VAT exemption for exports: is a TIR carnet enough?

A TIR carnet with a customs stamp – it still doesn't count

Romania, early 2012. A tax audit arrives at the headquarters of Cartrans Spedition SRL, a brokerage firm organizing road transport of goods to countries outside the European Union. The case seems routine: the authority is checking whether the company correctly applied the VAT exemption for transport services directly related to the export of goods outside the EU. Like any carrier operating in the export sector, Cartrans had been issuing invoices without VAT for years, based on the belief that since the goods had actually left the Union, the transport service was exempt from tax. Unfortunately, this assumption proved to be wrong.

Evidence that isn't evidence at all

The tax office in Ploiești analyzed seven of Cartrans' invoices and concluded that the company had not proven, in the manner required by Romanian regulations, that the goods had actually been exported. It wasn't that the export hadn't occurred – it was that one specific type of document was missing: the transport contract concluded with the service beneficiary, detailed transport documents, and, above all, the customs export declaration in the form required by national regulations.

Cartrans defended itself with what it actually possessed: TIR carnets and CMR consignment notes certified by the customs authorities of the countries to which the company transported the goods. It argued that the TIR carnet – a document that accompanies every transport from the moment of loading, through transit borders, to the customs office of destination outside the EU – contains exactly the information that was supposed to be in the "missing" declaration: a description of the goods and confirmation from customs authorities that the goods had indeed reached their destination outside the Union. The tax authority was adamant: only one strictly defined document counts. The rest – even if they substantively confirm the same thing – do not count.

The dispute reaches Luxembourg

The case went to the Tribunalul Prahova, a Romanian court, which – instead of ruling on its own – asked the Court of Justice of the European Union a question: can a member state make the VAT exemption for transport services related to exports conditional upon the presentation of one strictly defined document, when the EU VAT Directive does not explicitly require it?

In July 2018, Advocate General Eleanor Sharpston issued an opinion in which she pointed out something that sounds obvious, but was not obvious to the Romanian tax authorities: a taxpayer like Cartrans does not have to prove that the goods were actually exported – it only has to demonstrate that the transport services provided were directly related to the export of goods. The way this is demonstrated is not directly regulated by EU law – but, as the Advocate General noted, although a TIR carnet does not have to be conclusive proof of export, it is an important document in assessing whether transport services were directly linked to the export of goods.

The verdict: there is no single "holy" document

On November 8, 2018, the Court of Justice of the EU issued its judgment in case C-495/17. The judges ruled unequivocally: the VAT exemption for transport services related to exports cannot be strictly made conditional upon the presentation of a customs export declaration – tax authorities must instead assess whether there is sufficient evidence confirming that the goods have been exported, taking into account all available information. Moreover, the Court explicitly recognized that a TIR carnet certified by customs authorities is a valid document indicating that the goods have left the Union and reached their destination, and it should be taken into account as proof of export.

Formally: Cartrans won. Practically: this entire battle – the audit, the appeal, the national court, the Advocate General's opinion, the Court's judgment – took almost seven years. Seven years of uncertainty, legal costs, and frozen tax risk for something the company was doing in accordance with common industry practice.

The judgment in the Cartrans case does not mean that from now on "any document will do." The Court did not create a closed list of acceptable evidence – it only said that a member state cannot rigidly require only one specific piece of paper while ignoring other credible evidence. This is a ruling on a principle, not an instruction manual. In practice, this means that a carrier or forwarder still does not have 100% certainty as to which set of documents will protect them from the tax office – they only find out when the office challenges their settlements and the dispute ends up in court.

Worse still, the principle developed in the Cartrans case did not close the matter – in subsequent years, the Court had to clarify it in other cases (including the Czech case Vinš, C-275/18, concerning proof of export of goods), and individual EU countries still interpret differently which documents "sufficiently" confirm an export. For a transport company operating in several jurisdictions simultaneously, this means the ground can still shift under its feet – despite a favorable judgment from years ago.

A lesson for the industry

For forwarders and carriers, there is a hard lesson here: simply having a "logical" set of documents does not protect against a dispute – you must know the local formal requirements of the country where the service is being settled and not rely solely on the fact that something is "obviously visible in the paperwork." It is also worth remembering that even winning before the Court of Justice of the EU does not end the matter once and for all – it only creates a principle that you will likely have to fight for again with the local tax authorities.

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A TIR carnet with a customs stamp still doesn't count - Dark Histories #18