On 2 March 2023 the Court of Justice of the EU (ECJ) provided its ruling in the case Nec plus Ultra Cosmetics (ECJ C-664/21). This ruling outlines the importance of sufficient substantiation in relation to intra-EU movement of goods to apply the 0% VAT rate for intra-Community supplies. In this update, we will further elaborate on the case and discuss our view.

Facts and circumstances

The case relates to a supply of cosmetics by NEC Plus Ultra Cosmetics AG (‘NEC’), a Swiss supplier, to customers in both Croatia and Romania. The goods were transported from a warehouse in Slovenia to another Member State. The parties agree that this Croatian customer, or a third party on behalf of the Croatian customer, will collect and transport these goods to the Member State of destination (ex works). NEC applied the VAT exemption in respect of the intra-Community supply. 

The Slovenian tax authorities initiated an audit in 2017 and requested for evidence that the goods are dispatched to another EU Member State. This is, amongst others, relevant to substantiate the correct application of the 0% VAT rate for intra-Community supplies. By decision of 14 February 2019, the Slovenian tax authorities requested NEC to submit all the documentation relating to the supplies to the Croatian customer. By the time NEC provided the documents substantiating the 0% VAT rate, theSlovenian tax authorities already drafted a report that resulted in a decision to impose an additional VAT assessment. The delay was caused because the office responsible for these supplies ceased its activities. 

The application of the VAT exemption was refused because the Slovenian tax authorities stated that NEC had failed to demonstrate, by the invoices and transport documents, that the goods had actually been transported to another Member State. NEC disagreed that the evidence that was provided after the report was drafted was not taken into account. 


The ECJ has ruled that national legislation which does not take into account new evidence that is provided after a tax audit but prior to imposing the additional VAT assessment is not precluded, provided that the principles of equivalence and effectiveness are respected. 


This ruling outlines again that it is important for businesses to keep ownership of their supply chain and make sure an audit trail is available substantiating the movement of goods prior to any tax audits. Especially, in case of ex works supplies, this could be challenging as the supplier is dependent on the customer. 

If you have any questions relating to this newsletter, please contact your RSM advisor