Intra-Community supply and the classification of ancillary transactions
C‑234/24. – Brose Prievidza, spol. s r.o.
As a general rule, an intra-Community supply or acquisition of goods presupposes that the goods are physically dispatched or transported from one Member State to another. This requirement applies even where the ownership of a tool used in the production process is also transferred together with the product. Exceptionally, however, the sale of a tool that remains at the place of production may be included in the taxable amount of the intra-Community supply of goods if, from an economic perspective, the transfer of the tool could be separated from the sale of the product only in an artificial manner, or if, according to the case-law of the Court of Justice of the European Union (CJEU), it qualifies as an “ancillary supply.”
The plaintiff in the main proceedings was the Slovak subsidiary of the Brose Group, which manufactures window regulators and door modules for motor vehicles. Brose Slovakia ordered components from Bulgaria which required specific tools for their production. These tools were not ordered by Brose Slovakia itself, but by the group’s German company from the Bulgarian manufacturer, and were subsequently resold by Brose Germany to Brose Slovakia. The tools, however, remained physically in Bulgaria at all times. Brose Germany received an invoice from the Bulgarian manufacturer including Bulgarian VAT for the production of the tools, and then, under its Bulgarian VAT identification number, issued an invoice – also including Bulgarian VAT – for the resale of the tools to Brose Slovakia. Brose Slovakia sought to recover this VAT under the refund procedure based on Directive 2008/9/EC.
The Bulgarian tax authority rejected the application on the grounds that the tools used in the manufacturing process constituted an ancillary cost included into the taxable amount of the intra-Community supply of the finished products (from Bulgaria to Slovakia), and that such a purchase could not give rise to a VAT refund under the Directive. The matter was brought before the Bulgarian Supreme Administrative Court, which referred a request for a preliminary ruling to the CJEU.
The CJEU confirmed that an intra-Community supply of goods exists, in factual terms, only where the goods physically cross the border between Member States. However, in view of the complex nature of the transaction and the doctrine of ancillary supplies, it must be examined whether the sale of the finished product and that of the tools necessary for its production objectively constitute a single, indivisible economic transaction, which it would be artificial to split, or whether the transfer of the tools, as an ancillary supply, is ‘absorbed’ into the supply of the finished product or rather serves an independent economic purpose.
In the case at hand, several factors support the independent nature of the tool sale: the tools never left Bulgarian territory, the tools and the finished products were sold by different parties, the tools were durable assets used throughout the production cycle (so that their acquisition could serve an autonomous purpose for the purchaser), the tools and the components were invoiced separately, and no indication was found that the separation of the transactions was artificially constructed. In these circumstances, subject to the factual assessment of the national court, the sale of the tools does not constitute an intra-Community supply of goods, and therefore, the refund of Bulgarian VAT paid on the acquisition of the tools cannot be excluded in principle under the procedure laid down in Directive 2008/9/EC.
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