Irish Tribunal Rules on Import VAT Recovery for Goods Owners and Importers
In a recent ruling, the Irish Tribunal addressed the issue of import VAT recovery for individuals who are both the owners and importers of goods. The case raises questions about the conditions under which import VAT can be claimed as input tax and the potential distortion of the VAT system.
Under current regulations, in order to recover import VAT as input tax, a person must have the power to dispose of the goods and use them as cost components for their output supplies. This requirement ensures that the VAT system remains fair and avoids any potential distortions. If someone who only performs services in relation to the goods were to recover the import VAT, it would create an imbalance in the system.
However, the Tribunal clarified that it is not necessary for the person recovering import VAT to be both the owner and importer of the goods. This requirement would violate the principle of neutrality, which is a fundamental aspect of the VAT system. The Tribunal did not have to make a final decision on this point in the case at hand, but it acknowledged that it may be addressed in a future case.
The judge also highlighted the relationship between EU law and national law in the context of Brexit. Under the 2018 Withdrawal Act, EU law can override national law, and this includes VAT regulations. The judge further explained that the 2023 Revocation Act could have changed this situation, but it will not have any impact as it is no longer applicable.
This ruling comes as a result of a case brought before the Tribunal by a company involved in the transportation of goods. The company sought to recover import VAT as input tax, arguing that it should be entitled to do so as it was both the owner and importer of the goods. However, the Tribunal ruled against the company, stating that the conditions for VAT recovery were not met in this case.
The Tribunal referred to previous judgments by the European Court of Justice (ECJ) to support its decision. In the case of DSV Road (C-187/14), the ECJ ruled that a right to deduct VAT exists only if the imported goods are used for the purposes of taxable transactions. This means that the cost of the input services must be incorporated into the cost of output transactions or the cost of goods or services supplied by the taxable person.
In another case, Weindel Logistik Service (C-621/19), the ECJ clarified that persons who import goods without being the owners are not eligible to benefit from the right to deduct VAT. However, they may still be able to claim VAT recovery if they can demonstrate that the cost of importation is incorporated into the price of downstream operations or the price of goods or services provided in the course of their economic activities.
This ruling has significant implications for businesses involved in the importation and transportation of goods. It highlights the importance of understanding the conditions for VAT recovery and the potential limitations that may apply. Businesses should carefully review their operations to ensure compliance with VAT regulations and seek professional advice if necessary.
In conclusion, the Irish Tribunal’s ruling on import VAT recovery for goods owners and importers provides clarity on the conditions under which VAT can be claimed as input tax. While it is not necessary for the person recovering import VAT to be both the owner and importer of the goods, they must demonstrate that the cost of importation is incorporated into their economic activities. This ruling emphasizes the need for businesses to understand and comply with VAT regulations to avoid potential penalties and distortions in the VAT system.
