Support of the zero VAT rate on transport services is possible by providing proof not prescribed

Recently (8 November 2018), the ECJ issued its judgement in a case about the application of the zero VAT rate on transport services related to goods that are being exported. In this news item, we discuss the case and its relevance for day-to-day practice.

The case facts

In the period 2012 to 2014, Cartrans, a Romanian road transport services broker, transported goods from Romania to Turkey, Georgia, Iraq and Ukraine for its customers. Cartrans applied the zero VAT rate on the provided transport services (art. 146(1)(e) and art. 153 VAT Directive). The Romanian tax authorities performed a VAT audit and concluded that Cartrans did not have the export declaration that was necessary to support the application of the zero VAT rate. The zero VAT rate was therefore applied incorrectly. The Romanian tax authorities imposed additional assessments on Cartrans. Cartrans filed an objection against the assessment.

ECJ judgment

According to the ECJ, the competent authorities must examine all available proof for the application of the zero VAT rate on the provided transport services to determine whether the goods associated with these services have actually been exported. It is not allowed to only accept the export declaration and exclude the other available proof. In this specific case, the ECJ observes that Cartrans had a TIR carnet which was certified by the Customs authorities of the country of destination. According to the European court, the Romanian tax authorities should have included this document in their examination, unless the latter have reason to doubt the authenticity or reliability of the document.

Day-to-day practice

An important implication of this judgement is that authorities cannot refuse an exemption or the zero VAT rate just like that if the taxable person involved provides proof beyond that prescribed in national legislation.

In the Netherlands, it is also possible to apply the zero VAT rate on specific services related to the import and export of goods. It is important to substantiate the application of the zero VAT rate with relevant proof. In this context, the European court indicates that ‘a sufficient degree of probability’ must show that the conditions have been met. We therefore always advise exporters, importers and logistic service providers to ensure that they have enough proof regarding services they have provided related to the import and export of goods.