The Logistics Service Providers’ Pre-tax Deduction of Import VAT Is Still a Pipe Dream and the Recent ECJ Decision Hasn’t Changed That: Or Has It?

Abstract

According to general opinion in Germany and further EU Member States, all questions regarding pre-tax deduction of import VAT by a logistics service provider (‘LSP’) have been settled: there is no right to deduction without power of disposition at the time of the import. As LSPs typically become debtor of the import VAT, but do not dispose of the imported goods, they have been excluded from pre-tax deduction in the past. Besides causing costs for involved companies in millions of Euro, this clearly violates the principle of neutrality as one of the core principles of the EU VAT directive, still no steps have been taken to rectify the situation. The requirement of power of disposition is mainly derived from the cost formula test the Court of Justice of the European Union ECJ has been traditionally applying to VAT cases. In its recent Weindel-order of 10 October 2020, C- 621/19, the ECJ has – for the first time – amended the cost formula with regard to import VAT specific aspects. This article investigates whether in the light of Weindel, power of disposition can still be made an obligatory requirement of the right to pre-tax deduction of import VAT. Value added tax, VAT, pre-tax deduction, indirect representative, logistics service provider, cost-formula test, principle of neutrality of VAT, Council Directive 2006/112/EC, VAT-directive, upstream import cost, power of disposition