C-401/18 Herst

JUDGMENT OF THE COURT (Fourth Chamber)

23 April 2020 ( *1 )

(Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 2(1)(b) — Intra-Community acquisition of goods — Article 20 — Acquisition of the right to dispose of goods as owner — Chain of transactions for the purchase and resale of goods with a single intra-Community transport — Right to take decisions capable of affecting the legal situation of property — Transaction to which the transport should be ascribed — Transport under an excise duty suspension arrangement — Temporal effect of judgments by way of interpretation)

In Case C‑401/18,

REQUEST for a preliminary ruling under Article 267 TFEU from the Krajský soud v Praze (Regional Court, Prague, Czech Republic), made by decision of 6 June 2018, received at the Court on 18 June 2018, in the proceedings

Herst s.r.o.

v

Odvolací finanční ředitelství

THE COURT (Fourth Chamber),

composed of M. Vilaras, President of the Chamber, S. Rodin, D. Šváby, K. Jürimäe (Rapporteur) and N. Piçarra, Judges,

Advocate General: J. Kokott,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

Herst s.r.o., by J. Balada, advokát,

the Odvolací finanční ředitelství, by T. Rozehnal, acting as Agent,

the Czech Government, by M. Smolek, J. Vláčil and O. Serdula, acting as Agents,

the European Commission, by M. Salyková and L. Lozano Palacios, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 3 October 2019,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling primarily concerns the interpretation of Article 20 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’).

2The request has been made in proceedings between Herst s.r.o. and the Odvolací finanční ředitelství (Appellate Tax Directorate, Czech Republic; ‘the Tax Directorate’) concerning the deduction by Herst of value added tax (VAT) in respect of purchases of fuel transported by that company under an excise duty suspension arrangement from certain Member States to the Czech Republic.

Legal context

EU law

3Article 2(1)(a) and (b) of the VAT Directive provides as follows:

‘The following transactions shall be subject to VAT:

the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;

the intra-Community acquisition of goods for consideration within the territory of a Member State by:

a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such who is not eligible for the exemption for small enterprises provided for in Articles 282 to 292 and who is not covered by Articles 33 or 36;

…’

4As set out in Article 14(1) of that directive:

‘“Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.’

5The first paragraph of Article 20 of that directive is worded as follows:

‘“Intra-Community acquisition of goods” shall mean the acquisition of the right to dispose as owner of movable tangible property dispatched or transported to the person acquiring the goods, by or on behalf of the vendor or the person acquiring the goods, in a Member State other than that in which dispatch or transport of the goods began.’

6Article 138(1) of that directive states:

‘Member States shall exempt the supply of goods dispatched or transported to a destination outside their respective territory but within the Community, by or on behalf of the vendor or the person acquiring the goods, for another taxable person, or for a non-taxable legal person acting as such in a Member State other than that in which dispatch or transport of the goods began.’

Czech law

7As set out in Paragraph 2(1)(a) of Zákon č. 235/2004 Sb., o dani z přidané hodnoty (Law No 235/2004 on value added tax), in the version in force at the material time in the main proceedings:

‘The supply of goods for consideration by a taxable person as part of an economic activity where the place of performance is situated within the national territory shall be subject to tax.’

8Paragraph 13(1) of that law provides:

‘For the purposes of this law, “supply of goods” shall mean the transfer of the right to dispose of the goods as owner.’

9Paragraph 72(1)(a) of that law provides:

‘Persons liable for payment of VAT shall be entitled to a deduction of input VAT for supplies acquired which they use in connection with their economic activities for the purposes of carrying out taxable supplies of goods or services where the place of supply is the national territory.’

The main proceedings and the questions referred for a preliminary ruling

10Herst is a company established in the Czech Republic which operates in the road transport sector. It also owns a number of fuel filling stations.

11Following an inspection, the Czech tax authorities found that, during the periods from November 2010 to May 2013 and from July to August 2013, Herst had, using its own means and at its own expense, transported fuel from a number of Member States, namely Austria, Germany, Slovakia and Slovenia, to the Czech Republic.

12In transporting that fuel, Herst acted not only as carrier, but also as final purchaser, at the end of a chain of successive purchase and resale transactions.

13It is apparent from the information provided by the referring court that the fuel was initially purchased by an economic operator which is established and subject to VAT in the Czech Republic, and that Herst transported the fuel from the Member States cited in paragraph 11 of the present judgment to the Czech Republic. In each case, Herst carried out a single transport of fuel under an excise duty suspension arrangement, during the course of which the fuel was successively resold to other economic operators established in the Czech Republic. Herst was not paid to transport the fuel, but benefited from a mark-up representing the difference between the purchase price and sale price of the fuel.

14In addition, on the basis of a sale agreement between Herst and that economic operator, it was settled at the outset that Herst would be the legal owner of the fuel only once it was released for free circulation in the Czech Republic.

15Herst claimed to the Czech tax authorities that the acquisitions of fuel which it effected in the Czech Republic were internal acquisitions. The tax authorities, however, took the view that they were intra-Community acquisitions.

16According to the tax authorities, where there is a chain of transactions connected with a single intra-Community transport, that transport cannot be ascribed to one single transaction.

17Accordingly, the tax authorities took the view that the place of the acquisitions effected by Herst was not the Czech Republic, but the Member States where the fuel was located when it was loaded by Herst in order to be transported, using its own means and at its own expense, to the Czech Republic for the purposes of its own economic activity.

18By way of several additional payment demands, the Czech tax authorities refused Herst the right to deduct VAT from the acquisitions and imposed a penalty on Herst.

19Herst brought an appeal against the additional payment demands before the Tax Directorate, claiming that the place where the fuel was acquired was the Czech Republic since the fuel had been transported under an excise duty suspension arrangement and the goods were released for free circulation only after they were transported.

20The Tax Directorate, by its first decision, cancelled the additional payment demands relating to the period from July to August 2013 on the ground that Herst had submitted invoices showing that the other economic operators to which the fuel had been successively resold had acted as transport organisers. By its second decision, the Tax Directorate confirmed the additional payment demands relating to the period from February 2011 to February 2013. By a third decision, the Tax Directorate amended the additional payment demands relating to the periods from November 2010 to January 2011 and from March to May 2013. Herst received a tax adjustment in the sum of 145381137 Czech koruny (CZK) (approximately EUR 5664520) and a fine of CZK 30476215 (approximately EUR 1187450).

21Herst brought an action against the Tax Directorate’s second and third decisions before the referring court, the Krajský soud v Praze (Regional Court, Prague, Czech Republic).

22Before the referring court, Herst submits that each transport of fuel at issue in the main proceedings was made up of two separate transports. The first was an international transport between the Member State concerned and the Czech Republic during which Herst acted only as carrier. The second was a national transport after the fuel was released for free circulation in the Czech Republic, when Herst acquired the right freely to dispose of the goods.

23The referring court considers that, in the case before it, it is necessary to carry out an overall assessment of all of the circumstances of the case in order to identify which of the supplies at issue meets all of the conditions required for there to be an intra-Community supply. For a transaction to be classified as a ‘supply of goods’ within the meaning of Article 14(1) of the VAT Directive, the transaction must have had the effect of entitling a person to dispose, as owner, of the goods which are the subject of the transaction.

24As regards the situation at issue in the main proceedings, the referring court points out that the reason for the participation of other economic operators in such a complex chain of purchase and resale transactions was, besides economic considerations, the fact that Herst was not authorised to operate a tax warehouse or to receive goods under an excise duty suspension arrangement. That is why Herst needed to use an intermediary which operates such a warehouse, so that the intermediary could acquire the fuel in question in order to pay the excise duty and ensure that it was released for free circulation in the Czech Republic. The Tax Directorate submits that the involvement of a number of economic operators in the chain is evidence of VAT evasion.

25The referring court takes the view that, even if Herst had control over the fuel in question while it was being transported, it did not have the right to dispose of it as owner, within the meaning of the Court’s case-law, before the moment when, after it was transferred, the fuel was released for free circulation in the Czech Republic. Until that time, Herst could not supply the fuel to any person other than the person designated as the recipient in the accompanying documents.

26In the light of those considerations, the referring court, while acknowledging the significant factual similarities between the present case and that which gave rise to the judgment of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027), is nevertheless uncertain as to the moment at which, in the case pending before it, Herst acquired the right to dispose of the fuel ‘as owner’ within the meaning of the Court’s case-law.

27In particular, the referring court takes the view that, in the case in the main proceedings, only the economic operators to which the fuel was successively resold while it was being transported acquired the right of disposal. Herst, however, even though it had physical possession of the fuel while it was being transported, was not legally entitled to dispose of it. In that regard, Herst was required to comply with the instructions of the intermediary economic operators in the chain of purchase and resale transactions.

28The referring court considers, in essence, that there is doubt as to whether the fact that goods are transported under an excise duty suspension arrangement — in accordance with Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC (OJ 2009 L 9, p. 12) — affects the conditions governing the transfer of the right to dispose of the goods as owner, provided for by the VAT Directive. In that regard, the referring court points out that, where there is doubt as to the interpretation of a provision of national tax law in a dispute between the authorities and an individual, the case-law of the Ústavní soud České republiky (Constitutional Court, Czech Republic) has identified a constitutional principle under national law pursuant to which any doubt should be resolved in favour of the individual (the principle of ‘in dubio mitius’). In the present case, the referring court considers that, at the time of the facts in the main proceedings, the decisive legislation for the purposes of resolving the dispute before it cannot be described as clear, either at the level of national law or EU law, so that it is uncertain whether, if the interpretation adopted by the Court in this judgment is unfavourable to the taxpayer, the referring court must comply with it, regardless of the constitutional principle under national law. The referring court also wonders whether, in the light of that principle, the effects of the Court’s judgment should not be limited to legal situations which arise after it has been delivered.

29In those circumstances, the Krajský soud v Praze (Regional Court, Prague) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Must any taxable person be regarded as a taxable person within the meaning of Article 138(2)(b) of [the VAT Directive]? If not, to which taxable persons does that provision apply?

If the Court’s answer is that Article 138(2)(b) of the VAT Directive applies to a situation such as that in the main proceedings (that is, the acquirer of the products is a taxable person registered for tax), must that provision be interpreted as meaning that, where the dispatch or transport of those products takes place in accordance with the relevant provisions of [Directive 2008/118], a supply connected with a procedure under [Directive 2008/118] must be regarded as a supply entitled to exemption under that provision, even though the conditions for exemption under Article 138(1) of the VAT Directive are not otherwise satisfied, having regard to the assignment of the transport of goods to another transaction?

If the Court’s answer is that Article 138(2)(b) of the VAT Directive does not apply to a situation such as that in the main proceedings, is the fact that the goods are transported under an excise duty suspension arrangement decisive for deciding the question of which of several successive supplies a transport is to be ascribed to for the purposes of the right to exemption from VAT under Article 138(1) of the VAT Directive?

Is “the right to dispose of the goods as owner” within the meaning of the VAT Directive acquired by a taxable person who buys goods from another taxable person directly for a specific customer in order to fulfil an already existing order (identifying the type of goods, the quantity, place of origin and time of delivery) where he or she does not physically handle the goods him or herself since, in the context of concluding the contract of sale, his or her buyer agrees to arrange transport of the goods from their point of origin, so that he or she will only provide access to the requested goods via his or her suppliers and communicate the information necessary for acceptance of the goods (on his or her own behalf or on behalf of his or her sub-suppliers in the chain), and his or her profit from the transaction is the difference between the buying-in price and the selling price of such goods without the cost of transporting the goods being invoiced in the chain?

Does [Directive 2008/118] establish (for example, in Article 4(1), Article 17 or Article 19), either directly or indirectly through a limit on the effective handling of such goods, sufficient conditions for the transfer of the “right to dispose of the goods (that are subject to excise duty) as the owner” within the meaning of the VAT Directive, with the result that the taking over of the goods under an excise duty suspension arrangement by an authorised warehousekeeper or registered consignee should be treated as a supply of goods for VAT purposes?

In this context, when considering the determination of a supply which is linked to transport within a chain of supply of goods under an excise duty suspension arrangement with a single transport, is it necessary to regard a transport in the sense of the VAT Directive as commencing and closing in accordance with Article 20 of [Directive 2008/118]?

Does the principle of VAT neutrality or any other principle of EU law prevent application of the constitutional principle of in dubio mitius in national law, which obliges public authorities, where legal rules are ambiguous and objectively offer a number of possible interpretations, to choose the interpretation that benefits the person subject to the legal rule (here the taxable person for VAT)? Would the application of this principle be compatible with EU law at least if it were limited to situations where the relevant facts of the case preceded a binding interpretation of a disputed legal question by the Court, which has determined that another interpretation less favourable to the taxable entity is correct?

If it is possible to apply the principle of in dubio mitius:

Was it possible, in terms of the limits set by EU law at the time when the taxable transactions took place in this case (November 2010 to May 2013), to consider the question whether the legal concept of supply of goods or transport of goods has (or does not have) the same content both for the purposes of the VAT Directive and for the purposes of [Directive 2008/118] objectively as legally uncertain and offering two interpretations?’

Procedure before the Court

30By letter of 21 December 2018, the Court sent the referring court the judgment of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027) and asked whether, in the light of that judgment, it wished to maintain its request for a preliminary ruling and, if so, whether it intended to maintain all of the questions referred.

31By its response of 11 January 2019, the referring court stated that it was maintaining its request for a preliminary ruling, but that it was no longer seeking a response to the first, second, third, fifth and sixth questions.

32Accordingly, it is necessary to respond only to the fourth, seventh and eighth questions.

Consideration of the questions referred

The fourth question

33By its fourth question, the referring court wishes to know, in essence, whether Article 20 of the VAT Directive is to be interpreted as meaning that a taxable person which carries out an intra-Community transport of goods under an excise duty suspension arrangement with the intention of purchasing those goods for the purposes of its economic activity once they have been released for free circulation in the Member State of destination acquires the right to dispose of the goods as owner, within the meaning of that provision, even though, while they were being transported, the goods were successively resold to other economic operators.

34As a preliminary observation, it should be noted that the intra-Community acquisition of goods, within the meaning of Article 20 of the VAT Directive, is effected when the right to dispose of the goods as owner has been transferred to the purchaser, when the supplier establishes that those goods have been dispatched or transported to another Member State and when, as a result of that dispatch or that transport, they have physically left the territory of the Member State of origin (see, to that effect, judgments of 27 September 2007, Teleos and Others, C‑409/04, EU:C:2007:548, paragraphs 27 and 42, and of 19 December 2018, AREX CZ, C‑414/17, EU:C:2018:1027, paragraph 61).

35The aim of the national court in referring questions to the Court is to determine whether the first of those conditions is met in the present case, namely whether the right to dispose of goods as owner has been transferred to a taxable person such as Herst, which transports the goods under an excise duty suspension arrangement from one Member State to another, without being the owner of the goods at that stage, with the intention of purchasing the goods once they have been released for free circulation in the Member State of destination.

36First, it should be noted that, according to the Court’s case-law, the transfer of the right to dispose of goods as owner is not restricted to the transfer in accordance with the procedures prescribed by the applicable national law, but covers any transfer of tangible property by one party which empowers the other party actually to dispose of it as if he or she were its owner (see, to that effect, judgments of 3 June 2010, De Fruytier, C‑237/09, EU:C:2010:316, paragraph 24 and the case-law cited, and of 19 December 2018, AREX CZ, C‑414/17, EU:C:2018:1027, paragraph 75).

37As the Advocate General stated, in essence, in point 36 of her Opinion, the transfer of ownership under national law does not necessarily coincide with the transfer of the right to dispose of property as owner.

38Second, it should be noted that a transfer of the right to dispose of tangible property as owner does not require that the party to whom the property is transferred must physically possess it or that it must be physically transported to and/or received by that party (order of 15 July 2015, Itales, C‑123/14, not published, EU:C:2015:511, paragraph 36, and judgment of 19 December 2018, AREX CZ, C‑414/17, EU:C:2018:1027, paragraph 75).

39In that regard, a transaction for the transport of fuel, that is to say, the transportation of those goods from one Member State to another, cannot be considered as decisive for the purposes of determining whether the right to dispose of goods as owner has been transferred without there being any other circumstances which lead to the presumption that such a transfer took place on the date of the transport (see, to that effect, judgment of 19 December 2018, AREX CZ, C‑414/17, EU:C:2018:1027, paragraph 78).

40Moreover, the existence of a transfer of the right to dispose of tangible property as owner means that the party to whom the right is transferred has the right to take decisions which are capable of affecting the legal situation of the property concerned, including, inter alia, the decision to sell it.

41That is the case in a situation such as that in the main proceedings, in which, both before and while it was transported, the fuel was purchased and then resold by different economic operators which acted as owners.

42On that basis, having regard to the facts of the case in the main proceedings as set out in the request for a preliminary ruling, it is not inconceivable that the referring court found that, in the case before it, a number of successive transfers of the right to dispose of those goods as owner took place.

43In those circumstances, in order to give the referring court a response that is helpful for the purposes of resolving the dispute in the main proceedings, it is necessary to add that, according to the Court’s case-law concerning the interpretation of Article 138(1) of the VAT Directive, as regards transactions which form a chain of a number of successive supplies which gave rise to only a single intra-Community transport, the intra-Community transport can be ascribed to only one of the supplies, which, therefore, will alone be exempt under that provision, and that, in order to determine to which of the supplies the intra-Community transport must be ascribed, an overall assessment of all the circumstances of the individual case must be made. That case-law also applies to the assessment of transactions which, like those at issue in the main proceedings, form a chain of successive purchase and resale transactions in respect of goods subject to excise duty which gave rise to only a single intra-Community transport (see, to that effect, judgment of 19 December 2018, AREX CZ, C‑414/17, EU:C:2018:1027, paragraphs 70 and 71).

44As part of that overall assessment, it is necessary to determine, in particular, when the transfer to the final purchaser of the right to dispose of the goods as owner occurred. In the present case, if the transfer took place before the intra-Community transport, that transfer must be considered as a circumstance capable of causing that acquisition to be classified as an intra-Community acquisition (see, to that effect, judgment of 19 December 2018, AREX CZ, C‑414/17, EU:C:2018:1027, paragraphs 70 and 72).

45However, if the referring court were to find that a number of transfers of the right to dispose of the fuel in question occurred in favour of various intermediary operators in the chain of purchase and resale transactions while the fuel was being transported, applying the case-law of the Court recalled in the preceding paragraph would not enable the referring court to determine to which acquisitions in the chain the single transport of the fuel is to be ascribed.

46That case-law is based on a temporal criterion in accordance with which it is necessary to assess whether a transfer of the right to dispose of property as owner occurred before it was transported in order to determine to which of the acquisitions in the chain in question the single intra-Community transport is to be ascribed and which must, therefore, be classified as the intra-Community acquisition. In the present case, application of that temporal criterion could enable the referring court to determine whether the transport of fuel in question should be ascribed to the acquisition effected by the first economic operator in the chain of purchase and resale transactions before the single intra-Community transport of that fuel took place. The criteria will not apply, however, if successive transfers of the right to dispose of property as owner took place while the fuel was being transported.

47In those circumstances, to determine to which of the acquisitions at issue in the main proceedings the single intra-Community transport should be ascribed and which must, therefore, be classified as the intra-Community acquisition, it is for the referring court, in accordance with the case-law recalled in paragraph 43 of the present judgment, to carry out an overall assessment of all of the particular circumstances of the case in the main proceedings.

48As the Czech Republic submits in its written observations, the referring court will be able to take into account as part of its overall assessment the fact that Herst initiated the intra-Community transport at issue in the main proceedings for the purposes of carrying out its own economic activity, namely to purchase the fuel once it was released for free circulation in the Czech Republic and then resell it to its own customers, benefiting from a mark-up representing the difference between the purchase price and sale price of the fuel.

49As is apparent from the order for reference, Herst itself initiated the transport of the fuel by paying an advance invoice to the first economic operator in the chain of purchase and resale transactions before loading the fuel at the premises situated in the Member States of origin, transported the fuel using its own vehicles and did not invoice the cost of transporting it.

50In the context of that overall assessment, the fact that the transport of fuel in question was carried out under an excise duty suspension arrangement is not, however, a decisive factor in determining to which of the acquisitions that transport must be ascribed (see, by analogy, judgment of 19 December 2018, AREX CZ, C‑414/17, EU:C:2018:1027, paragraph 73).

51In the light of all the foregoing considerations, the answer to the fourth question is:

Article 20 of the VAT Directive must be interpreted as meaning that a taxable person which carries out a single intra-Community transport of goods under an excise duty suspension arrangement with the intention of purchasing those goods for the purposes of its economic activity once they have been released for free circulation in the Member State of destination acquires the right to dispose of the goods as owner, within the meaning of that provision, provided that it has the right to take decisions which are capable of affecting the legal situation of the goods, including, inter alia, the decision to sell them;

the fact that that taxable person had, at the outset, the intention to purchase those goods for the purposes of its economic activity once they have been released for free circulation in the Member State of destination is a circumstance which must be taken into account by the national court in its overall assessment of all of the particular circumstances of the case before it in order to determine to which of the successive acquisitions the intra-Community transport is to be ascribed.

The seventh question

52By its seventh question, the referring court asks, in essence, whether EU law precludes a national court that is confronted with a provision of national tax law, which has transposed a provision of the VAT Directive and is open to several interpretations, from adopting the interpretation that is most favourable to the taxable person, by relying on the constitutional principle of in dubio mitius under national law, even after the Court has held that such an interpretation is incompatible with EU law.

53In the present case, the referring court states, in essence, that Czech law is ambiguous as to the effect of the rules concerning the treatment of goods subject to excise duty on the determination of when the right to dispose of such goods as owner is transferred. According to the referring court, the Czech legislation which transposed the VAT Directive into national law leads taxable persons reasonably to assume that the fact that goods are transported to another Member State under an excise duty suspension arrangement affects the conditions which govern the transfer of the right to dispose of those goods as owner.

54In that regard, it should be recalled that, according to the Court’s settled case-law, the interpretation which, in the exercise of the jurisdiction conferred on it by Article 267 TFEU, the Court gives to a rule of EU law clarifies and defines the meaning and scope of that rule as it must be, or ought to have been, understood and applied from the date of its entry into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships which arose and were established before the judgment ruling on the request for interpretation, provided that in other respects the conditions for bringing a dispute relating to the application of that rule before the courts having jurisdiction are satisfied (judgments of 19 October 1995, Richardson, C‑137/94, EU:C:1995:342, paragraph 31, and of 13 December 2018, Hein, C‑385/17, EU:C:2018:1018, paragraph 56).

55As regards the question of whether EU law precludes the application of a constitutional principle under national law pursuant to which where, in a dispute between the authorities and an individual, there is doubt as to the interpretation of a provision of national tax law which transposed a provision of EU law, the authorities are to adopt the interpretation that is most favourable to the taxable person, it should be pointed out that the application of that principle, as contemplated by the referring court, would in practice have the effect of limiting the temporal effects of the interpretation given by the Court of the EU law which has been transposed by the provisions of national law since, as a result of that application, such an interpretation would not be applicable in the main proceedings (see, by analogy, judgments of 19 April 2016, DI, C‑441/14, EU:C:2016:278, paragraph 39, and of 13 December 2018, Hein, C‑385/17, EU:C:2018:1018, paragraph 61).

56In that regard, it should be noted that it is only quite exceptionally that the Court may, in application of the general principle of legal certainty inherent in the EU legal order, be moved to restrict, for any person concerned, the opportunity of relying on a provision which it has interpreted with a view to calling into question legal relationships established in good faith. Two essential criteria must be fulfilled before such a limitation can be imposed, namely that those concerned acted in good faith and that there is a risk of serious difficulties (judgment of 13 December 2018, Hein, C‑385/17, EU:C:2018:1018, paragraph 57 and the case-law cited).

57The Court has already held that restricting the temporal effects of such an interpretation may be allowed only in the actual judgment ruling upon the interpretation requested. That principle guarantees the equal treatment of the Member States and of other persons subject to EU law, under that law, fulfilling, at the same time, the requirements arising from the principle of legal certainty (see, to that effect, judgments of 6 March 2007, Meilicke and Others, C‑292/04, EU:C:2007:132, paragraph 37, and of 23 October 2012, Nelson and Others, C‑581/10 and C‑629/10, EU:C:2012:657, paragraph 91).

58In that regard, the Court has already held, in paragraph 76 of the judgment of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027), that although Directive 2008/118 lays down, inter alia, requirements applicable to the transport of goods under an excise duty suspension arrangement, it in no way affects the conditions for the transfer of the right to dispose of those goods as owner, which is provided for by the VAT Directive. In that judgment, the Court did not restrict the temporal effects of its interpretation of the VAT Directive.

59It follows that, in the present case, in applying national law, the referring court is required to take into consideration the whole body of rules of national law and to apply methods of interpretation that are recognised by those rules in order to interpret it, so far as possible, in the light of the wording and the purpose of the VAT Directive, as interpreted by the Court, in order to achieve the result sought by the directive and, consequently, to comply with the third paragraph of Article 288 TFEU (see, to that effect, judgment of 19 April 2016, DI, C‑441/14, EU:C:2016:278, paragraph 31 and the case-law cited).

60It follows from the above considerations that the response to the seventh question is that EU law precludes a national court that is confronted with a provision of national tax law, which has transposed a provision of the VAT Directive and is open to several interpretations, from adopting the interpretation that is most favourable to the taxable person by relying on the constitutional principle of in dubio mitius under national law, even after the Court has held that such an interpretation is incompatible with EU law.

The eighth question

61In view of the answer to the seventh question, there is no need to reply to the eighth question.

Costs

62Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Fourth Chamber) hereby rules:

Article 20 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a taxable person which carries out a single intra-Community transport of goods under an excise duty suspension arrangement, with the intention of purchasing those goods for the purposes of its economic activity once they have been released for free circulation in the Member State of destination, acquires the right to dispose of the goods as owner, within the meaning of that provision, provided that it has the right to take decisions which are capable of affecting the legal situation of the goods, including, inter alia, the decision to sell them; The fact that that taxable person had, at the outset, the intention to purchase those goods for the purposes of its economic activity once they have been released for free circulation in the Member State of destination is a circumstance which must be taken into account by the national court in its overall assessment of all of the particular circumstances of the case before it in order to determine to which of the successive acquisitions the intra-Community transport is to be ascribed.

EU law precludes a national court that is confronted with a provision of national tax law, which has transposed a provision of Directive 2006/112 and is open to several interpretations, from adopting the interpretation that is most favourable to the taxable person by relying on the constitutional principle of in dubio mitius under national law, even after the Court has held that such an interpretation is incompatible with EU law.

Signatures

[Signatures]

( *1 ) Language of the case: Czech.

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 3 October 2019 ¹

(Reference for a preliminary ruling — Common system of value added tax — Products subject to excise duty — Exemption of supplies of goods dispatched or transported within the European Union — Chain transaction — Ascribing transport to one supply within a supply chain — Transport of excise goods under a duty suspension arrangement — Primacy of EU law — Limits of an interpretation in conformity with EU law — Principle of in dubio mitius)

I. Introduction

1The present case once again concerns, in essence, a question of great practical importance: which transaction in a cross-border supply chain with multiple transactions is to be regarded as the exempt intra-Community supply if there is only one physical movement of goods. Because the applicant in the main proceedings is claiming deduction of input tax, it does not wish to have received an exempt intra-Community supply.

2Although the Court has already dealt with situations of this kind a number of times, ² in the view of the referring court clear criteria for determining the place of supply and ascribing the exemption to one of the supplies in a supply chain still cannot be inferred from the Court’s previous case-law. One crucial criterion in this connection is the transfer of the right of disposal. A particular feature of the present case in this regard is that the supplied fuel was transported under a duty suspension arrangement. The Court has, however, already ruled in its judgment in AREX that this is irrelevant for the purposes of the law on VAT. ³

3The proceedings will therefore give the Court another opportunity to clarify further the criteria for ascribing transport to a certain supply in a sales chain and to ensure greater legal certainty in this regard.

4Questions also arise in connection with the principle of in dubio mitius in the Czech Republic. According to that principle, where objectively there are a number of possible interpretations, a rule of tax law must always be interpreted in favour of the taxable person. If interpretations more favourable to the taxable person are not consistent with interpretations in conformity with EU law, the question arises of the relationship between national constitutional law and EU law.

II. Legal framework

A. EU law

5The framework in EU law is defined by the provisions of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’). ⁴

6Article 2 of the VAT Directive provides:

‘1. The following transactions shall be subject to VAT:

the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;

…’

7‘Supply of goods’ is defined in Article 14 of that directive as the transfer of the right to dispose of tangible property as owner.

8Article 32(1) of the VAT Directive regulates the place of supply and provides:

‘Where goods are dispatched or transported by the supplier, or by the customer, or by a third person, the place of supply shall be deemed to be the place where the goods are located at the time when dispatch or transport of the goods to the customer begins.’

9In Chapter 4 of Title IX, ‘Exemptions’, Article 138(1) of the VAT Directive provides:

‘Member States shall exempt the supply of goods dispatched or transported to a destination outside their respective territory but within the Community, by or on behalf of the vendor or the person acquiring the goods, for another taxable person, or for a non-taxable legal person acting as such in a Member State other than that in which dispatch or transport of the goods began.’

B. Czech law

10As far as the applicable Czech law is concerned, reference should be made in particular to Paragraph 64 of the Law on value added tax, ⁵ by which the Czech Republic transposed Article 138 of the VAT Directive. The right to deduct under Article 167 et seq. of the VAT Directive was transposed by Paragraph 72 et seq. of the Law on value added tax.

11Furthermore, the referring court mentions a constitutional principle of in dubio mitius (‘more leniently in case of doubt’). It aims to limit the impact of legal uncertainty on those affected by unclear legal provisions in cases where obligations are to be imposed on them by the State as the body responsible for the content and comprehensibility of the applicable rules.

12Consequently, in Czech tax law, where a regulation in public law may be interpreted in more than one way, the interpretation that does not interfere, or interferes as little as possible, with fundamental rights and freedoms should be chosen. The referring court considers that the legislation relevant to an assessment of the present case is not clear. The deduction should be allowed for that reason under national law on the basis of the principle of in dubio mitius.

III. Facts and reference for a preliminary ruling

13The applicant in the main proceedings (Herst, s. r. o) (Herst) is claiming a tax deduction before the national court. Herst carries on business inter alia in the field of road transport and owns several filling stations. Using its own vehicles, it transported fuel from other Member States (Austria, Germany, Slovakia, Slovenia) to the destination in the Czech Republic. The goods were sold on in many cases, but were transported only once (by Herst) to the final purchaser in the Czech Republic.

14In many cases Herst acted as a final purchaser of the fuel, which it purchased from suppliers registered for VAT purposes in the Czech Republic. Here Herst was at the end of the supply chain. In other cases it sold fuel on to its own customers. In those cases it was in the middle of a supply chain. Herst did not charge its suppliers for the cost of transport, but acquired the fuel at prices that did not include transport.

15Usually Herst placed an order with Czech suppliers which had acquired or were in the process of acquiring the fuel from a refinery in another Member State. The order stated the terminal at the refinery from which it would source the goods, the date and, as appropriate, the time of loading, the name of the driver, the registration number of the vehicle and trailer, the amount of fuel required and the place of unloading.

16After payment of the advance invoice, Herst was able to collect the goods based on instructions from the Czech suppliers. Herst collected the fuel directly from refinery terminals in other Member States. None of the contracting partners involved in the supply chain was present at the time of collection. Herst then transported the fuel to the Czech Republic. Customs clearance was carried out there after crossing the border. The fuel was released for free circulation in relation to excise duty and the applicant continued the journey to the place of unloading, which was its own filling stations or its customers’ filling stations.

17During a tax inspection for the period from November 2010 to May 2013 and July and August 2013, the tax authority found that the applicant had claimed a tax deduction in relation to the fuel supplies as if they were national supplies. According to the tax authority, however, the supply of goods did not take place in the Czech Republic, but in other Member States where the fuel was located at the time when its dispatch or transport began. It therefore constituted an exempt intra-Community supply to Herst, in respect of which Herst was not entitled to deduct VAT.

18Since the applicant collected the purchased goods itself in the other Member States and transported them at its own expense to the Czech Republic for the purpose of carrying out its economic activity, the tax authority considered the supply of goods between the Czech suppliers and the applicant as a supply involving the transport of goods. The tax authority therefore cancelled the incorrectly claimed tax deductions and reassessed the VAT payable by the applicant for the individual VAT periods checked by means of additional payment demands. At the same time, a penalty was imposed on Herst.

19The applicant lodged an appeal against the additional payment demands, in which it drew particular attention to the fact that the fuel was transported between Member States under an excise duty suspension arrangement. The transport took place under customs control. The goods were released for free circulation in a single Member State only after the transport was completed and were a taxable supply only then. The possibility that the applicant had already acquired rights over the goods at the place where transport began (that is, when abroad) was therefore excluded.

20In the contested decisions the tax authority confirmed the notices. Herst lodged an action against the contested decisions. The Krajský soud v Praze (Regional Court, Prague, Czech Republic) stayed the proceedings and referred a number of questions to the Court for a preliminary ruling pursuant to Article 267 TFEU. Following the Court’s judgment in AREX, ⁶ it reduced its reference for a preliminary ruling, at the request of the Court, to the following three questions:

Is ‘the right to dispose of the goods as owner’ within the meaning of the VAT Directive acquired by a taxable person who buys goods from another taxable person directly for a specific customer in order to fulfil an already existing order (identifying the type of goods, the quantity, place of origin and time of delivery) where he does not physically handle the goods himself since, in the context of concluding the contract of sale, his buyer agrees to arrange transport of the goods from their point of origin, so that he will only provide access to the requested goods via his suppliers and communicate the information necessary for acceptance of the goods (on his own behalf or on behalf of his sub-suppliers in the chain), and his profit from the transaction is the difference between the buying-in price and the selling price of such goods without the cost of transporting the goods being invoiced in the chain?

Does the principle of VAT neutrality or any other principle of EU law prevent application of the constitutional principle of in dubio mitius in national law, which obliges public authorities, where legal rules are ambiguous and objectively offer a number of possible interpretations, to choose the interpretation that benefits the person subject to the legal rule (here the taxable person for VAT)? Would the application of this principle be compatible with EU law at least if it were limited to situations where the relevant facts of the case preceded a binding interpretation of a disputed legal question by the Court of Justice of the European Union, which has determined that another interpretation less favourable to the taxable entity is correct?

If it is possible to apply the principle of in dubio mitius: Was it possible, in terms of the limits set by EU law at the time when the taxable transactions took place in this case (November 2010 to May 2013), to consider the question whether the legal concept of supply of goods or transport of goods has (or does not have) the same content both for the purposes of the VAT Directive and for the purposes of the Excise Duty Directive objectively as legally uncertain and offering two interpretations?’

21In the proceedings before the Court, Herst, the Czech Republic and the European Commission submitted written observations.

IV. Legal assessment

A. The first question

22The first question concerns Article 138 of the VAT Directive, which establishes the exemption of intra-Community supplies. The existence of such supplies determines whether Herst was rightly denied the right to deduct because, if the supply to Herst was exempt, it also would not be entitled to deduct VAT in this regard. On the contrary, Herst would have to initiate civil proceedings against its suppliers seeking the refund of the VAT wrongly paid.

1. Clarification of the first question

23The provisions of the VAT Directive regarding the cross-border dispatch of goods seek to realise the destination principle. According to this principle, it is to be ensured that, as a consumer tax, VAT is payable in the Member State of final consumption. Accordingly, in the case of a cross-border supply under Article 2(1)(b)(i) and Article 40 of the VAT Directive, the acquisition of goods is taxed in the country of destination. To avoid double taxation, however, the supply of those same goods must be previously exempt in the country of origin. ⁷ The intra-Community supply and the intra-Community acquisition are thus one and the same financial transaction. ⁸

24It becomes difficult, however, where there are multiple supplies (supply chain), but the goods are transported only once (from the first to the last link in the supply chain) (chain transaction). In that case, consideration must be given to multiple intra-Community supplies, although the exemption under Article 138 of the VAT Directive may be applied to only one supply. ⁹ The exempt intra-Community supply determines the place of the subsequent and preceding supplies in the supply chain. ¹⁰ That place is, pursuant to Article 32(1) of the VAT Directive, in the country of origin for all supplies before the exempt intra-Community supply and in the country of destination for all subsequent supplies. ¹¹ It is thus crucial to which of the supplies in the supply chain the cross-border transport can be ascribed.

25By the first question, the referring court asks about the criteria on which ascription can and must be based.

26The fact that Herst transported and dispatched the goods in a special customs procedure (the duty suspension arrangement) is, in principle, irrelevant in this regard. As the Court has already ruled in AREX, ¹² ascribing the VAT exemption to one of the supplies is purely a matter of VAT law, the constituent elements of which are not altered by the duty suspension arrangement. The question of which supply in a supply chain is to be regarded as the exempt intra-Community supply must therefore be determined on the basis of the general rules of VAT law.

27The referring court would also like to know whether the vendor (B) in the middle of the two-link supply chain (A — B — Herst) acquires the right of disposal even where it only provides its customer (here Herst) with access to the goods, which are still with A (its supplier), and Herst effects the subsequent transportation at its own expense.

28The crucial factor in this situation for the purposes of the VAT deduction in respect of Herst is, however, whether the place of the supply from B to Herst is in the Czech Republic. Only in that case would the supply be taxable and liable to tax there. The statement of Czech VAT in the invoice issued to Herst would then have been made correctly and Herst would be able to make a corresponding VAT deduction.

29Nevertheless, this presupposes that the first supply (A — B) is to be considered to be the exempt intra-Community supply. Only then is the place of the first supply under Article 32 of the VAT Directive in the Member State where transport begins, while the place of the subsequent supply (B — Herst) is in the Member State where transport ends (here the Czech Republic). ¹³

2. Ascribing the cross-border transport to one of the supplies

30It must therefore be clarified whether the cross-border transport can be ascribed to the preceding supply (A — B) despite the fact that Herst transported the goods directly from A to itself (or its customers).

31In the light of the Court’s case-law, it can also be stated that in the case of a sales chain with a single physical movement of goods only one of the supplies can be classified as an intra-Community and thus exempt supply. ¹⁴ Which of the supplies this is depends on the supply to which the cross-border transport is to be attributed. All other supplies in the sales chain which do not have this additional element of cross-border transport are thus to be regarded as domestic supplies.

(a) Significance of ownership and the right of disposal

32On the basis of the specific question asked by the referring court regarding the right of disposal of the intermediate undertaking (B) in a supply chain, it must first be reiterated, however, that that undertaking, if it forms part of a supply chain, has naturally also acquired the right of disposal for VAT purposes and transfers it to its customers (here Herst).

33It is absolutely clear from the Court’s case-law that in a supply chain with a single transport operation there are multiple supplies whose place of delivery is to be defined differently. ¹⁵ If, therefore, a supply under Article 14(1) of the VAT Directive is defined such that the customer were granted the right of disposal by the supplier, then the intermediate undertaking must also have acquired the right of disposal (for one ‘logical second’ at least). Otherwise, there would not be two supplies, but at most one supply and one service. It is thus sufficient for the intermediate undertaking (B) ‘only’ to provide its customer (Herst) with access to the goods to be procured, which it has previously acquired itself (but has not yet collected), in order to accept a transfer of the right of disposal from A to B and then from B to Herst.

34This finding (multiple supplies logically implies multiple transfers of the right of disposal) would also not be affected if national civil law were to permit direct acquisition of ownership from the first link (A) to the last link in a supply chain (here Herst). Article 14(1) of the VAT Directive specifically does not refer, as least in certain language versions, ¹⁶ to a person who has acquired the right of ownership, but states that there must be a transfer of the right to dispose of tangible property as an owner. Being able to dispose of property as an owner is not necessarily the same as having acquired ownership. First of all, there would not then be a right to dispose of property [in the German language version] ‘wie ein Eigentümer’ (‘like an owner’) but a right to dispose ‘als Eigentümer’ (‘qua owner’). Second, the concept of supply in VAT law would otherwise be dependent on national notions of ownership. The term ‘supply of goods’ does not, however, refer to the transfer of ownership in accordance with the forms prescribed by the applicable national law. ¹⁷

35Accordingly, it is clear that it is immaterial, in principle, whether and when a transfer of ownership in civil law is made to the intermediate undertaking (B) or to the last undertaking in the chain (Herst). As the Commission rightly states, formal ownership is not decisive. Acquisition of ownership may be significant at most as one indicator as part of an overall assessment because, in the vast majority of the cases, acquisition of the right of disposal accompanies acquisition of ownership.

36Based on this understanding, the meaning of the statement made by the Court regarding AREX’s potential acquisition of ownership under Czech law in the AREX judgment becomes clear. ¹⁸ The Court considered it to be irrelevant to the decision whether ownership was acquired at the time of loading of the fuel by the recipient carrier (AREX). Acquisition of ownership by the carrier is thus a very important indicator for a supply, but is not decisive in itself. ¹⁹

37Accordingly, the Court has held that it is not decisive in itself who is the owner of the goods under national law during transport or who has actual physical control of the goods. ²⁰ The Court has also ruled that it cannot be concluded from the mere fact that the goods have already been sold on that the transport is to be ascribed to the subsequent supply. ²¹ Simply selling on is thus irrelevant for the purposes of ascribing transport to one of the supplies.

38The right of disposal for the purposes of Article 14(1) of the VAT Directive is thus broader than ownership in civil law. However, like the latter, it is not precluded by legal restrictions. Legal restrictions on disposal during customs transit arrangements have as little effect on the customer’s acquisition of a right of disposal under Article 14(1) of the VAT Directive as existing rights, such as those of a lessee, have on the owner’s right of disposal.

39As an interim conclusion, it can thus be stated that the time of acquisition of ownership under national law is not decisive in ascribing the transport of one of the supplies under consideration and thus in determining the exempt intra-Community supply.

(b) Specifically ascribing the cross-border transport in a supply chain

40According to the Court’s case-law, the basis for ascribing the cross-border transport to a supply in a sales chain — in this case to one of the two supplies (A to B or B to Herst) — is an overall assessment of all the specific circumstances of the case. ²²

41In the case of chain transactions it must be borne in mind in particular by whom or on whose behalf transport is effected. ²³ In my view, the crucial factor is who bears the risk for the accidental loss of the goods during transport. ²⁴

42Accordingly, in a number of cases concerning a two-link sales chain (A — B — C), the Court has ruled that the transport can no longer be ascribed to the ‘first’ supply if the right to dispose of the goods as owner was transferred prior to transport to the final purchaser (C), that is, to the consignee of the ‘second’ supply (B — C). ²⁵

43The person who already disposes of goods ‘as owner’ will generally also bear the risk for their accidental loss, as the right to dispose of property as one sees fit, to destroy or use it, for example, is a typical expression of ownership. ²⁶ In its observations, the Commission also rightly refers in this regard to legal decision-making power over an object. The reverse side of this legal decision-making power, however, is that the holder bears the risk of accidental destruction of the object (of its legal decision-making power).

44The person who has to bear the risk of accidental loss can therefore also be considered to hold the right to dispose of the property as owner within the meaning of Article 14(1) of the VAT Directive. ²⁷

45It may well be, as the Czech Republic asserts, that, as a matter of law, the question of who bears the risk of accidental loss is not always easy to answer. Nevertheless, an answer is easier and leads to greater legal certainty than an overall assessment, where it is unclear what criteria are to be decisive and how they are to be weighted.

46However, inferences can be drawn most easily from the assumption of risk for the role of the person concerned in a supply chain. ²⁸ There is in fact a factual presumption that the person who supplies goods for another person and bears the risk for the accidental loss of those goods during the supply also acts in law as supplier (and not only as a carrier for another party). If, however, he is the supplier of the cross-border supply, then his supply must also be the exempt intra-Community supply.

47The fact that Herst assumed the transport costs in this case can thus be regarded merely as an indicator that Herst acted on its own behalf as a supplier. Because, as a rule, the purchaser always covers the transport costs financially (either as part of the price or additionally), that indicator is not, however, compelling. If the vendor (here B) is able to add transport costs to the price, but Herst bears the risk of accidental loss during transport, the cross-border transport is nevertheless to be ascribed to Herst.

48This holds regardless of who outwardly effects the transport in such cases (this was mostly the intermediate undertaking in the cases decided) ²⁹ and irrespective of the legal classification of the relationship of the person holding the power of disposal ³⁰ (that is to say, whether he is already the owner or merely has a right to transfer of ownership).

49In the main proceedings this means that the crucial factor is whether Herst had already acquired the power to dispose of the fuel before its cross-border transport such that it bore the risk for its accidental loss. It cannot be ruled out that this had already taken place with a transfer of ownership at the time of loading at the refinery terminal because the owner of goods generally also bears the risk of their loss. In that case, in a two-link supply chain the second supply (B — Herst) would be the exempt supply and Herst would not be entitled to deduct.

50If, on the other hand, the goods were sold on prior to transport and there was thus a three-link supply chain (A — B — Herst — D), the conclusion must be slightly modified. The last undertaking in the supply chain would not then transport the goods, but an intermediate undertaking. In that case, if Herst bears the risk of accidental loss during transport, its supply (that is, the third supply, Herst — D) would be the cross-border and thus the exempt supply. ³¹ In that case too, Herst would not be able to claim deduction of VAT from the preceding supply in the Czech Republic, but only in the country where transport of the goods began.

51It is nevertheless also conceivable that the time of the transfer of the risk (with or without concurrent acquisition of ownership under civil law) was different. The referring court thus states that, under the contracts normally used in the sector, acquisition of ownership, and thus possibly also transfer of risk to the transporting purchaser, occurs only when the goods subject to excise duty are released for free circulation.

52If that were the case, Herst would have acted merely as a carrier during the cross-border transport (from the refinery until release for consumption in the Czech Republic). ³² Although this would be rather unusual, it is not inconceivable. It is also permitted by Article 32(1) of the VAT Directive as, under that provision, goods can be transported by the supplier (here A and B), by the customer (here B and Herst) or by a third person (that is to say, a carrier, here Herst for A or for B). In that case, the transport for the purposes of Article 32(1) of the VAT Directive would be ascribed to the supply either from A to B or from B to Herst.

53The question whether the supply from B to Herst would then be made in the Czech Republic depends on whether the transport is to be ascribed to the first supply (A to B), which presupposes that the first undertaking (A) bore the risk of loss for the cross-border supply. That would be unusual as A allowed B to have the goods collected by a third person (here Herst), unknown to A. It is not clear prima facie why in such a situation A should also bear the risk of accidental loss after the time of collection.

54The Court cannot, however, make the assessment of who bore the risk of loss during the cross-border transport. On the contrary, this is a task for the referring court. ³³

3. Conclusion

55In summary, it must be stated that in ascribing the single cross-border transport to a certain supply in a supply chain, the crucial factor is who bears the risk for accidental loss during the cross-border transport of the goods. That supply is the exempt intra-Community supply, the place for which is where transport began. It is not decisive, on the other hand, who is the owner under civil law during the transport or whether the goods are transported under a special customs procedure.

B. The second and third questions

1. Admissibility and understanding of the two questions

56The second and third questions essentially concern the relationship between a directive and national law. Specifically, the constitutional principle of in dubio mitius in tax law requires that the interpretation of a national law that is favourable to the taxable person is always chosen. The condition for this is that those legal rules objectively offer a number of possible interpretations.

57It is not evident from the request for a preliminary ruling whether this actually comes into question in the present case. Curiously, the relevance of this principle was not mentioned in the request for a preliminary ruling in AREX, ³⁴ although the underlying situation and the majority of the questions were almost identical. This contradicts somewhat the referring court’s statement that objectively a number of possible interpretations are offered under national law.

58Nevertheless, the view taken by the Czech Republic that the request for a preliminary ruling is inadmissible on that basis cannot be accepted. According to the settled case-law of the Court, questions referred by a national court enjoy a presumption of relevance. That court is responsible for defining the factual and legislative context in which it refers its questions on the interpretation of EU law. The Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. ³⁵

59Although, as the Commission rightly states, there are doubts whether the principle of in dubio mitius applies in this case, a hypothetical situation cannot be presumed. Consequently, the Court should answer the underlying legal question.

60The Czech Republic has implemented the VAT Directive as far as possible. The concepts contained in the VAT Directive and their interpretation are sufficiently clear. However, ascribing the exemption to one of the supplies in the supply chain and, connected with this, determining the place of the other supplies are subject to a degree of legal uncertainty. This is shown by the many decisions in this regard which have now been made by the Court ³⁶ and also by the new Article 36a of the VAT Directive, which is to be implemented on 1 January 2020. ³⁷

61In the event that the national rules objectively permit a different way of ascribing the exemption to another supply by way of interpretation and this means that the place of performance in this case would objectively be in the Czech Republic, the question arises as to the relationship between the constitutional principle of in dubio mitius and the VAT Directive. It will then have to be determined whether the more favourable interpretation of national law provided for under national constitutional law can prevent an interpretation of national law which is less favourable to the taxable person, but is in conformity with EU law.

2. No question of the primacy of EU law

62At first sight, one might be inclined to answer this question in the negative on the basis of the primacy of EU law. ³⁸ However, this would overlook the fact that the question raised by the referring court — in so far as it actually arises — does not concern the primacy of EU law. This is because the primacy of EU law constitutes a conflict rule ³⁹ which concerns the relationship between two provisions which are in themselves applicable. That is not the case here.

63The VAT Directive is not a regulation, but a directive, which, under Article 288 TFEU, is addressed only to the Member State. In principle, it is not therefore directly applicable. An EU directive is directly applicable, according to the Court’s case-law, ⁴⁰ only if it appears, so far as its subject matter is concerned, to be unconditional and sufficiently precise.

64However, as the Court has expressly stated, such a directive cannot of itself impose obligations on an individual and cannot therefore be relied on as such against such a person before a national court. ⁴¹ Thus, obligations arising from a directive must be transposed into national law in order to be capable of being relied on directly against an individual.

65The Court has created an effective instrument for the enforcement of EU law in favour of the individual. Accordingly, the Member State is not able to rely on failure to transpose EU law or incorrect transposition against an individual. The State is prevented from taking advantage of its own failure to comply with EU law. ⁴² If the interpretation of national law in conformity with EU law is the interpretation more favourable to the taxable person, both the national principle of in dubio mitius and a possible direct application of the directive achieve the same result.

66The principle of in dubio mitius can thus have autonomous effect in the field of VAT law only if the interpretation possible at national level leads to a more favourable result for the taxable person than is prescribed by the directive. In such cases, however, the direct applicability of the VAT Directive is precluded. Consequently, there is no conflict between two rules that are applicable in themselves, such that the question of the primacy of one of the rules does not arise.

3. Divergence between the directive and national law

67On the contrary, there is a classic case of a divergence between a directive and national law. This divergence is to be resolved in principle by the requirement for national law to be interpreted in conformity with EU law. ⁴³ It permits national courts, for the matters within their jurisdiction, to ensure the full effectiveness of EU law when they determine the disputes before them.

68The principle that national law must be interpreted in conformity with EU law requires national courts to do whatever lies within their jurisdiction, taking the whole body of domestic law into consideration and applying the interpretative methods recognised by domestic law, with a view to ensuring that the directive in question is fully effective and achieving an outcome consistent with the objective pursued by it. ⁴⁴

4. Limits of an interpretation in conformity with EU law

69However, the requirement of an interpretation in conformity with EU law is not unlimited. On the contrary, the obligation on a national court to refer to the content of a directive when interpreting and applying the relevant rules of domestic law is limited by general principles of law, particularly those of legal certainty and non-retroactivity, and that obligation cannot serve as the basis for an interpretation of national law contra legem. ⁴⁵

70According to the referring court, the general legal principle of in dubio mitius fosters legal certainty in the Czech Republic because it regulates the impact of legal uncertainty arising from an unclear law clearly and to the detriment of the party causing the uncertainty. As a principle of Czech law, it thus constitutes a limit on interpretation in conformity with EU law in the same way as the limits of the wording of a rule.

71It is evident from the abovementioned case-law that not all national law can be interpreted in conformity with EU law. Furthermore, EU law requires the Member States, under certain circumstances, to make good damage caused if the result prescribed by a directive cannot be achieved by way of interpretation. ⁴⁶

72If, therefore, it is not possible to interpret national law in conformity with EU law, national law is contrary to EU law but applicable in favour of the taxable person. This situation can arise not only if the wording of national legislation is clearly conflicting, but also where legal principles — in this case the constitutional principle of in dubio mitius — reduce the possibilities for interpretation to just one possible interpretation. It is, however, for the referring court to make this determination.

73Such consequences of a directive not being directly applicable, which are regrettable from the point of view of EU law, also arise in other areas of law. ⁴⁷ It is then for the Member State to comply with its implementation obligations and to organise its national law (clearly) in conformity with EU law if it wishes to avoid infringement proceedings being brought by the Commission.

5. Conclusion

74Neither the principle of VAT neutrality nor any other principle of EU law preclude the application of conflicting national law, provided that the individual does not or cannot himself rely directly on the VAT Directive and it is also not possible to interpret national law in conformity with EU law (here based on the principle of in dubio mitius).

C. The third question

75By the third question, the referring court would like to know whether — if it is ‘possible to apply’ the principle of in dubio mitius — the legal concept of supply of goods or transport of goods, which both have (or do not have) the same content for the purposes of the VAT Directive and for the purposes of the Excise Duty Directive, can be considered as objectively uncertain and offering two interpretations.

76As has already been stated above, in determining the place of supply under Article 32 of the VAT Directive, the concepts of VAT law alone are decisive, and they cannot be regarded as objectively uncertain. A degree of legal uncertainty applies ‘only’ in ascribing the exemption to one of the supplies in the supply chain and, connected with this, in determining the place of the other supplies.

77However, this does not preclude a different interpretation of the formulations of national law in their own context (scheme, drafting history, spirit and purpose) notwithstanding an identical wording. The principle of in dubio mitius relates only to national law, with the result that the only decisive factor in this connection is whether the national rules objectively offer a number of possible interpretations.

78This remains a question of national law which can be answered only by the referring court.

V. Conclusion

Conclusion

79I therefore propose that the Court answer the questions referred by the Krajský soud v Praze (Regional Court, Prague, Czech Republic) as follows:

In ascribing the single cross-border transport to a certain supply in a supply chain, the crucial factor is who bears the risk for accidental loss during the cross-border transport of the goods. That supply is the exempt intra-Community supply, the place for which is where transport began.

Neither the principle of VAT neutrality nor any other principle of EU law preclude the application of the constitutional principle of in dubio mitius in national law, which obliges public authorities, where legal rules are ambiguous and objectively offer a number of possible interpretations, to choose the interpretation that benefits the person subject to the legal rule (here the taxable person for VAT).

¹ Original language: German.

² The Court has already dealt with the question of ascribing transport to a supply with regard to an ‘intra-Community chain transaction’ in a number of cases; see, for example, judgments of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027); of 21 February 2018, Kreuzmayr (C‑628/16, EU:C:2018:84); of 26 July 2017, Toridas (C‑386/16, EU:C:2017:599); of 27 September 2012, VSTR (C‑587/10, EU:C:2012:592); of 16 December 2010, Euro Tyre Holding (C‑430/09, EU:C:2010:786); and of 6 April 2006, EMAG Handel Eder (C‑245/04, EU:C:2006:232).

³ Judgment of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027).

⁴ OJ 2006 L 347, p. 1.

⁵ Zákon č. 235/2004 Sb., o dani z přidané hodnoty (Law No 235/2004 on value added tax).

⁶ Judgment of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027).

⁷ See my Opinions in AREX CZ (C‑414/17, EU:C:2018:624, point 28) and EMAG Handel Eder (C‑245/04, EU:C:2005:675, points 23 to 25).

⁸ Judgments of 26 July 2017, Toridas (C‑386/16, EU:C:2017:599, paragraph 31); of 18 November 2010, X (C‑84/09, EU:C:2010:693, paragraph 28); and of 27 September 2007, Teleos and Others (C‑409/04, EU:C:2007:548, paragraphs 23 and 24).

⁹ Judgments of 26 July 2017, Toridas (C‑386/16, EU:C:2017:599, paragraph 34); and of 6 April 2006, EMAG Handel Eder (C‑245/04, EU:C:2006:232, paragraph 45), and my Opinions in AREX CZ (C‑414/17, EU:C:2018:624, point 55) and EMAG Handel Eder (C‑245/04, EU:C:2005:675, point 35).

¹⁰ Judgment of 6 April 2006, EMAG Handel Eder (C‑245/04, EU:C:2006:232, paragraph 50).

¹¹ Judgment of 6 April 2006, EMAG Handel Eder (C‑245/04, EU:C:2006:232, paragraph 50).

¹² Judgment of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027, paragraph 66 et seq. and 73 and 74); see also my Opinion in AREX CZ (C‑414/17, EU:C:2018:624, point 69 et seq.).

¹³ Judgment of 6 April 2006, EMAG Handel Eder (C‑245/04, EU:C:2006:232, paragraphs 40, 42 and 50).

¹⁴ Judgments of 26 July 2017, Toridas (C‑386/16, EU:C:2017:599, paragraph 34); and of 6 April 2006, EMAG Handel Eder (C‑245/04, EU:C:2006:232, paragraph 45); and my Opinions in AREX CZ (C‑414/17, EU:C:2018:624, point 55) and EMAG Handel Eder (C‑245/04, EU:C:2005:675, point 35).

¹⁵ See judgments of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027, paragraph 70); of 26 July 2017, Toridas (C‑386/16, EU:C:2017:599, paragraphs 34 to 36); and of 6 April 2006, EMAG Handel Eder (C‑245/04, EU:C:2006:232, paragraph 50).

¹⁶ Thus, according to the German and French language versions, ‘wie ein Eigentümer’ and ‘comme un propriétaire’ respectively, whereas in the English and Estonian language versions (‘as owner’ and ‘“Kaubatarne”on materiaalse vara omanikuna käsutamise õiguse üleminek’ respectively).

¹⁷ Judgments of 2 July 2015, NLB Leasing (C‑209/14, EU:C:2015:440, paragraph 29); of 16 February 2012, Eon Aset Menidjmunt (C‑118/11, EU:C:2012:97, paragraph 39); of 6 February 2003, Auto Lease Holland (C‑185/01, EU:C:2003:73, paragraph 32); and of 8 February 1990, Shipping and Forwarding Enterprise Safe (C‑320/88, EU:C:1990:61, paragraphs 7 and 8).

¹⁸ See judgment of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027, paragraph 78).

¹⁹ See, to that effect, judgments of 16 December 2010, Euro Tyre Holding (C‑430/09, EU:C:2010:786, paragraph 40), and of 27 September 2012, VSTR (C‑587/10, EU:C:2012:592, paragraph 32 et seq.), where transfer of ownership played no role at all and regard was had instead to notification of the intention to sell on.

²⁰ It is not disputed that, for example, although a carrier currently has actual physical control of goods, it does not act as a participating supplier, but as a carrier for a supplier. See, to that effect, judgment of 16 December 2010, Euro Tyre Holding (C‑430/09, EU:C:2010:786, paragraph 40).

²¹ Judgment of 27 September 2012, VSTR (C‑587/10, EU:C:2012:592, paragraphs 36 and 37).

²² Judgments of 21 February 2018, Kreuzmayr (C‑628/16, EU:C:2018:84, paragraph 32); of 26 July 2017, Toridas (C‑386/16, EU:C:2017:599, paragraph 35); of 27 September 2012, VSTR (C‑587/10, EU:C:2012:592, paragraph 32); and of 16 December 2010, Euro Tyre Holding (C‑430/09, EU:C:2010:786, paragraph 27); and my Opinions in AREX CZ (C‑414/17, EU:C:2018:624, point 58 et seq.) and EMAG Handel Eder (C‑245/04, EU:C:2005:675, point 56).

²³ See also judgment of 16 December 2010, Euro Tyre Holding (C‑430/09, EU:C:2010:786, end of paragraph 40).

²⁴ See my Opinion in AREX CZ (C‑414/17, EU:C:2018:624, point 60).

²⁵ See judgments of 26 July 2017, Toridas (C‑386/16, EU:C:2017:599, paragraph 36); of 27 September 2012, VSTR (C‑587/10, EU:C:2012:592, paragraph 34); and of 16 December 2010, Euro Tyre Holding (C‑430/09, EU:C:2010:786, paragraph 33).

²⁶ See my Opinions in AREX CZ (C‑414/17, EU:C:2018:624, point 62) and EMAG Handel Eder (C‑245/04, EU:C:2005:675, point 58).

²⁷ See also my Opinion in AREX CZ (C‑414/17, EU:C:2018:624, point 62).

²⁸ See also my Opinion in AREX CZ (C‑414/17, EU:C:2018:624, point 73).

²⁹ The carrier or forwarder does not hold the power to dispose of the goods as owner; see judgments of 20 June 2018, Enteco Baltic (C‑108/17, EU:C:2018:473, paragraph 88), and of 3 June 2010, De Fruytier (C‑237/09, EU:C:2010:316, paragraph 25).

³⁰ See, to that effect, judgments of 20 June 2018, Enteco Baltic (C‑108/17, EU:C:2018:473, paragraph 86), and of 3 June 2010, De Fruytier (C‑237/09, EU:C:2010:316, paragraph 24).

³¹ The EU legislature attempts to introduce new rules with greater legal certainty to govern this situation (transport by the intermediate undertaking) with the aid of a fiction in the new Article 36a of the VAT Directive (OJ 2018 L 311, p. 3), which is to be implemented on 1 January 2020.

³² Similarly, judgment of 20 June 2018, Enteco Baltic (C‑108/17, EU:C:2018:473, paragraph 89).

³³ See also, to that effect, judgments of 16 December 2010, Euro Tyre Holding (C‑430/09, EU:C:2010:786, paragraph 45), and of 27 September 2012, VSTR (C‑587/10, EU:C:2012:592, paragraph 37).

³⁴ Judgment of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027).

³⁵ Judgments of 17 September 2014, Cruz & Companhia (C‑341/13, EU:C:2014:2230, paragraph 32); of 30 April 2014, Pfleger and Others (C‑390/12, EU:C:2014:281, paragraph 26); of 22 June 2010, Melki and Abdeli (C‑188/10 and C‑189/10, EU:C:2010:363, paragraph 27); and of 22 January 2002, Canal Satélite Digital (C‑390/99, EU:C:2002:34, paragraph 19).

³⁶ Judgments of 19 December 2018, AREX CZ (C‑414/17, EU:C:2018:1027); of 21 February 2018, Kreuzmayr (C‑628/16, EU:C:2018:84); of 26 July 2017, Toridas (C‑386/16, EU:C:2017:599); of 27 September 2012, VSTR (C‑587/10, EU:C:2012:592); of 16 December 2010, Euro Tyre Holding (C‑430/09, EU:C:2010:786); and of 6 April 2006, EMAG Handel Eder (C‑245/04, EU:C:2006:232).

³⁷ Council Directive (EU) 2018/1910 of 4 December 2018 amending Directive 2006/112/EC as regards the harmonisation and simplification of certain rules in the value added tax system for the taxation of trade between Member States (OJ 2018 L 311, p. 3).

³⁸ Judgments of 9 March 1978, Simmenthal (106/77, EU:C:1978:49, paragraphs 17/18); of 17 December 1970, Internationale Handelsgesellschaft (11/70, EU:C:1970:114, paragraph 3); and of 15 July 1964, Costa (6/64, EU:C:1964:66, p. 1270).

³⁹ Primacy is thus rightly characterised as a conflict resolution rule in Marc Desens, Auslegungskonkurrenzen im europäischen Mehrebenensystem, EuGRZ 2011, p. 211 (212), Harald Schaumburg in Schaumburg/Englisch, Europäisches Steuerrecht, Cologne 2015, paragraph 4.19 et seq., Claus Dieter Classen/Martin Nettesheim in Oppermann/Classen/Nettesheim, Europarecht, Munich, 8th edition 2018, § 10, paragraph 33.

⁴⁰ Judgments of 22 November 2017, Cussens and Others (C‑251/16, EU:C:2017:881, paragraph 26); of 16 July 2015, Larentia + Minerva and Marenave Schiffahrt (C‑108/14 and C‑109/14, EU:C:2015:496 paragraphs 48 and 49); of 12 December 2013, Portgás (C‑425/12, EU:C:2013:829, paragraph 18); of 24 January 2012, Dominguez (C‑282/10, EU:C:2012:33, paragraph 33); and of 19 January 1982, Becker (8/81, EU:C:1982:7, paragraph 25).

⁴¹ Judgments of 22 November 2017, Cussens and Others (C‑251/16, EU:C:2017:881, paragraph 26); of 12 December 2013, Portgás (C‑425/12, EU:C:2013:829, paragraph 22); of 24 January 2012, Dominguez (C‑282/10, EU:C:2012:33, paragraphs 37 and 38); of 14 July 1994, Faccini Dori (C‑91/92, EU:C:1994:292, paragraph 20); and of 26 February 1986, Marshall (152/84, EU:C:1986:84, paragraph 48).

⁴² See expressly, to that effect, judgments of 24 January 2012, Dominguez (C‑282/10, EU:C:2012:33, paragraph 38); of 14 July 1994, Faccini Dori (C‑91/92, EU:C:1994:292, paragraphs 22 and 23); and of 26 February 1986, Marshall (152/84, EU:C:1986:84, paragraph 49).

⁴³ Judgments of 4 July 2006, Adeneler and Others (C‑212/04, EU:C:2006:443, paragraphs 109 and 110); of 16 June 2005, Pupino (C‑105/03, EU:C:2005:386, paragraphs 44 and 47); of 5 October 2004, Pfeiffer and Others (C‑397/01 to C‑403/01, EU:C:2004:584, paragraph 114); of 14 July 1994, Faccini Dori (C‑91/92, EU:C:1994:292, paragraph 26); and of 13 November 1990, Marleasing (C‑106/89, EU:C:1990:395, paragraph 8).

⁴⁴ Judgments of 24 January 2012, Dominguez (C‑282/10, EU:C:2012:33, paragraph 24); of 4 July 2006, Adeneler and Others (C‑212/04, EU:C:2006:443, paragraph 111); and of 5 October 2004, Pfeiffer and Others (C‑397/01 to C‑403/01, EU:C:2004:584, paragraphs 115, 116, 118 and 119).

⁴⁵ Judgments of 24 January 2012, Dominguez (C‑282/10, EU:C:2012:33, paragraph 25); of 4 July 2006, Adeneler and Others (C‑212/04, EU:C:2006:443, paragraph 110); and of 16 June 2005, Pupino (C‑105/03, EU:C:2005:386, paragraphs 44 and 47).

⁴⁶ See, to that effect, judgments of 24 January 2012, Dominguez (C‑282/10, EU:C:2012:33, paragraphs 42 and 43); of 4 July 2006, Adeneler and Others (C‑212/04, EU:C:2006:443, paragraph 112); and of 14 July 1994, Faccini Dori (C‑91/92, EU:C:1994:292, paragraph 27).

⁴⁷ See, for example, judgments of 16 July 2015, Larentia + Minerva and Marenave Schiffahrt (C‑108/14 and C‑109/14, EU:C:2015:496, paragraph 52); of 12 December 2013, Portgás (C‑425/12, EU:C:2013:829, paragraph 31, in so far as the body was not sufficiently closely related to the State); and of 14 July 1994, Faccini Dori (C‑91/92, EU:C:1994:292, paragraph 30).