, while Article 156 of the VAT Directive permits Member States to exempt certain types of transaction which it lists and which include, in point (b), the supply of goods which are intended to be placed in a free zone or in a free warehouse, the first paragraph of Article 61 and the first subparagraph of Article 71(1) of that directive refer not to the conditions for the application of Article 156 but solely to the situations and customs arrangements referred to in that article.

 

·   Under the first subparagraph of Article 71(1) of the VAT Directive, where, on entry into the European Union, goods are placed under one of the arrangements or situations referred to in Article 156 of that directive, the chargeable event occurs and VAT becomes chargeable when the goods cease to be covered by those arrangements or situations. In that case, in accordance with the first paragraph of Article 61 of that directive, the place of importation of such goods is the Member State within whose territory the goods cease to be covered by those arrangements or situations.

 

·   Accordingly, the reference in the first paragraph of Article 61 and in the first subparagraph of Article 71(1) of the VAT Directive to ‘one of the arrangements or situations referred to in Article 156’ must be interpreted as meaning that that reference includes free zones.

 

·   It follows from the foregoing considerations that, in accordance with those provisions, goods placed in a free zone cannot, in principle, be considered to have been imported for VAT purposes. In that regard, the free zones referred to in a national provision which states that, for the purposes of imposing VAT, free zones are not part of its national territory correspond to those referred to in Article 156 of the VAT Directive.

 

·   In the light of the foregoing, the answer to the first question is that the first paragraph of Article 61 and the first subparagraph of Article 71(1) of the VAT Directive must be interpreted as meaning that the reference to ‘one of the arrangements or situations referred to’ in Article 156 of that directive includes free zones.

 

The second question

·   By its second question, the referring court asks, essentially, whether Article 71(1) of the VAT Directive must be interpreted as meaning that the removal of goods from customs supervision in a free zone gives rise to the chargeable event and causes VAT to become chargeable.

 

·   Under the first subparagraph of Article 71(1) of the VAT Directive, where, on entry into the European Union, goods are placed under the external transit procedure or one of the arrangements or situations referred to in Article 156 of that directive, inter alia, the chargeable event occurs and VAT becomes chargeable when the goods cease to be covered by those arrangements or situations.

 

·   The second subparagraph of Article 71(1) of the VAT Directive covers the specific situation concerning imported goods subject to customs duties, to agricultural levies or to charges having equivalent effect established under a common policy, for which the chargeable event occurs and the tax becomes chargeable when the chargeable event in respect of those duties occurs and those duties become chargeable.

 

·   In the case in the main proceedings, it is common ground that the removal of the goods in question from customs supervision, as a consequence of the customs seals having been broken when they should not have been, gave rise to a customs debt under Article 203(1) of the Customs Code (see, in that regard, judgment of 15 May 2014, X, C‑480/12, EU:C:2014:329, paragraph 34).

 

·   That removal from customs supervision also ended the external transit procedure (see, to that effect, judgment of 11 July 2002, Liberexim, C‑371/99, EU:C:2002:433, paragraph 53).

 

·   However, in so far as that removal from customs supervision took place inside a free zone, the goods at issue in the main proceedings continued to be in one of the situations referred to in Article 156(1)(b) of the VAT Directive, with the result that the conditions for incurrence of a VAT debt laid down in the first subparagraph of Article 71(1) of that directive were not, in principle, met.

 

·   As is apparent from paragraph 45 of the present judgment, the location of the goods inside a free zone at the time of their removal from customs supervision also precludes the application of the second subparagraph of Article 71(1) of the VAT Directive since there is no place of importation.

 

·   In that context, it must nevertheless be noted that the Court has held that, in addition to the customs debt, there may also be a requirement to pay VAT in the case where, on the basis of the particular unlawful conduct which gave rise to the customs debt, it can be presumed that the goods entered the economic network of the European Union and, consequently, that they may have undergone consumption, that is, the act on which VAT is levied (judgment of 2 June 2016, Eurogate Distribution and DHL Hub Leipzig, C‑226/14 and C‑228/14, EU:C:2016:405, paragraph 65).

 

·   In this regard, as the Advocate General observed in points 67 to 69 of his Opinion, in the event that goods liable to import duties are removed from customs supervision in a free zone and are no longer located in that zone, it should, in principle, be presumed that they have entered the economic network of the European Union.

 

·   However, where, in circumstances such as those of the case in the main proceedings, referred to in paragraphs 32 and 33 of the present judgment, it transpires that the goods concerned did not enter the economic network of the European Union, which is a matter for the referring court to establish, no import VAT can be payable.

 

·   Having regard to the foregoing, the answer to the second question is that Article 71(1) of the VAT Directive must be interpreted as meaning that the removal of goods from customs supervision in a free zone does not give rise to the chargeable event or make import VAT chargeable if those goods did not enter the economic network of the European Union, this being a matter for the referring court to determine.

 

The third question

·   By its third question, the referring court asks, in essence, whether the second subparagraph of Article 71(1) of the VAT Directive must be interpreted as meaning that, where a customs debt is incurred by virtue of Article 203 of the Customs Code and no VAT debt is consequently incurred, on account of the circumstances of the dispute in the main proceedings, Article 204 of that code should be applied for the purpose of providing a basis for charging VAT. 

 

·   In this regard, it should be noted at the outset, as observed by the Advocate General in point 74 of his Opinion, that the referring court assumes that, in circumstances such as those of the dispute in the main proceedings, Articles 203 and 204 of the Customs Code may be simultaneously applicable.

 

·   That court appears to take the view that, where the removal of goods from customs supervision does not lead to the incurrence of a VAT debt, it is still necessary to determine whether the imposition of that tax can be based on the incurrence of a customs debt under Article 204(1)(a) of the Customs Code.

 

·   It must, however, be noted that, as is apparent from its wording, Article 204 of the Customs Code applies only in cases not covered by Article 203 of that code. Accordingly, in order to determine which of those two articles causes a customs debt to be incurred, it is necessary, as a matter of priority, to consider whether in the factual situation in question there was removal from customs supervision for the purposes of Article 203(1) of the Customs Code. Only if that question is answered in the negative is it possible that Article 204 of the Customs Code may apply (judgment of 12 February 2004,Hamann International, C‑337/01, EU:C:2004:90, paragraphs 29 and 30).

 

·   Consequently, where goods liable to incur import duties have been removed from customs supervision, it is not necessary, for the purposes of the second subparagraph of Article 71(1) of the VAT Directive, to apply Article 204(1)(a) of the Customs Code in order to determine whether the imposition of VAT may be based on the incurrence of a customs debt under that provision.

 

·   It follows from the foregoing that that answer to the third question is that the second subparagraph of Article 71(1) of the VAT Directive must be interpreted as meaning that, where a customs debt arises by virtue of Article 203 of the Customs Code and no VAT debt is consequently incurred, on account of the circumstances of the dispute in the main proceedings, Article 204 of that code may not be applied for the sole purpose of providing a basis for charging VAT.

 

For further information click here to be forwarded to the text of the judgment as published on the website of the CJEU, which will open in a new window.

 

The opinion as delivered by Advocate General Campos Sánchez-Bordona on December 13, 2016 can be found here.

 

Did you know that in our section CJEU Rulings we have made a selection of rulings of the CJEU? We have organized these rulings based on the subject they relate to (e.g. Freedom of establishment, Free movement of capital, Indirect taxes on the raising of capital, etc).

 

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