Services related to imports: narrowing VAT exemption

The amendment thereby excluded from the scope of the tax exemption any further services provided by subcontractors used by the freight forwarders. This is an important change because earlier all enterprises in the chain that provided services related to the importation of goods were exempt from VAT. 

What we can find in the background of the above is point (e) of Article 146 (1) of the Directive on the common system of value added tax (hereinafter: the VAT Directive), which was interpreted by the Court of Justice of the European Union in case no. C‑288/16. The exporter in the above case concluded a contract with a carrier enterprise, and the latter used the services of a subcontractor. The subcontractor invoiced its service as an exempt transaction, which was not accepted by the local (Latvian) tax authority, and the case was eventually referred to the Court of Justice. Ultimately, the Court interpreted the relevant point of the Directive in such a way that the tax exemption does not apply to a supply of services relating to a transaction consisting in the transport of goods to a third country, where those services are not provided directly to the consignor or the consignee of those goods.

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