Insights
INTERNATIONAL TAX
VAT exemption despite breach of customs formalities
A breach of formalities does not lead to the inapplicability of VAT exemptions, according to the Court of Justice of the European Union (CJEU), provided there is no attempt at deception.
The Court of Justice of the European Union (CJEU) delivered a judgment in June 2025 that is relevant for companies with cross‑border activities. Specifically, it concerned the question of whether the VAT exemption on the re‑importation of goods also applies when the substantive conditions are met but certain customs formalities have been breached. The judgment now provides legal certainty on the classification of material and formal requirements.
The CJEU made clear in its ruling that the EU VAT exemption (EUSt) may not be refused solely because formalities have been breached, as long as the material conditions are satisfied. The Customs Code also contains provisions intended to protect bona‑fide participants in cases of mere negligent breaches of duty. The aim is to avoid excessive sanctions for minor formal errors.
Exception for deception
An exception, however, is an attempt at deception. Where a participant intentionally provides false information or seeks to deceive, the tax exemption is lost. In this way, the CJEU confirmed that the VAT exemption must not fail due to strict compliance with every formal requirement, provided there is no attempt at deception. Ensuring customs obligations is the task of customs law and should not affect VAT law.
Note: The CJEU judgment brings certain practical reliefs. It also has significance for Austria because of the harmonisation of VAT. Customs formal errors alone do not automatically result in the loss of the VAT exemption, as long as the material conditions are met. Nevertheless, customs formalities must be observed precisely to avoid complications, and assistance from us is advisable.
The CJEU made clear in its ruling that the EU VAT exemption (EUSt) may not be refused solely because formalities have been breached, as long as the material conditions are satisfied. The Customs Code also contains provisions intended to protect bona‑fide participants in cases of mere negligent breaches of duty. The aim is to avoid excessive sanctions for minor formal errors.
Exception for deception
An exception, however, is an attempt at deception. Where a participant intentionally provides false information or seeks to deceive, the tax exemption is lost. In this way, the CJEU confirmed that the VAT exemption must not fail due to strict compliance with every formal requirement, provided there is no attempt at deception. Ensuring customs obligations is the task of customs law and should not affect VAT law.
Note: The CJEU judgment brings certain practical reliefs. It also has significance for Austria because of the harmonisation of VAT. Customs formal errors alone do not automatically result in the loss of the VAT exemption, as long as the material conditions are met. Nevertheless, customs formalities must be observed precisely to avoid complications, and assistance from us is advisable.