The supply of goods, which are transported from one Member State to another in connection with that supply, is subject to VAT at the 0% rate. Naturally, both the supplier and the recipient of the goods must be VAT-registered businesses, and great care must be taken to provide evidence that the goods have actually been transported. In contrast to the supply at the 0% rate in the Member State from which the goods originate, the purchaser of the goods is obliged to pay VAT in the Member State where the goods arrive. This is the system of intra-Community supplies and acquisitions.
On 2 October 2014, the European Court of Justice ruled, in a case involving the processing of goods, that for VAT purposes the place of supply is where the goods are located after processing. In this regard, consideration must be given to what the parties have contractually agreed regarding (the status of) the goods to be supplied. Only once the goods have attained the agreed status are they supplied to the customer.
This judgment may have significant consequences for the (administrative) processing of transactions involving goods to which some form of processing is applied during the logistics process of the supply. For example, if goods are processed by a Dutch supplier in Germany prior to delivery to the German customer, the supply does not qualify for VAT purposes as an intra-Community supply subject to 0%, but as a (German) domestic supply subject to German VAT. The transfer of the goods from the Netherlands to Germany constitutes a deemed (intra-Community) supply.
(ECJ 2 October 2014, Case C-446/13; “Fonderie”)