The ECJ ruled that transportation costs connected with imports are always VAT exempt

on Oct 9, 2017 in News

The transportation costs connected with imports are to be included in the taxable basis upon import and follow the VAT treatment of the imported goods. They cannot be taxed separately, says the European Court of Justice.

On 4 October, the Court of Justice of the European Union (“ECJ”) rendered its decision in the Federal Express Europe case. It answered the question whether the Italian exemption for transport of goods imported in the EU is in accordance with the EU VAT Directive.

After long proceedings and with a pending infringement procedure against Italy initiated by the European Commission, the case was dealt with by the Italian Supreme Court. The Court referred the case to the ECJ.

The question asked was whether ancillary costs (such as transport costs) at import should be exempt from VAT if two conditions are fulfilled simultaneously: (1) their value has been included in the taxable amount at import and (2) VAT has actually been charged on those services at the time of import.

The ECJ ruled that Article 86(1)(b) of the VAT Directive ensures that ancillary services are given the same tax treatment as the primary service. The Court confirmed that, in the case of imports, the transport costs follow the treatment of the import service and are to be included in the taxable amount at import. So they follow the treatment of the imported goods. Since the levy of VAT on the transport service is secured through this mechanism, Article 144 of the VAT Directive prescribes that Member States must grant a VAT exemption for these transport services. Article 144 can in this sense be considered a “technical simplification”.

This exemption applies even in cases, such as in the case at hand, where the consignments of negligible value are exempt of VAT.

Read the full judgement

For more information, please contact Ine Lejeune or Liesbeth Vermeire.