In the case of JP Commodities Ltd [2008] STC 816, the Court
considered the meaning of taxable person in the context of Article
138 of the Principal VAT Directive, and whether the
Commissioners’ view, that an entitlement to zero-rate is
dependent upon the customer being VAT registered in another Member
State, is reasonable.
JP Commodities (JP) zero-rated supplies of high value
electronic goods to its customer (B), a company established in
Gibraltar. The goods were dispatched to Belgium at B’s
request. B was not registered for VAT in any EC Member state,
although it was agreed that the company was liable to be registered
in Belgium. The supplies failed to meet one of our basic conditions
for zero-rating – that the supplier must show a valid EC VAT
number on the sales invoice. Consequently zero-rating was
disallowed and output tax was assessed.
JP contended that their supplies were within Article 138(1)
because B was a taxable person. They further contended that our
condition, requiring suppliers to quote a valid EC VAT number,
prevents the correct application of article 138, and this offends
the principle of effectiveness. The tribunal rejected these
contentions and JP lodged an appeal to the High Court. The appeal
was dismissed.
Mr Justice Briggs concluded that, for the purpose of article
138, “taxable person” must be the definition given in
article 9 that is, any person who independently carries out in any
place any economic activity; taxable person cannot be construed as
meaning a person registered for VAT. Nevertheless, the condition
imposed by the Commissioners that the supplier must show on the VAT
sales invoice the customer’s EC VAT number, is a legitimate
condition authorised by article 131, which requires Member States
to lay down conditions to ensure the correct and straightforward
application of the zero-rate, whilst preventing evasion, avoidance
or abuse.
The Court also ruled that the condition is proportionate
because it is reasonable to expect a supplier to take steps to
satisfy himself that his customer is VAT registered in order to
ensure that the intra-community supply he is effecting does not
lead to his participation in evasion or avoidance.
Finally, the Court confirmed that the condition does not
offend the principle of effectiveness because it does not make it
virtually impossible or excessively difficult for a supplier to
exercise the right to zero-rate. That right is conferred because
the inter-connectedness of the transaction makes tax payable in the
Member State of acquisition. It is not an objective to facilitate
the exercise of the right to zero-rate in circumstances where the
corresponding VAT obligations of the customer are likely to be
flouted because they are not VAT registered. The requirement to
provide the customer’s EC VAT number is a simple mechanism to
ensure that the right to zero-rate is correctly conferred.
