In accordance with Article 41(1)(1)(2) of the VAT Code, services that relate to the importing of goods and the value of which is included in the taxable amount at the time of importation are exempt from VAT. For example, the transport services of logistics service providers following the import of goods may be exempt from VAT, provided that the freight costs are included in the taxable amount of the imported goods.
In the above fact, it must be indicated that in principle it is mandatory to include freight costs in the taxable amount at the time of importation on the basis of another legal provision, namely Article 34(2)(1)(2) of the VAT Code (insofar as these costs would not yet be included in that taxable amount). This concerns both freight costs to the first place of destination in Belgium and to another place of destination within the EU if this place is already known at the time of importation.
The idea behind this VAT exemption is simple: if the freight costs have already been taxed by inclusion in the taxable amount at the time of importation, they should not be taxed again on the part of the logistics service provider.
Practical difficulties/questions
In practice, the VAT exemption sometimes raises questions: can transport services be exempted simply or automatically at the time of importation, assuming that according to VAT legislation it is mandatory that they are also included in the taxable amount at the time of importation?
Or must it be possible to conclusively demonstrate with evidence that the freight costs were actually included in the taxable amount at the time of importation?
A recent judgment of the Court of Justice provides more clarity in this regard.
Cartrans Preda case (ECJ, C-461/21)
In this Romanian case, the Romanian tax authorities refused to grant the VAT exemption on transport services provided by a logistics service provider as the latter was unable to prove by means of documents that the freight costs were actually included in the taxable amount at the time of importation.
The counterparty argued that these costs should be included in the taxable amount at the time of importation and that in the present case an import had actually taken place (and reference was made to the CMR consignment note, the summary declaration and the MRN number). However, according to the Romanian tax authorities, this was not enough.
The Court of Justice seems to have a stern reply in its judgment. While tax administrations should not require specific documents in order to be able to provide evidence, taxable persons should be able to prove – on the basis of any information – that freight costs are effectively included in the taxable amount at the time of importation.
What now?
As a result of the judgment, the question inevitably arises: how will it be possible to provide this proof as a logistics service provider? In practice, it is virtually impossible for logistics service providers to know whether their freight costs have actually been included in the taxable amount at the time of importation, especially in situations where customs clearance was carried out by another party.
In our view, this is not the last word on the matter. In any case, it would seem desirable that the Belgian VAT authorities themselves also respond to the judgment and how they interpret the position of the Court of Justice.
Our BOFIDI experts are happy to help you
Would you like more information about VAT exemptions? Then you can always contact Pieter via pieter.vanhauwaert@pkfbofidi.com.