Case law: Classification of supply transports within the EU and VAT exemption

In the recent case no. C-386/16 Toridas, the Court of Justice again describes in detail the rules for claiming VAT exemptions for the intra-Community supply of goods. The court confirms that, if three entities are engaged in trading and one of the entities transports the goods from one EU member state to another then the realised transport must be classified for only one of the two supplies. This fact has a key impact on the possible application of VAT exemption to the supply of goods by the first (or the second) entity in the trade chain, or on the possible use of the simplified procedure for three-party trading which is applicable in the country where the goods were delivered. This confirms that, for example, in the case of two successive sales under the Incoterms EXW conditions the first supply cannot be exempt.

Traders who sell goods on an international scale should pay attention to the rules for the correct classification of transport in a chain supply of goods. Besides the above-mentioned Incoterms rules, it is necessary to follow any other contract provisions relating to where exactly the transferring of risks and rights (related to the possibility to de facto handle the goods) happens. Each trader should acquire at least some information from the receiver where it transfers the risks and rights to its customers, especially with respect to trading goods in the parity Incoterms EXW/FCA and if the supply can be exempt. It should be noted that if this happens in the same country, the first delivery cannot be exempt.