Is it possible for an intra-community delivery of goods to be VAT-exempt if the buyer does not hold a VAT number?

10.2012

According to EU VAT regulations, for an intra-community sale of goods to be VAT-exempt, the following requirements must be met: 1) the buyer must be a business person; 2) the goods must be transported; 3) the right to dispose of the goods must be transferred. Concerning the first requirement, the tax administration requires the buyer to be included in the VIES Register (or ROI in Spain). If this is not met, the European tax administrations require output VAT to be automatically applied to these operations; in such cases, the intra-community sale of goods is not VAT-exempt.

However, the CJEU ruling of 27 September 2012 (C-587/10) diminishes the importance of the absence of the buyer’s tax identification number in the case of intra-community purchases. In the case under examination, the buyer, an American company with a branch office in Portugal, was not able to provide an intra-community VAT number, as it was not enrolled in the VIES Register, but it did provide the VAT number of the second buyer of the goods in concern. In the absence of the VAT number of the first buyer, the German company who sold the goods issued an invoice to the second buyer directly, which was rejected by the German tax administration. That is to say, since these were chain transactions, a single invoice was issued instead of two, as the first buyer did not hold an intra-community VAT number.

The ruling establishes that the identification of the buyer by means of a VAT number is not an essential requirement for the sale of goods to be VAT-exempt if the three requirements stated above can be proven. Thus, the strictness of the formal requirements applicable to issued invoices is reduced if it can be proven that there was no intended fraud in the operation.

++Published at the tax newsletter of the German Chamber of Commerce related to VAT news.++