With a recent judgment the European Court of Justice has confirmed that in case of missed physical introduction of the goods in a VAT consignment, VAT at importation is not due if the same has already been paid with the reverse-charge mechanism at the moment of their extraction from the VAT consignment/deposit itself.
This decision of the European Court positively reverberates on the numerous tax inspections in progress on the use of VAT consignments just as "virtual" deposits.
2. THE INTRODUCTION TO FREE CIRCULATION OF GOODS ADDRESSED TO A VAT CONSIGNMENT
Under article 50, paragraph 4, letter b) of the Law Decree 331/1993 the introduction to free-circulation of goods addressed to VAT consignments is an exchange not subject to VAT. With the custom regimen of "free-circulation" goods imported from countries outside the EU, acquire the status of "communitarian" goods.
To this aim, the importer of goods from outside EU has to:
- deliver to the Custom office of importation a copy of the importation document stamped with the declaration of the VAT Consignment handling the goods;
- give a bank or insurance guaranty measured on the amount of the VAT not paid at Custom valid until the moment of extractions of the goods from the VAT consignment;
The VAT consignment has to process the handling of the goods in a specific register called "charges and discharges", in order to return the importation letter, stamped with the commitment to handle the goods, to the Custom Office of importation.
The guaranty mentioned above is not due by the so called AEO (Authorized Economic Operators) and by importers exempted under article 90 of the General Custom Law. Under this article the Italian Financial Administration has the chance to exempt those operators with "proven financial reliability" from delivering the guaranty connected to the payment of custom duties due on goods.
3. THE EXTRACTION OF GOODS FROM THE VAT CONSIGNMENT/DEPOSIT
Goods extracted from the VAT Consignment can be consumed or sold in Italy, or sold abroad with their shipment or transportation.
Under article 50, paragraph 6 of the Law Decree 331/1993, the extraction of goods from the VAT Consignment to be used or sold in Italy, can be done only by VAT subjects identified in Italy and implies the payment of the VAT (if this is made as a taxable exchange).
Moreover, after the modifications made by the Law 138/2011, the extraction of goods can be executed only by VAT subjects registered at the local Companies Register for at least one year, that demonstrate an effective business and certify the regular payment of VAT.
The extractions of goods shipped abroad is an exchange not subject to VAT under article 50-bis, paragraph 4, letters f) and g) of the Law Decree 331/1993.
Independently from the exchange that generated the introduction of the goods in the VAT consignment, the operator that extracts the goods must communicate to the Consignment's Manager all information pertaining its VAT periodical calculation, also for the release of the guaranty mentioned above.
This communication has to include a copy of the self-invoice or, in case of EU exchange, a copy of the invoice integrated with information on its processing in the general ledger and a self declaration confirming the above.
4. MISSED INTRODUCTION OF THE GOODS INTO THE CONSIGNMENT/DEPOSIT
In case of missed physical introduction of the goods into the consignment, the Financial Administration has the chance to require the payment of VAT on the importation, even if the tax has already been paid at the extraction of the goods with the reverse-charge mechanism (issuing a self-invoice under article 17, paragraph 2 of the Republic Presidential Decree 633/1972 and processing of the same invoice both in the sales and purchases VAT books).
According to the judgment of the Supreme Court (Sentences nr. 12262/2010, 12263/2010 e 12272/2010), in fact, the tax inspection system of the two taxes is different, since VAT on importation is a border duty that has to be inspected and collected at the moment when the taxation requirement born, while domestic VAT is calculated and paid with reference to the total amount of exchanges made in a certain period.
5. THE PRONUNCIATION OF THE EUROPEAN COURT OF JUSTICE
With the judgment C-272/13 dated July 17th 2014, the European Court of Justice expressed on the effects of the missed "physical" introduction of good into the VAT consignment.
The case under verification concerns a dispute between a resident company and the Custom Office of Livorno, regarding the missed payment of VAT on importation on goods only "virtually" introduced in a VAT Consignment, that is with their inclusion just on the "charge and discharge" book kept by the consignment's manager.
The Custom Office has claimed the missed "physical" introduction of the goods into the consignment and has therefore required the payment of VAT at importation with an administrative fine of 30% foreseen by article 13 of the Legislative Decree 471/1997.
The fiscal demand has been opposed by the company under the prerequisite that VAT had already been paid, with the self-invoicing system, at the moment of extraction of the goods from the consignment, therefore the request of the Office would imply a double taxation on the same goods (the VAT due to the Custom Agency at the moment of their importation and the one due to the Tax Agency at the moment of their extraction).
The Regional Tax Commission of Firenze, to which the dispute has been submitted following the appeal of the company, has suspended the procedure in order to submit the decision to the European Court of Justice with reference to some judicial matters regarding the legitimacy on the base of the European law:
- to avoid the charge of the VAT on importation for goods only "virtually" introduced onto the VAT consignment (through their inclusion in the "charge and discharge" book);
- to ask fro the payment of the VAT on importation when the company has paid the tax with the self-invoicing procedure.
Regarding the first item, the Court of Justice has reminded that Member States have the duty to identify formalities that the VAT subject has to respect to benefit from the exemption of VAT payment under article 155 of the European Directive 2006/112/CE.
The domestic law that subordinates the "physical" introduction of the goods into the VAT consignment to benefit from VAT exemption at importation, despite its too formal characteristic, is however suitable to guarantee the collection of the tax and to contrast evasion events and, therefore, is not contrasting the general principle of the European discipline.
Regarding the second item, instead, the European Judges have observed that the obligation to physically introduce imported goods into the VAT consignment, is only a formal requisite and not a condition to benefit from the preferential treatment reserved to goods conditioned by the consignment's regimen.
In this case, in particular, the failure to comply with this obligation hasn't implied the missed payment of the VAT at importation, since this has been "regularised" when goods have been extracted from the consignment issuing a self-invoice.
Given that goods hadn't been physically introduced in the consignment, as required by the Italian legislation, the Court recognizes that VAT was due at the moment of importation and not at the extraction of the goods.
However failing an attempt of fraud or damage to State's financials, this delayed payment is only a formal violation that can't bring under discussion the right of the tax payer to deduct the VAT paid (in fact, the request of the Office to pay, in addition to the fine, VAT in its entire amount, is equivalent to deprive the tax payer from its right to deduct the VAT on purchases).
The Court of Justice has therefore ratified that the claim by the Custom Agency, requiring a new payment of the VAT already paid with the reverse-charge, without giving the chance to off-set that payment, can't be considered as conformed to the "neutrality" principle of VAT.
Conclusions offered by the Court of Justice are in an open contrast with the orientation supported by the Supreme Court so far, that state that the payment of VAT at the moment of extraction of goods from the VAT consignment doesn't preclude the Financial Administration to require the payment of VAT at importation.
The European Judges have, in fact, definitely clarified that VAT at importation and domestic VAT are not two different taxes and, therefore, the request of payment of VAT at importation configures a duplication of the same tax, conflicting with the European principle of VAT neutrality.
This judgment reflects directly on the verification activity of the Custom Agency, as well as on the on-going disputes. Given this, the Custom Offices can't no more demand for the payment of VAT at importation, in case the same tax has been paid at the moment of extraction of the goods from the VAT consignment.
HOW WE CAN HELP
The VAT Team of Batini Colombo Saottini is available for any information you may need on the above mentioned topics. In case you need further assistance, please do not hesitate to contact them at your convenience.
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