© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
R1. Goods (place of supply)
GENERAL
- Strict interpretation does not apply to place of supply rules
"[32] Before addressing the grounds of appeal it is important to recognise, as Mr Milne emphasised, that like the corresponding provision in the Sixth Directive, article 59(c) of the Principal VAT Directive is not an exemption that must be strictly construed." (HMRC v. Gray & Farrar International LLP [2023] EWCA Civ 121, Simler LJ)
Purpose
- Rational delimination of jurisdiction/avoid double taxation
"[43] As a preliminary point, it should be pointed out that Title VI of the Sixth Directive contains specific provisions for determination of the place of taxable transactions, namely Article 8 for supplies of goods and Article 9 for supplies of services. The objective pursued by those provisions within the context of the general scheme of the Sixth Directive, as the seventh recital in the preamble implies, is designed to secure the rational delimitation of the respective areas covered by national VAT rules by determining in a uniform manner the place where supplies of goods and supplies of services are deemed to be provided for tax purposes. The object of those provisions is also to avoid conflicts of jurisdiction which may result in double taxation or non-taxation (see, by analogy, Case 168/84 Berkholz [1985] ECR 2251, paragraph 14; Case C‑452/03 RAL (Channel Islands) and Others [2005] ECR I‑3947, paragraph 23; and Case C‑58/04 Köhler [2005] ECR I‑8219, paragraph 22)." (Aktiebolaget NN C-111/05)
- Place of departure rule only applies to supply giving rise to dispatch
"[22]...(7) The place of departure of the goods represents the place of supply for VAT purposes only in respect of the supply giving rise to the dispatch/transportation. Any other supply in the chain of transactions relating to such goods will be where the goods are located (Euro Tyre Holding BV v Staatssecretaris van Financiën C-430/09 (Euro Tyres) paragraph 25)." (Procurement International Limited v. HMRC [2024] UKFTT 949 (TC), Judge Brown KC)
- Requires temporal and material link between supply of goods and transport
"[22]...(8) In order for a supply to involve the dispatch/transport of the goods there must be a temporal and material link established between the supply of goods in question and the transport of those goods as well as continuity in the course of the transaction (X v Skattenverket C-84/09 (X) paragraph 33).
(9) Where the dispatch or transport of the goods is effected by or on behalf of an intermediate supplier in a chain of transactions (i.e. the purchaser under the first transaction and supplier under the second), which supply represents the supply involving the dispatch/transportation of goods will depend on an overall assessment of all the specific circumstances (Euro Tyres paragraph 27).
(10) Where A supplies to B with B intending to collect the goods and move them it is reasonable for A's supply to B to be considered the supply eligible for exemption and made in the member state of departure (subject to evidencing the removal of the goods). Where however, B informs A that prior to departure the goods will be sold by B to C the dispatch/transport of the goods will only attach to the supply from B to C as A was not party to the supply effecting the dispatch/transport (Euro Tyre paragraphs 33 – 37).
(11) The question who holds the right to dispose of the goods whilst they are transported is strictly irrelevant; however, the circumstance that the transport is effected by the owner of the goods or on his behalf might play a role in the question of to which in a series of transactions the movement is ascribed (Euro Tyres paragraph 40).
(12) The circumstance that the goods are not transported to the address of the first person acquiring the goods does not exclude the possibility that the transport was undertaken in the context of the first supply. The address at which the transport finishes is thereby irrelevant (Euro Tyres paragraph 42).
(13) The purpose of the dispatch/transport must be materially linked, as a condition of the contract to the supply of those goods and not for some other purpose (i.e. further processing of the goods) (Fonderie 2A v Ministre de l'Economie et des Finances C-446/13 paragraph 28 and 30)." (Procurement International Limited v. HMRC [2024] UKFTT 949 (TC), Judge Brown KC)
Place of installation
- Cable installed in two member states: each has right to tax pro rata
"[47] It follows that, in such a case, as the Advocate General observed in point 88 of his Opinion, each Member State must have the right to tax the transaction in respect of that part of the goods installed in its territory.
[48] The respective tax jurisdiction of each Member State with respect to the transaction as a whole covers not only the collectability of the tax due on the price of the cable itself but also includes the right to tax the services relating to installation.
[49] In the main proceedings, the services related to installation of the fibre-optic cable include not only the laying itself and any lengthening of the cable but also the regular tests carried out during the laying, certain preliminary functionality tests carried out once laying is complete and the carrying-out of additional tests over about 30 days after the cable’s entry into service, during which the supplier repairs any faults. That group of services, some of which are not connected to a precise geographical location, concern the entire cable and must, accordingly, like the price of the cable itself and the rest of the materials, be taxed by each Member State pro rata according to the length of cable in its territory." (Aktiebolaget NN C-111/05)