The Court of Justice of the European Union (CJEU) has issued another decision of major practical relevance on proving the VAT exemption of intra‑Community supply, i.e. the intra‑EU supply of goods. The C‑639/24 (Flo Veneer) case provides a clear answer to a long‑standing question affecting many businesses: Can the VAT exemption be denied solely because the transport is not documented “by the textbook”?
What was the case about?
A Croatian company sold timber to another EU Member State. The company acted as many businesses typically do in everyday operations: based on invoices, transport documents and customer confirmations, it applied the VAT exemption for intra‑Community supply.
However, the Croatian tax authority rejected the VAT exemption. According to its reasoning, the submitted documents did not fully comply with the proof requirements listed in Article 45a of Implementing Regulation 282/2011/EU (the so-called Quick Fixes) – even though the authority itself fully acknowledged that the goods had actually left Croatia.
The Croatian court initiated a preliminary ruling procedure to clarify whether the VAT exemption may be denied solely because the taxpayer does not rely on the documents explicitly listed in the regulation to prove the dispatch of goods to another Member State.
Essence of the Court’s decision
1. The evidence under Article 45a is not exclusive
The Court stated that Article 45a of the Implementing Regulation is not exhaustive. It creates a presumption regarding the dispatch of goods to another Member State, but it does not restrict the taxpayer from relying on other types of evidence to prove the reality of the EU cross‑border supply of goods.
2. The tax authority may not automatically deny the exemption
The Court emphasised that VAT exemption cannot be denied solely on formal grounds if the transaction was in fact an intra‑Community supply. The tax authority must assess all relevant evidence, even if such evidence is not listed in Article 45a.
3. Proportionality of the burden of proof and protection of taxpayers
The Court reaffirmed that the tax authority may only deny the exemption if objective circumstances show that the taxpayer abused the rules or if the transaction did not take place. The evidentiary requirements must remain proportionate and must not impose an unreasonable burden on the taxpayer.
Why is this CJEU decision important in practice?
- More flexible evidentiary framework: The decision ends the rigid, formalistic approach where authorities denied VAT exemption even when the goods had undeniably left the Member State.
- Obligations of tax authorities: National authorities must now examine a broader set of evidence, not only the prescribed list.
- Positive precedent for businesses: Particularly in commercial practice – where shipments cannot always be documented strictly according to the Regulation – taxpayers now have more flexible opportunities to prove the VAT exemption of an intra‑Community supply.
The conflict between the current practice of the Hungarian tax authority and the CJEU’s interpretation
The Hungarian tax authority often ties the application of VAT exemption for an intra‑Community supply strictly to the presence of the documents listed in Article 45a, even if the transaction has clearly taken place. In many cases the Hungarian tax authority does not accept alternative evidence at all and automatically assesses a VAT difference due to deficiencies in the Quick Fixes documentation.
The Flo Veneer judgment sends a clear message: the evidentiary system is flexible, and the actual fulfilment of the transaction prevails. The decision aligns with the CJEU’s consistent case law, according to which economic reality is paramount in the application of VAT exemptions, and formal requirements may not override actual transactions. This significantly enhances legal certainty in the field of intra‑Community supply, including for Hungarian businesses.
The Hungarian tax authority will need to adapt its practice accordingly, which requires a substantial shift in mindset and audit methodology: instead of focusing on formal errors, economic reality must be examined. Once this happens, the Hungarian tax authority is expected to place greater emphasis on risk analysis and the verification of actual fulfilment, since it must accept a wider range of documents such as bank transfers, customer delivery confirmations, warehouse dispatch documents, and even GPS data. This could create a more predictable environment for businesses operating in Hungary.
What do we recommend?
- Documentation should continue to be organised and consistent.
- Companies involved in intra‑Community supply should retain all evidence supporting the dispatch of goods.
- Businesses should review their contracts with transporters and their internal procedures.
If you need expert support regarding the VAT processes of your intra‑Community supply, the VAT advisers of WTS Klient Hungary are ready to assist you with reviewing internal procedures, designing documentation systems or preparing for Hungarian tax authority audits. Feel free to contact us and request a proposal!
This article provides general information and does not constitute advice.
