The Queen, on the application of Teleos plc and Others v Commissioners of Customs & Excise.

• Jurisdiction: European Union
• Celex Number: 62004CC0409
• ECLI: ECLI:EU:C:2007:7
• Docket Number: C-409/04
• Date: 11 January 2007
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling

OPINION OF ADVOCATE GENERAL

KOKOTT

11 January 2007 ¹(1)

Case C-409/04

Teleos plc and Others

v

The Commissioners of Customs and Excise

(Reference for a preliminary ruling from the High Court of Justice for England and Wales, Queen’s Bench Division, Administrative Court)

(Sixth VAT Directive – Article 28a(1)(a) and (3) and Article 28cA(a) – Intra-Community acquisition – Intra-Community supply – Exemption – Goods dispatched or transported to another Member State – Proof required – Irregularities in dispatch or transport for which the supplier was not to blame)

I – Introduction

1. This case raises questions on the interpretation of the Sixth VAT Directive (2) in connection with the exemption of intra-Community supplies. The questions are closely connected with those arising in Case C-146/05 Collée and Case C-184/05 Twoh International, in which I am also delivering an Opinion today.

2. The claimants in the main proceedings, Teleos plc and 13 other undertakings (3) (Teleos and Others), all established in the United Kingdom, have sold mobile telephones to a Spanish undertaking. The acquirer was supposed to export the goods from the United Kingdom to other Member States. It later transpired that irregularities had been committed, in which, however, Teleos and Othershad had no part. Nevertheless, the tax authorities declined to exempt their supplies.

3. The referring court first asks at what point the intra-Community acquisition or intra-Community supply was concluded and an entitlement to exemption from inland VAT came into being. It needs to be clarified in particular whether the goods actually have to cross the frontier. The question also arises whether the supplier can be refused exemption if the proof supplied by the purchaser of the goods crossing the frontier subsequently turns out to be false, without the supplier having been aware of the irregularity or being deemed to have been aware of it.

4. In making this interpretation of the Sixth Directive, two objectives must be reconciled. On the one hand, evasion of VAT must be fought. It is precisely the VAT treatment of trans-frontier transactions in high-value, easily-transportable goods that is particularly susceptible to fraud. On the other hand, in order that intra-Community trade should not be made inordinately difficult, undertakings which carry out trans-frontier transactions correctly and carefully should not be saddled with excessive risks and burdens. Finally, the question arises as to who has to bear the risk of fraudulent conduct by a third party: that party’s trading partner acting in good faith, or the State.

II – Legal background

A – Community law

5. Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/388/EEC with a view to the abolition of fiscal frontiers (4) inserted into the Sixth Directive a new Title XVIa (Transitional arrangements for the taxation of trade between Member States) (Articles 28a to 28m). Those provisions are still in force, since there has not so far been any definitive legislation on the trade in goods by undertakings between Member States.

6. Article 28a of Sixth Directive, so far as relevant, reads:

‘(1) The following shall also be subject to value added tax:

(a) intra-Community acquisitions of goods for consideration within the territory of the country by a taxable person acting as such or by a non-taxable legal person where the vendor is a taxable person acting as such who is not eligible for the tax exemption provided for in Article 24 and who is not covered by the arrangements laid down in the second sentence of Article 8(1)(a) or in Article 28b(B) (1).

…

(3) “Intra-Community acquisition of goods” shall mean acquisition of the right to dispose as owner of movable tangible property dispatched or transported to the person acquiring the goods by or on behalf of the vendor or the person acquiring the goods to a Member State other than that from which the goods are dispatched or transported.

…’

7. The moment when tax becomes payable is defined in Article 28d(1) of the Sixth Directive as follows:

‘The chargeable event shall occur when the intra-Community acquisition of goods is effected. The intra-Community acquisition of goods shall be regarded as being effected when the supply of similar goods is regarded as being effected within the territory of the country.’

8. Article 28bA of the Sixth Directive specifies the place of intra-Community acquisition as follows:

‘(1) The place of the intra-Community acquisition of goods shall be deemed to be the place where the goods are at the time when dispatch or transport to the person acquiring them ends.

(2) Without prejudice to paragraph 1, the place of the intra-Community acquisition of goods referred to in Article 28a(1)(a) shall, however, be deemed to be within the territory of the Member State which issued the value added tax identification number under which the person acquiring the goods made the acquisition, unless the person acquiring the goods establishes that that acquisition has been subject to tax in accordance with paragraph 1.

…’

9. Under Article 28c(A) of the Sixth Directive, intra-Community supplies between two Member States are exempted from the tax. So far as relevant, the provision reads:

‘Without prejudice to other Community provisions and subject to conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions provided for below and preventing any evasion, avoidance or abuse, Member States shall exempt:

(a) supplies of goods, as defined in Article 5, dispatched or transported by or on behalf of the vendor or the person acquiring the goods out of the territory referred to in Article 3 but within the Community, effected for another taxable person or a non-taxable legal person acting as such in a Member State other than that of the departure of the dispatch or transport of the goods.

…’

B – National law

10. Section 30(8) of the Value Added Tax Act 1994 (VAT Act 1994) provides:

‘Regulations may provide for the zero-rating of supplies of goods, or of such goods as may be specified in the regulations, in cases where

(a) the Commissioners are satisfied that the goods have been or are to be exported to a place outside the Member States or that the supply in question involved both –

(i) the removal of the goods from the United Kingdom; and

(ii) their acquisition in another Member State by a person who is liable for VAT on the acquisition in accordance with provisions of the law of that Member State corresponding, in relation to that Member State, to the provisions of section 10; and

(b) such other conditions, if any, as may be specified in the regulations or the Commissioners may impose are fulfilled.’

11. Pursuant to that empowerment, Regulation 134 of the Value Added Tax Regulations 1995 makes more detailed provision for the exemption of intra-Community supplies. Further details can be found in the Commissioners’ Notices 725 and 703, which in part have legal force pursuant to Section 30(8) of the 1994 Act and Paragraph 4 of Schedule 7. The referring court states that, under all these provisions, entitlement to exemption of intra-Community supplies with the right to zero-rating is not conferred until the goods have actually left the United Kingdom.

III – Facts and questions referred

12. In 2002, Teleos and Otherssold mobile telephones to the company Total Telecom SA/Ercosys Mobil SA (TT), established in Spain. In the contracts, the destination of the goods was stipulated in most cases as France and in individual cases as Spain. The supply was made ‘Ex works’. (5) Under that provision, Teleos and Otherswere required only to deliver the goods to the warehouse of TT’s forwarding agent in the United Kingdom. The forwarding agent then allegedly passed them to a carrier for transport to the destination States. In respect of each transaction, TT sent Teleos and Othersby courier service a stamped and signed original CMR note as proof that the mobile telephones had reached their destination. According to the findings of the referring court, there was no occasion for Teleos and Othersto doubt the genuineness of the notes or the information contained in them.

13. On the application of Teleos and others, the supplies were zero-rated and the applicants authorised to be reimbursed for input tax paid. On checks some weeks after the last supplies, the Commissioners discovered that the CMR notes contained several false indications concerning the destination, the freight forwarder and the vehicles allegedly used. They therefore concluded that the mobile telephones had not left the United Kingdom. The referring court shares that view. The Commissioners subsequently made retrospective VAT assessments against Teleos and Othersof several million pounds. They acknowledged at the same time, however, that Teleos had not been involved in a fraud, and neither did they know that the mobile telephones had not left the United Kingdom.

14. The referring court found evidence that TT had made declarations to the Spanish tax authorities of the intra-Community acquisition of the mobile telephones, claimed the VAT payable on them as input tax, and declared their onward dispatch as an intra-Community departure not subject to VAT.

15. Before Teleos and Othersentered into business relations with TT, they had assured themselves as to the reliability of this purchaser by checking its Spanish VAT number, its entry in the commercial register and its creditworthiness. They also made enquiries concerning the freight forwarder used by TT.

16. The disputed VAT assessment came before the High Court of Justice for England and Wales, Queen’s Bench Division, (Administrative Court), which made an order of 7 May 2004 (received at the Court of Justice on 24 September 2004) referring the following questions...