(September 3, 2015) 

On September 3, 2015 the European Court of Justice (CJEU) ruled in Case C‑526/13 ‘Fast Bunkering Klaipėda’ UAB versus Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos (ECLI:EU:C:2015:536).

Must Article 148(a) of Directive 2006/112 be interpreted as meaning that the provisions of that paragraph concerning exemption from VAT are applicable not only to supplies to the operator of a vessel used for navigation on the high seas, who uses those goods for the fuelling and provisioning of the vessel, but also to supplies other than to the operator of the vessel, that is to say, to intermediaries acting in their own name, where at the time of the supply the ultimate use of the goods is known in advance and duly established, and evidence confirming this is submitted to the tax authority in accordance with the legislative requirements?

Facts in the main proceedings and question referred for a preliminary ruling

·        FBK is registered for VAT in Lithuania.

·        Between 1 October 2008 and 31 December 2011, FBK supplied fuel, within Lithuanian territorial waters to vessels used for navigation on the high seas. The fuel concerned came from non-member States and was stored in Lithuania under customs warehousing arrangements. Under those arrangements, the collection of VAT for the import of that fuel was suspended so long as it was not released into free circulation in the European Union.

·        When FBK received an order, the corresponding fuel was taken from the customs depot and FBK carried out the necessary formalities. The fuel was then sold ‘free on board’, that is to say without transport or other related taxes and costs and without insurance, and FBK itself loaded the fuel into the vessels’ fuel tanks.

·        However, the orders were sent to FBK not by the ships’ operators but by intermediaries established in various Member States, to which FBK invoiced the sales. Those intermediaries acted in their own name, both with regard to FBK and to the operators of the vessels, buying from the former and selling to the latter. At the hearing, FBK’s representative explained that those intermediaries never took physical delivery of any fuel, their role being essentially to centralise orders and to ensure payment of the fuel delivered. It was only once it was loaded into the fuel tanks of the vessels that FBK was in a position to determine the actual amount transferred and thus to draw up the corresponding invoice.

·        Starting from the principle that the sale of the fuel at issue was exempt from VAT, in accordance with the Lithuanian law transposing Article 148(a) of Directive 2006/112, FBK applied a zero rate of VAT to those deliveries of fuel.

·        On 15 February 2013, following a tax inspection for the period mentioned in paragraph 11 of this judgment, the Klaipėdos apskrities valstybinė mokesčių inspekcija (‘the Klaipėda tax inspectorate’) drew up a report, in which it stated that it was of the view that since the fuel at issue was not sold directly by FBK to the operators of the vessels, but to intermediaries acting in their own name, the latter must be regarded as having sold the fuel to those operators. Consequently, FBK could not apply the exemption laid down in Article 44(1) of the Law on VAT, because that exemption applies only where there is a supply of goods to the operators of seagoing vessels intended for international carriage of passengers and/or goods.

·        By decision of 26 March 2013, based on the report of 15 February 2013, the Klaipėdos apskrities valstybinė mokesčių inspekcija made an upward adjustment of FBK’s declaration with respect to the application of a zero rate of VAT on the supplies of fuel at issue of LTL 37 847 771, that is to say, approximately EUR 11 000 000.

·        On 15 April 2013, FBK lodged a complaint against the decision of the Klaipėdos apskrities valstybinė mokesčių inspekcija before the Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos.

·        By decision of 27 June 2013, the Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos dismissed that complaint on the ground that, according to the case-law of the Court of Justice in Velker International Oil Company (C‑185/89, EU:C:1990:262) and Elmeka (C‑181/04 to C‑183/04, EU:C:2006:563), the exemption provided for in Article 148(a) of Directive 2006/112, transposed by Article 44(1) of the Law on VAT, for supply of goods for the fuelling and provisioning of vessels used for navigation on the high seas may apply only at the last stage in the commercial chain of the goods concerned, when they are supplied to the operator of the vessels which will use them.

·        On 30 July 2013, FBK brought an action against that decision before the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania).

·        That court is unsure as to whether it is possible to apply the reasoning followed by the Court in the judgment in Velker International Oil Company (C‑185/89, EU:C:1990:262) to a situation in which the goods at issue are transferred to the tanks of the vessels which will use them by a taxable person and in which adequate checks were in place to ensure that the goods were actually used for the fuelling and provisioning of vessels used on the high seas. In the judgment in A (C‑33/11, EU:C:2012:482), the Court acknowledged that the exemption provided for in what is now Article 148(f) of Directive 2006/112, for the supply of aircraft, might apply to supplies prior to the final stage of the commercial chain on the ground that taking account, in particular, of the type of goods concerned and, inter alia, of the registration and authorisation mechanisms to which their operation is subject, that extension of the exemption does not seem to be liable to give rise to constraints for the Member States and the economic agents concerned which could not be reconciled with the correct and straightforward application of the exemptions laid down by what is now Article 131 of Directive 2006/112.

·        In those circumstances, the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:

Must Article 148(a) of Directive 2006/112 be interpreted as meaning that the provisions of that paragraph concerning exemption from VAT are applicable not only to supplies to the operator of a vessel used for navigation on the high seas, who uses those goods for the fuelling and provisioning of the vessel, but also to supplies other than to the operator of the vessel, that is to say, to intermediaries acting in their own name, where at the time of the supply the ultimate use of the goods is known in advance and duly established, and evidence confirming this is submitted to the tax authority in accordance with the legislative requirements?

The CJEU ruled as follows:

Article 148(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the exemption provided for in that provision is not, in principle, applicable to supplies of goods for the fuelling and provisioning to intermediaries acting in their own name, even if, at the date on which the supply is made the ultimate use of the goods is known and duly established and evidence confirming this is submitted to the tax authority in accordance with the national legislation. However, in circumstances such as those at issue in the main proceedings, that exemption may apply if the transfer to those intermediaries of the ownership in the goods concerned under the procedures laid down by the applicable national law took place at the earliest at the same time when the operators of vessels used for navigation on the high seas were actually entitled to dispose of those goods as if they were the owners, a matter which is for the national court to ascertain.

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

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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