CHEP Equipment Pooling case: Transfer of goods is not an intra-Community supply and refusal of a VAT refund due to lack of VAT registration is unjustified
When operators trade internationally, they may move goods from one EU Member State to another. Such a movement may result in a deemed intra-Community supply in the EU Member State of departure and a deemed intra-Community acquisition in the EU Member State of destination. This situation occurred in the CHEP Equipment Pooling case, where the European Court of Justice (ECJ) ruled that the transfer of goods in that case did not qualify as an intra-Community supply and that a refund of VAT cannot be refused because the taxable person is not identified for VAT purposes in the EU Member State where a refund was requested.
The judgment of the European Court of Justice
Central to the case was the Belgian company CHEP Equipment Pooling. CHEP Equipment Pooling bought pallets in several EU Member States, including in Romania. CHEP Equipment Pooling transported the pallets (bought in Romania and in other EU Member States) to Romania for rental. It then rented them out to the group company CHEP Pooling Services Romania, which in turn sublet the various pallets to Romanian customers. Subsequently, CHEP Equipment Pooling applied to the Romanian tax authorities for a refund of the VAT charged by the Romanian pallet supplier. The Romanian tax authorities refused to grant the VAT refund. According to the Romanian tax authorities, CHEP Equipment Pooling must be identified for VAT purposes in Romania because of a deemed intra-Community supply concerning the transfer to Romania of pallets purchased in other EU Member States.
In dispute in the case was whether the transfer to Romania of the pallets purchased in other EU Member States qualifies as a deemed intra-Community supply, thus requiring a VAT registration of CHEP Equipment Pooling in Romania because of the deemed intra-Community acquisition. The ECJ ruled that the transfer of the pallets by CHEP Equipment Pooling to Romania does not constitute a deemed intra-Community supply because the exception for so-called temporal movement applies. In coming to this conclusion, first the ECJ considered that the pallets must be hired out in Romania. As well, the ECJ considered it important that the use of the pallets was only temporary and that the pallets were dispatched or transported from that other Member State. And finally, the ECJ held that even if CHEP Equipment Pooling had to register to report the deemed intra-Community acquisition, the refund of VAT cannot be refused.
The importance of this judgment
The ECJ has already ruled that taxable persons may not be restricted in their right to deduct VAT for the sole reason that they are not registered for VAT. To that extent, the ruling of the ECJ in the CHEP Equipment Pooling case is not surprising. Nevertheless, the ruling is favourable to companies that reclaim VAT paid abroad. It is clear from the present case that the right to a VAT refund is protected and that an EU Member State cannot refuse a taxable person from another EU Member State the right to a VAT refund on the sole ground that this taxable person is not identified for VAT in the EU Member State of refund.