In brief
In a series of judgments issued in 2025 (C 639/24 FLO VENEER, C 602/24 W. sp. z o.o. and C 125/24 Palmstråle), the Court of Justice of the European Union (CJEU) once again confirmed its established case law: where there is no tax fraud and the substantive conditions for a value-added tax (VAT) exemption are met, a taxpayer's failure to satisfy certain formal requirements cannot, in itself, deprive the taxpayer of the exemption provided for under the VAT Directive 2006/112/EC ("VAT Directive").
In more detail
1) Judgment C‑639/24 FLO VENEER — documentation for intra‑community supplies (ICS)
On 13 November 2025, the CJEU ruled, in FLO VENEER, on the rules for documenting ICS and the legal effect of Article 45a of Implementing Regulation 282/2011.
Under Article 138 of the VAT Directive, ICS are exempt from VAT (with the right to deduct, often functioning as a 0% rate), provided that the following conditions are met:
- Substantive conditions, including that:
(i) The goods were supplied to another taxable person or to a non-taxable legal person acting as such in a member state other than the one in which the dispatch or transport began.
(ii) The purchaser was identified for EU VAT in a member state other than that of dispatch and provided the supplier with that VAT identification number.
(iii) The supplier submitted recapitulative statements in accordance with EU law.
- Formal conditions, including documentary requirements evidencing that the goods were dispatched or transported to another member state
To harmonise divergent practices among member states, Regulation (EU) 2018/1912 introduced Article 45a to the Implementing Regulation 282/2011 (effective 1 January 2020), establishing the presumption that if the supplier holds specific combinations of documents, it is presumed that the goods were dispatched or transported to another member state. The regulation sets out two categories of documents and alternative combinations that can establish this presumption.
In some member states (e.g., Poland), Article 45a has been applied as a rebuttable presumption only, meaning other documents may also evidence transport, subject to free evaluation by the tax authorities. However, practices across EU states have not been uniform.
In FLO VENEER, the Croatian tax authorities denied the exemption solely because the supplier did not hold all documents listed in Article 45a, even though the cross‑border movement from Croatia to Slovenia was not disputed. The referring court asked whether the absence of Article 45a documentation automatically precludes the ICS exemption or whether the authorities must consider all available evidence, even if it falls outside Article 45a.
The CJEU stipulated as follows:
- Article 138(1) of the VAT Directive and Article 45a of the Implementing Regulation 282/2011 preclude refusing the ICS exemption solely because the specific Article 45a document set was not provided.
- National authorities are required to assess any evidence produced to determine whether the goods were dispatched/transported to another member state beyond the presumptions in Article 45a(1).
The court emphasised that formal requirements under Article 138 and Article 45a cannot undermine the exemption where substantive conditions are satisfied. The principle of fiscal neutrality requires granting the exemption if the material conditions are met, even if the taxpayer failed to comply with certain formalities.
There are only two exceptions where failure to meet a formality may justify refusal, listed as follows:
- Intentional participation in tax fraud that undermines the common VAT system
- Non‑compliance that prevents conclusive proof that the substantive conditions are satisfied
2) Judgment C‑602/24 W. sp. z o.o. — export exemption where goods left the EU
In W. sp. z o.o., the CJEU considered whether the export exemption (Article 146(1)(b) of the VAT Directive) applies where a supply was initially declared as ICS, but the goods were in fact taken by the purchaser outside the EU (in this case, from Poland to Belarus) without the supplier's knowledge.
The Polish authorities confirmed that the goods left Poland and the EU, but nonetheless denied the ICS treatment and treated the transaction as a domestic supply, arguing the ICS conditions were not met.
The referring court asked whether Article 146(1)(b) of VAT Directive should be interpreted to cover such a supply, provided the export is established and undebatable.
The CJEU answered in the affirmative: the export exemption does apply in these circumstances, provided the export is proven. The CJEU reiterated that member states may impose formal requirements, but such requirements must not alter the scope of the exemption provided by the directive. Refusing the exemption solely for lack of the "correct" export documentation — where the authorities are otherwise certain the goods were exported — would be disproportionate and go beyond what is necessary to ensure proper tax collection.
As in FLO VENEER, the court stressed the two narrow exceptions where failure to meet formalities can defeat the exemption: (i) the failure prevents conclusive proof that the substantive conditions are met; or (ii) the taxpayer intentionally participated in tax evasion.
3) Judgment C‑125/24 Palmstråle — re‑importation exemption (Article 143(1)(e) of the VAT Directive)
In C‑125/24 Palmstråle (judgment of 12 June 2025), the CJEU addressed Article 143(1)(e) of the VAT Directive on re‑importation of goods into the EU in the same state from which they were exported.
For this exemption to apply, EU law typically requires, among other things, that the goods be declared for release for free circulation and that the person applies for exemption from import duties. In this case, the taxpayer exported horses from Sweden to Norway and then re‑imported them into the EU across the Norway-Sweden border, without presenting the goods to customs. The Swedish customs administration assessed VAT on re‑importation, arguing that the taxpayer had not complied with the formal customs steps (declaration and application for exemption from import duties).
The national court asked whether failure to comply with such formal obligations precludes the VAT exemption for re‑importation in the same state.
The CJEU held that — absent any attempt at fraud — non‑compliance with formal obligations does not preclude the application of the VAT exemption under Article 143(1)(e) of VAT Directive for re‑importation in the same state. The court's reasoning further clarifies that an unintentional breach of formal requirements by an economic operator acting in good faith (e.g., failure to present the goods to customs or file the release for free circulation) does not, by itself, defeat the exemption.
4) Common thread across the three judgments — key takeaways for taxpayers
- Substance over form: Where no fraud is present and material conditions for a VAT exemption are satisfied, formal non‑compliance alone cannot justify refusal of the exemption.
- Narrow exceptions: Refusal due to formal defects is permissible only where: (i) the failure prevents conclusive proof of substantive compliance; or (ii) the taxpayer intentionally participates in tax fraud.
- Proportionality and fiscal neutrality: Formalities cannot be applied in a manner that distorts the scope of exemptions set by the VAT Directive or undermines fiscal neutrality where the tax outcome is substantively correct and objectively verifiable.
5) Practical implications
- Document pragmatically: Continue to collect robust documentation (including, where possible, Article 45a combinations), but note that alternative evidence can suffice if it reliably proves substantive conditions
- Audit strategy: In disputes focused solely on formal defects, emphasise objective proof of cross‑border movement/exportation/re‑importation and the absence of fraud
- Process design: Align internal procedures with Article 45a presumptions as a risk mitigation tool, without treating them as the exclusive route to exemption
- Litigation strategy: Where exemptions are denied solely for formal lapses, consider challenging decisions on grounds of proportionality, fiscal neutrality and CJEU case law