Consequences of the ECJ’s FedEx-judgment C-26/18 for the logistics sector?

31.07.2019 erstellt von Karl Hannl

On July 10, 2019, the ECJ rendered a groundbreaking decision which will have considerable ramifications for the logistics sector as well as for other economic operators with business in third-party countries.

In its judgment C-26/18, the Court ruled:

“1. Article 2 (1) (d) and Article 30 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, must be interpreted as meaning that if a good is transferred into the territory of the European Union it is not sufficient for determining that this good has entered the economic network of the Union in that member state that a violations of customs law with respect to the good has been committed in a certain member state which incurred a import VAT debt in that state, if it is proven that the good in question has been forwarded to another member state, its final destination, where it has been consumed; import VAT then only incurs in this other member state.”

In contrast to the interpretation of Austrian customs authorities, the judgment has a considerable impact on the controversy in Austria regarding the customs procedure 4200, which has held hostage the whole logistics sector and killed businesses as well as highly qualified jobs.

However, the ramifications of the judgment are even graver and need a comprehensive analysis in the near future. 

For example, the judgment should have meaning also for re-exportation of products which are released for free circulation only to be exported as Union goods to Turkey (customs union). The goods do not enter the economic network, still import VAT is claimed. Maybe a similar procedure as the procedure 4200 should be established in these cases?

These are the ramifications of the judgment at first glance:

1.        If even in cases of incompliant transfer or removal from customs supervision, legal base for the import VAT is the entering of the goods into the economic network of the member state, the consequence for compliant releases for free circulation with subsequent delivery to another member state is a fortiori: no import VAT in the member state of import (e.g. Austria). The consignment note would be sufficient as mean of proof.

2.        The removal from customs supervision is prosecuted by the customs authority of the member state where the respective violations was committed. This however does not mean that – together with customs duties – import VAT is to be claimed or prosecuted, if it can be shown by the consignment note that the goods have entered another member state. The competent authority for claiming and prosecuting the import VAT is the authority in the member state wherein the goods entered the economic network.

3.        Incompliant transfer into the custom territory of the Union only incurs import VAT in the member state wherein the goods enter the economic network.

4.        Non-Union goods which are released for free circulation only for the purpose of issuing the A.TR do not incur import VAT as they only need to be released for this purpose.

The interpretation of the Austrian customs authority according to which there is no connection between the FedEx-judgment and the customs procedure 4200 is incorrect which is shown by the following:

In case of a procedure 4200-customs declaration and subsequent irregularities, Austrian customs authorities would prosecute based on the Italmoda-doctrine of the ECJ. However, if the same Non-Union goods are removed from customs supervision (and no declaration submitted at all), prosecution in Austria regarding import VAT would not be possible because of FedEx. Thus, Austrian authorities prosecute the (usually bona fide) declarant while – based on the FedEx judgment – has to let go the smuggler (as the prosecution is the responsibility of the customs authority of the member state the goods entered the economic network).

This result cannot be held up and shows how gravely the FedEx-judgment influences the traditional, economic harmful approach of the Austrian tax authorities.

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