Storage of goods is not necessarily to be regarded as a service connected to an immovable property
The Court of Justice of the European Union (CJEU) recently published its judgment about the place where the supply of storage services has to be subject to VAT. It is especially interesting since the EU Member states had divergent interpretations about the place where such services should be located for VAT purposes. According to the CJEU, the supply of storage services takes place where the warehouse (or any other immovable property where goods are stored) is located, provided the recipient of the services is given a right to use all or part of expressly specific immovable property. If not, the storage services falls under the default B2B or B2C rules.
Legal context and Belgian administrative position
The VAT directive 112/2006/EC does actually not include expressis verbis a reference to the storage services as such. Article 47 relates to services that are “connected with immovable property”, and gives some examples of services covered by this notion, without making any specific reference to the storage of goods.
Contrary to the VAT directive, the Belgian VAT Code does refer to “the provision of areas for the storage of goods” in the list of the services to which this rule is applicable. The Belgian VAT Authorities did confirm that, according to them, the storage services are always subject to VAT where the warehouse is located, except in case of a complex supply where the storage cannot be regarded as the principal element of the said supply (see circular letter No 3/2010 of 7 January 2010).
In his answer to a parliamentary question, the Belgian Minister of Finance confirmed the approach of his administration. Due to the divergent opinions of the EU Member States, the matter was however brought to the attention of the advisory committee on value added tax (hereafter the ‘VAT Committee’). In the meantime, it was decided, by way of tolerance, that the default B2B rule (i.e. taxation where the recipient of the services is established) could be applied by the businesses (see parliamentary question No 486 of Mr Van Biesen, dated 12 March 2010).
Position of the VAT Committee
Almost unanimously (24 to 26 Member States), the VAT Committee was of the opinion that storage services in an immovable property where no specific part of the immovable property is assigned for the exclusive use of the customer shall not be covered by article 47 of the VAT Directive (see guidelines resulting from the 93rd meeting of the VAT Committee on 1 July 2010). In other words, the VAT Committee adopted a more restrictive approach than the Belgian authorities, considering that only those warehousing services where a specific part of an immovable property can be identified as being dedicated to the storage of goods by the customer (and by him only) should be considered to take place where the immovable property is located.
There was no official communication by the Belgian VAT Authorities further to the publication of the guidelines of the VAT Committee.
The judgment of the CJEU
The CJEU held that a storage service only has a sufficiently direct connection with immovable property, for the purposes of article 47 of the VAT Directive, where the recipient of that service is granted the right to use a specific property or a specific area of a property to store goods (see Case C-155/12 of 27 June 2013, RR Donnelley Global Turnkey Solutions Poland).
It has to be noted that the Court does not limit the application of article 47 to the situations where there is an exclusive right to use a specific property (or a part of it), contrary to the VAT Committee.
One has therefore to distinguish the following situations:
- The recipient of the storage services obtains the right to use a specific storage area: in such a case, the supply displays a specific connection with an immovable property and it takes place where the said immovable property is located;
- The recipient is merely to receive the goods back in the same condition: in that case, the immovable property is only a means of performing the supply and the default localization rules apply.
At the light of the CJEU judgment, the Belgian VAT Authorities should in principle update their position laid down in circular letter No 3/2010, as the localization of storage services where the immovable property is located should now be more limited. It is now clear that the storage of goods is not a priori to be regarded as a service connected to an immovable property.
The consequences of the judgment are of course not limited to Belgium only. For instance, Member States where it was considered that storage services were never connected to an immovable property will have to update their position as well. As a consequence, storage services that were until now subject to the reverse charge mechanism might now have to be charged with local VAT.
Now that there are clear guidelines in that respect (although there is still space for interpretation), it is the right moment for the businesses to review their storage agreements and determine where the services have to be subject to VAT. It has a significant impact as VAT could have to be charged or the reverse charge might be applicable depending on the situations.