With regards to goods in process within the European Union, several are aspects that enterprises and manufacturers should to consider to correctly frame the operations for VAT.
As a general rule, the Italian law envisages a suspension regimen for goods moved from a European member state to another for their processing. They are, in fact, movements that don't integrate an intercommunity sale in the Country of origin and that, as a consequence, don't give rise to a correspondent intercommunity purchase in the country of destination.
As we can deduce from the recent sentence of the European Court of Justice for combined causes C-606/12 and C- 607/12, the misalignment that, on the matter, characterizes the domestic discipline with respect to the community one, can imply problems for the Italian enterprises if goods, once processed, are not returned to the State of origin, as envisaged by the more restrictive rules of the Directive nr. 2006/112/EC.
In Italy, in fact, the Law nr. 28/1997 has enforced the Directive nr. 95/7/EC in a incomplete way, Directive that has modified the article 28-bis, paragraph 5, letter b) of the VI EU Directive requiring that "goods, once their processing is ended, have to be shipped at the subject of the member State from where they have been initially shipped or transported". The domestic law, even also as a consequence of the enforcement of the Directive 2006/112/EU, has, on the contrary, remained linked to the old text of the mentioned article 28-bis, that just recalls "the performance of a service, having as object a manufacturing on those goods, made by the VAT subject and performed in the member state of arrival of the shipment or of the transportation".
The attention, for enterprises delocalizing manufacturing processes in other members States, has therefore to be stressed on the verification of assumptions of the suspending regimen envisaged by the local legislations, in particular when the end-product is obtained assembling other goods purchased from local suppliers.
Assuming that goods, at the end of their processing, are subject to an intercommunity sale, potential scenarios vary depending on the fact that the domestic rules is conformed to the one of the community or not.
Assuming that the Italian operator adequates its behaviour to the content of the above mentioned sentence, the transfer from Italy, causes, at the same time:
- an "assimilated" community sale, not taxable for VAT under article 41, paragraph 2, letter c) of the Law Decree nr. 331/1993 (so called sale to "itself"), that counts for the formation of the VAT "plafond" and for the acquisition of the status of "habitual exporter";
- the correspondent community purchase, to be taxed in the country of destination via the VAT number obtained in advance.
Complication will emerge if the Tax Authorities of the member State of destination would consider that transfer as a "suspended transfer", conflicting therefore with the EU Directive.
In this case, in fact, is likely to deem that to the VAT number of the Italian company, would be contested the missed application of VAT on the purchase of goods from domestic suppliers due to the fact that, downstream, sales don't assume the nature of community sales, missing the territoriality's prerequisite; it is well known, in fact, that those exchanges are not relevant in the country of their processing if goods are sold with VAT suspension.
Basically, requalifying (ex post) the nature of the sales made by the domestic VAT number, the plafond used (ex ante) to purchase goods without VAT, would fall.
Under a more general profile, it is worth to verify if assembled products fall into the discipline under exam, regarding the transfer of goods with VAT suspension with the scope of their processing.
The domestic law, recalling the so called "perfectioning" operations, allows to confirm the positive interpretation, being them defined as - under article 5, point 37 of the EU Ruling nr. 952/2013 (EU Customs Code) – "the processing of goods, including their mounting, their assembly and their customization to other goods".
The EU Directive nr. 2006/112/CE, on the contrary, in defining the intercommunity exchanges of goods with the aim of their processing, only refers to the "processes regarding the goods", but shouldn't there be doubts that the perfectioning operations, together with the so called "usual manipulations" (under article 220 of the EU Ruling nr. 952/2013) are included in the said concept.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.