New Opinion Suggests Changes for Transport or Dispatch Rules for VAT Purposes

An EU distance sale of goods occurs when goods are “dispatched or transported by or on behalf of the supplier from an EU Member State other than that in which dispatch or transport of the goods ends.” On 6 February, AG Sharpston delivered an opinion on this aspect of the distance sale of goods, including the impact of the new definition in the 2021 E-Commerce Package.

Dispatch by the Supplier

Why is this relevant? If transport or dispatch occurs by or on behalf of the supplier, then the supply to consumers is taxable in the EU country where transport ends. If transport occurs by or on behalf of the end customer, then the supply is taxable in the country where transport starts. The question raised is whether transport or dispatch is done by or on behalf of the supplier? In absence of definitions in the VAT Directive, AG Sharpston proposes a working definition for ‘dispatch’: “if the supplier, at his initiative and choice, takes most or all of the essential steps necessary to prepare the goods for transportation, makes the arrangements for the goods to be collected and start their journey, and relinquishes possession of and control over the goods, there has been dispatch by the supplier."

Only in the case of a pure EX Works supply—where the goods are picked from the vendor's warehouse by or on behalf of the customer—there would NOT be dispatch by or on behalf of the supplier. This is quite a wide definition considering the Cambridge Business English Dictionary defines ‘dispatch’ only as the ‘act of sending goods to a place.”

And when is this done ‘by or on behalf’ of the supplier?

It should be the supplier, rather than the customer, who effectively makes the decisions governing how those goods are to be dispatched or transported. This decision is factual and can depend on the following (non-exhaustive) aspects:

• The range of transport options offered by the supplier on its website;
• The degree of connexity between the supplier and the LSP’s;
• Whether supply and transport are governed by a single contract or by separate contracts; When the obligation to pay for the goods arises;
• When and where ownership and risk pass; and
• How is payment for goods and transport arranged?

The Impact of the New Definition of 'Distance Sale'

Another question brought forward is what the impact of the new definition of distance sale in the 2021 package is on current scenario’s. It is good to understand that under the new rules, “including where the supplier intervenes indirectly in the transport or dispatch” will be added. The question is whether this is an explanation of the current rule or a new definition. As this definition is explicitly destined to enter into force in 2021, the AG concludes that this is a new definition and not an explanation of the current one. The explanation in the VAT committee in 2015 that an indirect intervention is relevant is considered irrelevant as this Court case concerns 2012 and thus the explanation of the VAT Committee is after the fact. However what would then be the conclusion for distance sales between 2015 and 2021?

It’s interesting to see if the arguments of the AG are adopted by the Court as conclusions will be based on self-formulated definitions of dispatch, while at the same time considering the explanation of the VAT Committee irrelevant.