Import sales tax: ECJ denies forwarders input tax deduction

The European Court of Justice has ruled in a recent ruling that freight forwarders may not be entitled to deduct import sales tax as input tax. The judgment of the Court of Justice of 25 June 2015 (Case C-187/14) should already set the trend for many freight forwarders.

Goods seized under the transit procedure

The Court’s judgment was based on an action brought by a Danish freight forwarder. This had 148 and 703 packages of electronic products to be transported from the free port in Copenhagen (Denmark) to Jönköping (Sweden) under the external transit procedure. As the consignee had refused to accept the goods in Sweden, the goods were transported back to Denmark. However, the goods were not properly presented. Later a new transport to Sweden took place and the goods were accepted. Among other things, the ECJ expressed its views on the question of whether the implementation of a second transit procedure could cure the first transit procedure that was carried out incorrectly.

The ECJ ruled that there was no withdrawal from customs supervision if goods were returned to the free port of exit after an unsuccessful delivery attempt without having been presented to the customs office of destination or the customs office of the free port. However, the condition is that it must be proved that the second transit procedure concerned the same goods which were returned to their destination. As this was not the case in part, the import duties were partly incurred.

No input tax deduction for forwarders with regard to import sales tax

Danish VAT law provided that the carrier or carrier, who is neither the owner nor the importer, may not deduct import VAT. The complaining forwarding company had turned against this. It argued that the scheme was contrary to the VAT Directive.

The European Court of Justice ruled that the VAT Directive was not applicable in the present case. According to Article 168 (e) of the VAT Directive, there is a right to deduct input tax only if the imported goods are used for the purposes of the taxed transactions of the taxable person. However, this is not the case with a forwarding agent because the value of the goods is not reflected in the freight charges invoiced.

The European Court of Justice has therefore not objected to the Danish regulation, so that the freight forwarder could not claim an input tax deduction under Danish law.

Pending proceedings of the FG Hamburg on the EUSt

Another case is currently pending before the European Court of Justice, which is concerned with the question of whether a freight forwarder can claim the import sales tax by way of input tax deduction. The FG Hamburg was of the opinion that this should be possible. The case is currently pending before the Federal Fiscal Court. It remains to be seen how this decision will be taken in the light of this one.

Lawyer Dr. Tristan Wegner

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