On October 4, 2017 the Court of Justice of the European Union (CJEU) judged in Case C-273/16, Agenzia delle Entrate versus Federal Express Europe Inc. (ECLI:EU:C:2017:733).
This request for a preliminary ruling concerns the interpretation of Article 86(1)(b) and Article 144 of 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’).
The request has been made in proceedings between the Agenzia delle Entrate (Italian Revenue Authority) and Federal Express Europe Inc. (‘FedEx’), an Italian subsidiary of the FedEx Corporation group, concerning the levying of value added tax (VAT) on transport costs connected to the importation of goods exempt from VAT.
The dispute in the main proceedings and the question referred for a preliminary ruling
· Following a tax inspection carried out by the Guardia di Finanza (Italian Finance Police) and the drawing-up of an official report notified on 18 September 2008, four tax assessment notices were issued against FedEx regarding ‘inbound’ transport services carried out by it, namely receiving international consignments and subsequently delivering them to recipients in Italy.
· In particular, in the tax assessment notice relating to the 2007 financial year, at issue in the main proceedings, the Revenue Authority found that the VAT should have been increased by EUR 1 913 970 and, furthermore, applied penalties totalling EUR 5 167 719.01 for the ‘failure to invoice taxable transactions’ and for the ‘under-declaration of tax due’.
· The Revenue Authority relied on an interpretation of point 2 of Article 9(1) of Decree No 633/72, read in conjunction with Article 69(1) of that decree, pursuant to which the non-applicability of VAT for customs purposes to the importation of small consignments of goods does not preclude the levying of VAT on the payment corresponding to the transport costs relating to those goods, and that the exemption from VAT of those ancillary costs is granted only if those costs have already been subject to VAT at the customs stage.
· FedEx brought an action before the Commissione tributaria provinciale di Milano (Provincial Tax Court, Milan, Italy) against that tax assessment notice, submitting in particular that the Revenue Authority’s interpretation of point 2 of Article 9(1) of Decree No 633/72 was manifestly lacking any foundation in law.
· By judgment of 27 March 2013, the Commissione tributaria provinciale di Milano (Provincial Tax Court, Milan) upheld the action brought by FedEx.
· In the meantime, FedEx had lodged a complaint with the European Commission seeking the initiation, pursuant to Article 258 TFEU, of infringement proceedings against the Italian Republic regarding the transport costs of imported goods of negligible value being subject to VAT, which it considered to be contrary to Article 86(1)(b) and Article 144 of the VAT Directive.
· After the initiation of infringement proceedings on 27 September 2012, the Commission issued a letter of formal notice on 1 October 2012 and a reasoned opinion on 21 November 2013. Since the Italian Republic, following that reasoned opinion, amended Article 9(1) of Decree No 633/72 in the manner set out in paragraph 15 above, the infringement proceedings were closed.
· The judgment of the Commissione tributaria provinciale di Milano (Provincial Tax Court, Milan) of 27 March 2013 was confirmed by the Commissione tributaria regionale della Lombardia (Regional Tax Court, Lombardy, Italy), which took the view that the Revenue Authority’s position was ‘manifestly contrary’ to Article 144 of the VAT Directive. The Revenue Authority lodged an appeal on a point of law against that judgment before the Corte suprema di cassazione (Supreme Court of Cassation, Italy).
· In its appeal on a point of law, the Revenue Authority argued that its interpretation of point 2 of Article 9(1) of Decree No 633/72, read in conjunction with Article 69(1) of that decree, is not contrary to the VAT Directive in so far as, first, that directive entered into force only on 1 January 2008 and, accordingly, is not applicable to the dispute in the main proceedings and, second, in any event, the dispute does not fall within the scope of either Article 86 or Article 144 of that directive, since the costs at issue in the main proceedings are not ancillary in nature and were not incurred as a result of an international transport.
· The referring court expresses doubts as to whether point 2 of Article 9(1) and Article 69(1) of Decree No 633/72 are in conformity with Article 86(1)(b) and Article 144 of the VAT Directive.
· In those circumstances, the Corte suprema di cassazione (Supreme Court of Cassation) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:
‘Can Article 144 and Article 86(1) of [the VAT Directive] [corresponding to Article 14(1) and (2) and Article 11.B(3) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1)], taken together, be interpreted to mean that the only condition in order for connected services consisting of the “inbound” transport service — from airports to the place of destination within the territory of the Member State, with the “free-at-destination” clause — not to be liable to VAT is that their value is included in the taxable amount, regardless of whether or not the goods in question were in fact subject to customs duties, at the time of their importation; and is it therefore incompatible with those [EU law] provisions if the domestic rules laid down in [point 2 of] Article 9(1) and Article 69(1) of [Decree No 633/72] read together in the versions in force at the time of the material facts, provide that in every case, and therefore also in the case of imports that are not liable to VAT — as is the case here, since it concerns documents and goods of negligible value — there has to be compliance with the additional requirement that those imports must in fact be liable to VAT (and customs duty must in fact be paid) at the time of the importation of such goods, even, if need be, when account is taken of the ancillary nature of the transport services in relation to the main services (namely the importation) and of the rationale of simplification underlying both the main and the ancillary operations? ’
Judgment
The CJEU ruled as follows:
Article 144 in conjunction with Article 86(1)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national legislation such as that at issue in the main proceedings which requires, for the application of an exemption from value added tax for ancillary services, including transport services, not only that their value is included in the taxable amount, but also that value added tax has in fact been charged on those services at the customs stage at the time of importation.
From the considerations of the Court
· By its question, the referring court asks, in essence, whether Article 144 in conjunction with Article 86(1)(b) of the VAT Directive must be interpreted as precluding national legislation such as that at issue in the main proceedings which requires, for the application of an exemption from VAT for ancillary services, including transport services, not only that their value is included in the taxable amount, but also that VAT has in fact been charged on those services at the customs stage at the time of importation.
· Since the Italian Government argues that the VAT Directive was not in force at the time of the facts in the main proceedings, it is necessary at the outset to establish the legal framework applicable in the present case.
· In that regard, it is clear from Article 413 of the VAT Directive that it entered into force on 1 January 2007. As regards the time limits for transposition, recital 66 of that directive states that ‘the obligation to transpose this Directive into national law should be confined to those provisions which represent a substantive change as compared with the earlier Directives’ and that ‘the obligation to transpose into national law the provisions which are unchanged arises under the earlier Directives’.
· Articles 86 and 144 of the VAT Directive correspond to Article 11.B(3) and Article 14(1)(i) of Sixth Directive 77/388 respectively, so that the obligation to transpose stems from the earlier directives. The latter provisions were inserted into Sixth Directive 77/388 by Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/388 with a view to the abolition of fiscal frontiers (OJ 1991 L 376, p. 1), Article 3(1) of which set 1 January 1993 as the deadline for the transposition of those provisions.
· It follows that, in so far as, in the present case, the question referred concerns a tax adjustment notice issued by the Revenue Authority relating to 2007, the VAT Directive is applicable ratione temporis to the dispute in the main proceedings.
· The referring court is unsure whether the Italian legislation, by making the application of the exemption from VAT to transport costs subject not only to the inclusion of their value in the taxable amount, but also to VAT actually being charged on them at the customs stage at the time of importation, is compatible with EU law.
· In particular, the question referred relates to consignments of goods of negligible value or without commercial value, which, first, in accordance with Article 27 of Regulation No 918/83, are exempted from import duties and, second, in accordance with Article 143(b) of the VAT Directive, are exempt from VAT at the time of importation.
· In that regard, it should be recalled that, under Article 143(b) of the VAT Directive, the Member States are required to exempt from VAT the final importation of goods from third countries governed by Directives 83/181 and 2006/79. Furthermore, according to Article 144 of the VAT Directive, the Member States are required to exempt the supply of services relating to the importation of goods where the value of such services is included in the taxable amount in accordance with Article 86(1)(b) of that directive.
· As regards the taxable amount relating to the importation of goods, it is clear from Article 85 of the VAT Directive that that amount is formed by the value defined as the value for customs purposes. That value must, in any event, include the factors covered by Article 86(1)(b) of that directive, including, as ancillary costs, transport costs.
· The Italian legislation in force at the time of the facts in the main proceedings, in particular Article 9 of Decree No 633/72, required, for the exemption from VAT to be applied to ancillary services, not only that their value was included in the taxable amount, but also that VAT was actually charged on them at the customs stage at the time of importation. According to the request for a preliminary ruling, the latter requirement sought to avoid situations of double imposition of VAT.
· In that regard, it should be recalled that, for VAT purposes, each transaction must normally be regarded as distinct and independent, as follows from the second subparagraph of Article 1(2) of the VAT Directive (see, to that effect, judgment of 17 January 2013, BGŻ Leasing, C‑224/11, EU:C:2013:15, paragraph 29).
· Nevertheless, it is also clear from the case-law of the Court that, in certain circumstances, several formally distinct services, which could be supplied separately and thus give rise, separately, to taxation or exemption, must be considered to constitute a single transaction when they are not independent. There is a single supply where two or more elements or acts supplied by the taxable person to the customer are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split (judgment of 16 July 2015, Mapfre asistencia and Mapfre warranty, C‑584/13, EU:C:2015:488, paragraph 50).
· In that regard, it should be noted that Article 86(1)(b) of the VAT Directive ensures that the taxation of the ancillary service follows the taxation of the primary service. According to Article 144 of that directive, first, the exempted primary service corresponds to that of the importation of goods and, second, the ancillary services are the services listed in Article 86(1)(b) of that directive, which should, as such, follow the tax treatment of the primary service, provided that their value is included in the taxable amount.
· Accordingly, it follows from a combined reading of Article 86(1)(b) and Article 144 of the VAT Directive that, to the extent that the transport costs are included in the taxable amount of the exempted importation transaction, the supply of ancillary services must also be exempt from VAT.
· The requirement that that supply of services has in fact been subjected to VAT at the customs stage, as provided for under the legislation at issue in the main proceedings, would negate the effectiveness of the exemption provided for in Article 144 of the VAT Directive, given that such a requirement would have the result that that exemption would never be applicable to the importation of consignments of goods of negligible value or of a non-commercial character, even where they should be exempt from VAT pursuant to Article 143(b) of that directive.
· It is settled case-law of the Court that the interpretation of the terms used to define the exemptions must be consistent with the objectives pursued by those exemptions, guarantee their effects and comply with the principle of fiscal neutrality (see, to that effect, judgment of 21 March 2013, PFC Clinic, C‑91/12, EU:C:2013:198, paragraph 23).
· Lastly, with regard to the objective pursued by the exemption at issue in the main proceedings, the Italian Government argues that that exemption seeks to avoid situations of double taxation, explaining that, in the situation where the transport costs are exempted from VAT for customs purposes, they should be liable to VAT, even if the consideration is included in the taxable amount. FedEx and the Commission take the view, by contrast, that the purpose of the exemption is technical simplification and, therefore, the application of such an exemption is independent of whether the transport costs are subjected to VAT for customs purposes. Consequently, in their view, the transport costs relating to importations are exempt from VAT on the basis of Article 144 of the VAT Directive, in so far as their value is included in the taxable amount.
· The Court has already acknowledged, as regards relief from import duty of goods of negligible value, that such relief aims at administrative simplification of customs procedures (see, to that effect, judgment of 2 July 2009, Har Vaessen Douane Service, C‑7/08, EU:C:2009:417, paragraph 33).
· Since the exemption provided for under Article 144 of the VAT Directive relates to the same goods as those which enjoy such relief, it is necessary to apply that line of case-law to that article too. Accordingly, it may be concluded that the purpose of that exemption is not to avoid situations of double taxation but, in a purely technical sense, to simplify the application of tax.
· It follows that transport costs related to the final importation of goods must be exempt from VAT, provided that their value is included in the taxable amount, even though they were not subjected to VAT at the customs stage at the time of importation.
· Having regard to those considerations, the answer to the question referred is that Article 144 in conjunction with Article 86(1)(b) of the VAT Directive must be interpreted as precluding national legislation such as that at issue in the main proceedings which requires, for the application of an exemption from VAT for ancillary services, including transport services, not only that their value is included in the taxable amount, but also that VAT has in fact been charged on those services at the customs stage at the time of importation.
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