On September 3, 2015, the Court of Justice of the European Union (CJEU) rendered its judgment in the "Fast Bunkering Klaipėda" UAB case (hereafter: FBK). This case revolved around the question whether the supply of fuel on board seagoing vessels is subject to the zero VAT rate if the fuel was sold and invoiced by an intermediary acting in its own name. The CJEU ruled in the FBK case that the zero VAT rate can, under specific conditions, apply to this supply.
In the Netherlands, the zero VAT rate can only be applied in the last link in the chain of supply of fuel for use in seagoing vessels. The last link concerns the legal supply to the operator of the seagoing vessel. Supplies occurring in earlier links in the chain are subject to the general 21% VAT rate. This is in line with an earlier judgment rendered by the CJEU in the Velker International Oil Company case.
Now, as a result of the FBK case, the zero VAT rate can be applied in specific situations, for example if the fuel is pumped directly into the seagoing vessel’s tanks. The CJEU concluded from this that the power to dispose of the quantity of fuel supplied was only transferred to the ships’ operators from that moment on, while the determination of the quantity of fuel supplied and the invoicing of the intermediary only takes place after this. According to the CJEU, under these circumstances there may be a direct VAT supply to the ships’ operators. The zero VAT rate can be applied to this supply.
In light of the FBK case, we believe that it is important to re-examine the VAT treatment of bunker fuel transactions. It depends on the circumstances of the case whether there is a VAT supply and whether the zero VAT rate can be applied. In our view, previous agreements with the Dutch tax authorities on the application of the zero VAT rate to earlier (legal) links of the chain will need to be updated. The outcome of the FBK case can have a – more general – effect on (legal) consecutive supplies between several parties, whereby the actual power of disposal is not transferred to each following link.
The tax advisors of Meijburg & Co’s Indirect Tax Group would be pleased to help you identify the potential implications of this judgment. Feel free to contact one of them or your regular advisor at Meijburg & Co for more information.