Supply of goods means transferring the right to deal with goods as an owner pursuant to Section 13 (1) of Act No. 235/2004 Coll., on Value Added Tax (hereinafter the “VAT Act”). The established judicial decision-making practice indicates that transfer of the right to deal with goods as an owner for the VAT purposes does not have to be identical with the transfer of ownership in the legal sense. Supply of goods for the VAT purposes includes any transfer of tangible assets, under which the recipient is entitled to effectively deal with such assets as if the recipient were an owner thereof, even though the title was not transferred to the recipient (refer for example to CJEU C-320/88 Shipping and Forwarding Enterprise Safe BV, or the local 9 Afs 137/2016 Arex).
The Supreme Administrative Court dealt with a transfer of the right to deal with goods as an owner again (8 Afs 206/2020) at the end of the previous year, and we would like to present the judgment’s content to you.
What Was the Judgment About?
The case involved a mobile phone supplier who entered into an agreement for the purchase of mobile phones with a customer (whereby the customer acquired the title to the phones). However, the customer agreed that the goods would be handled by the supplier (and, as a result, it was the supplier to continue to make any dealings with the goods). The goods remained in the supplier’s warehouse, and the supplier subsequently sold the goods to third parties on the basis of the customer’s authorisation. The customer never physically received the goods under its control.
The customer kept a register of tax documents received from the supplier and subsequently documents issued in the customer’s name to third parties (the documents were issued in the customer’s name by the supplier with reference to the relevant authorisation). The customer exercised its right to a tax deduction under the received tax documents. That right was challenged by the tax administrator who assessed VAT to the customer in the form of payment assessments.
Decision of the Supreme Administrative Court
The Regional Court and later the Supreme Administrative Court (the “SAC”) examined the question of transferring the right to deal with goods as an owner. The SAC agreed with the decision of the Regional Court in this case and stated that it was necessary for the owner to be able to make decisions that affect the legal condition of goods, namely decisions on the goods’ sale, for the purpose of transferring the right to deal with goods as an owner (the SAC referred to the decision of the Court of Justice of the European Union in case C-401/18 Herts). This, however, did not apply to this case. The customer only received summarised information about the goods’ sale on a monthly basis without being able to have an effective influence thereon. As a result, the customer had no knowledge in the real time about purchases of the goods for it or about subsequent sales to third parties, and, as a consequence, was unable to make decisions that could affect the goods’ legal condition.
The SAC stated in the above-mentioned judgment that a transfer of the right to deal with goods as an owner for the VAT purposes does not occur if the acquirer waves, in the supplier’s favour, the exercise of the owner’s substantive rights whereby decisions can be made on the legal condition of the goods.
If the judgment mentioned above caught your attention and you need to consult your situation, please feel free to contact us. We will be happy to provide you with assistance!
Michaela Kozminská Lenka Kolmanová
kozminska@edmutilitas.cz kolmanova@edmutilitas.cz