The court denied a direct delivery
resulting in an intra-community supply because there was no
binding purchase contract in place at the beginning of the
transport of the stock.
Case background
A Dutch BV delivered screens to a
German customer. The screens were brought to a call-off stock
on the customer’s site. The BV remained the owner
of the consignment stock until such time as the
BV’s customer transmitted its weekly list of the
consignment stock sold in the previous week. The purchase price
charged by the BV was only set on the day on which the customer
resold the consignment stock. The BV was obliged to leave the
consignment stock in the warehouse for at least three weeks.
After this period, the customer was entitled to return the
whole stock or part thereof to the BV.
Court’s rational
Since there are no special
regulations for consignment stocks in Germany, the Federal
Fiscal Court decided the case using the general VAT principles.
Therefore, the court considered whether section 3, paragraph 6
of the German VAT Act could be applied and if the place of
delivery was consequently in the Netherlands, from where the
goods were transported to the warehouse. Since section 3,
paragraph 6 of the German VAT Act requires shipment to the
customer, it must be clear who the customer is at the beginning
of the shipment. The German Federal Fiscal Court decided that,
at the beginning of the shipment, a binding purchase contract
is therefore crucial.
However, according to the agreement between the parties in the
case, the customer was not obliged to buy the goods brought to
the warehouse. Moreover, the customer was not obliged to make a
payment until the goods were taken out of stock. According to
the German Federal Fiscal Court, a binding purchase contract
was not concluded until after the storage period (or, to be
more precise, when the goods were removed from the warehouse).
The place of delivery was, therefore, in Germany and not in the
Netherlands, as it would have been in the case of a direct
delivery.
Apparently, the German Federal
Fiscal Court’s decision was influenced by the fact
that the goods were in the books of the supplier and not the
customer until their removal from the stock.
This is surprising because entering the goods in the balance
sheet is only a result of the person being the beneficial
owner. It is not an indication of the VAT treatment, even if
the right to dispose of the goods and the economic ownership
have certain similarities.
All in all, the questions of how binding a purchase contract
needs to be and which conditions need to be fulfilled remain
open. German civil law cannot be relevant because cross-border
transactions are to be assessed, which means that eventually,
the civil law of the ship-from country also needs to be
considered. This might differ from German civil law.