European Union – Logisticians and warehousekeepers: which VAT to apply to warehousing services

Discover the VAT rules for complex storage services (services related to immovable property or services following the general rule). These rules are derived from European case law, R Donnelley Poland, whose conclusions have been incorporated into Implementing Regulation 282/2011.

Summary of the R Donnelley Case (C-155/12)

The company RR Donnelley, based in Poland, offered complex warehousing services to companies established in other European Union countries, which included:

– Receipt of goods in the warehouse

– Placement in appropriate storage spaces

– Storage in Poland

– Packaging

– Delivery, unloading, and loading

RR Donnelley submitted a request to the Polish tax administration for an individual opinion on determining the location of its complex warehousing services. The company believed that this constituted a service taxable at the place of establishment of the customer, according to the general rule. In this case, it would invoice its clients without VAT, and the clients would be required to declare the VAT due in their own country through the reverse charge mechanism.

On the contrary, the Polish tax administration considered that warehousing services constituted services related to immovable property. Therefore, RR Donnelley, which stored the goods in Poland, should have invoiced its clients with Polish VAT.

Following an internal contentious procedure, the Supreme Administrative Court of Poland (Naczelny Sąd Administracyjny) decided to stay the proceedings in order to refer the following interpretative question to the Court of Justice of the European Union:

“Does a supply of complex storage services, which comprises admission of the goods to a warehouse, placing them on the appropriate storage shelves, storing the goods, packaging them, issuing them, unloading and loading them, and, in the case of certain customers, repackaging materials supplied in collective packaging into individual sets, constitute a supply of services connected with immovable property within the terms of that article?”

The CJEU held that only storage services granting recipients the right to use all or part of a specifically designated immovable property constitute services connected with immovable property, taxable at the location of the warehouse. In the absence of this specific right, VAT is due according to the general rule at the place of establishment of the taxable customer.

Integration of conclusions on storage services attached to a building

The conclusions of the RR Donnelley case law on complex storage services were incorporated into Council Implementing Regulation 282/2011 of 15 March 2011 in Article 31a, which has, since 1 January 2017, provided that:

“Services connected with immovable property, as referred to in Article 47 of Directive 2006/112/EC, shall include only those services which have a sufficiently direct connection with the immovable property. Such services shall include, sample services meeting the said criteria will include: the leasing or letting of immovable property (other than thus provided advertising services), including the storage of goods for which a specific part of the property is assigned for the exclusive use of the customer“

These conclusions were subject to comments from the European Commission in an explanatory note dated 26 October 2015, dedicated to the VAT rules applicable to services connected to immovable property.

The note provides clarification on allocation for the exclusive use of the lessee.

It specifies that the space in which goods are stored must be identified and known to the lessee and assigned exclusively to their needs for the entire duration of the contract.

In practice, cases where storage services qualify as services connected to immovable property are rather rare.

Want to learn more? Check out our blog dedicated to services connected to immovable property: here.

Consequences for Carriers / Logistics Providers

Service does not meet the conditions to be considered as related to immovable property

These services then fall under the general rule and are taxable at the place of establishment of the customer for taxable clients (businesses registered for VAT).

Example 1: A French logistics provider stores goods in its warehouse in France for companies established in France, Germany, and the United States. Its clients do not have any dedicated space or any right to use part of the property.

The storage services follow the general rule and are taxable at the place of establishment of the customer in B2B transactions.

The French logistics provider must charge French VAT to its French clients and must issue invoices without VAT to its foreign clients. French clients can deduct the VAT through their French VAT return, provided they meet the conditions for VAT deduction. For foreign clients, they must self-assess (declare and deduct within the limits of their deduction rights) VAT on their local VAT returns.

Example 2: A Luxembourg logistics provider, contracted by client companies established in Italy, Germany, Romania, and the United States, outsources the management and storage of goods to another logistics provider with warehouses in Germany and Italy. Neither the Luxembourg logistics provider nor its end clients have any dedicated space or specific usage rights to a part of the property.

In this case, the services follow the general VAT rule for B2B services, and VAT is due in the country of establishment of the customer.

Thus, the Luxembourg logistics provider receives invoices from its foreign subcontractors without VAT and must self-assess VAT due in Luxembourg on the services received from abroad. It must charge Luxembourg VAT to its clients established in Luxembourg and issue invoices without VAT for its foreign clients, who must self-assess (declare and deduct within the limits of their deduction rights) VAT on their local VAT returns.

Service meets the conditions to be considered as related to immovable property

Services connected to immovable property are taxable at the location of the property. The logistics provider must charge VAT based on the country where the warehouse is located, regardless of the client’s VAT status or place of establishment.

Example 3: A French logistics provider stores goods in its warehouse in France for clients, companies established in France, Germany, and the United States. The clients have explicitly dedicated spaces in the warehouse for storing their goods.

The French logistics provider must charge French VAT to its clients, regardless of their place of establishment.

Example 4: A Luxembourg logistics provider, contracted by client companies established in Italy, Germany, Romania, and the United States, outsources the management and storage of goods to another logistics provider with warehouses in Germany and Italy. The clients have explicitly dedicated spaces in the warehouses for storing their goods.

The storage services are taxable at the location of the warehouses, in Germany and Italy. In principle, this means that the Luxembourg logistics provider receives invoices from its subcontractors with VAT from each country where the warehouse is located. It must charge local VAT to its clients and, according to the applicable rules in each country, must register for VAT and submit VAT returns in the storage countries to declare and remit the collected VAT. In certain cases, the company may be able to invoice without VAT if the warehouse country has implemented the reverse charge rule under Article 194 of Directive 2006/112/EC, and if all conditions for this derogation are met.

“As a warehouse keeper/logistics provider, it is important to make foreign companies aware of the need to register for VAT in the country of storage to declare the operations they conduct.”

Consequences for companies

Service does not meet the conditions to be considered as related to immovable property

If the warehouse keeper/logistics provider is located in the same country as the company, local VAT is charged. Provided that the formal and substantive conditions are met, this VAT is deductible on the client’s VAT return.

Example 5: A French company uses a French warehouse keeper. Regardless of the storage location—France, Germany, or Italy—French VAT is applied. Provided that the conditions for VAT deduction are met, the client can deduct this VAT on their French VAT return.

If the warehouse keeper/logistics provider is located in a foreign country, regardless of the actual storage location, they must invoice without VAT. It is up to the company receiving the services to self-assess VAT in its own country.

Example 6: A Luxembourg company uses a foreign warehouse keeper. Regardless of the storage location—France, Germany, or Italy—the subcontractor will not apply VAT. It is up to the Luxembourg company to self-assess the VAT due in Luxembourg.

Service meets the conditions to be considered as related to immovable property

If the storage warehouse is located in the client’s country of establishment, then the service provider (logistics provider, warehouse keeper) will charge local VAT if it is also established in the same country. Provided that the formal and substantive conditions are met, this VAT will be deductible on the client’s VAT return.

Example 7: A French company uses a warehouse keeper whose warehouse is located in France. French VAT is charged to the company. This VAT is deductible on the client’s French VAT return, provided that the conditions for VAT deduction are met.

If the warehouse is located in a foreign country, then foreign VAT is charged. This VAT is not deductible on the VAT return in the country of residence. However, this VAT is deductible in the country of storage if the client has a VAT registration there. If applicable, a digital refund procedure under Directive 2008/9 can be considered in the country of residence if the eligibility conditions are met.

Example 8: A Luxembourg company uses a warehouse keeper for the storage of goods in Latvia. The warehouse keeper must apply Latvian VAT on the invoice. If the Luxembourg company has a VAT registration in Latvia, it can deduct this VAT on its Latvian VAT return; otherwise, it can recover this VAT via a digital refund procedure under Directive 2008/9 in Luxembourg, provided that the eligibility conditions are met.

“Are you storing goods in a foreign country? It is very likely that you are required to register for VAT in the country of storage to declare your operations”.

How to Ensure VAT Compliance?

Step 1 – Contract Analysis

Begin by analyzing the commercial documents and contracts concluded with the logistics provider. This helps determine whether it is a service related to immovable property, taxable at the location of the property, or a service that falls under the general rule, taxable at the place of the customer (in B2B).

Step 2 – VAT Compliance

Once the contracts are analyzed, it is necessary to determine, based on the nature of the service, the storage location, the type of client, and the client’s place of establishment, the applicable VAT rules, and any possible reporting requirements that may need to be implemented abroad, for both the logistics provider and the client.

Step 3 – Regularization

Calculate the past implications and establish reporting mechanisms to regularize past VAT if necessary.

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– Diagnostic of your VAT organization, your flows, and the methods for preserving proof of exempt operations, as well as assessing the impact of new VAT rules;

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– Coaching/training;

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