The European Court of Justice ruled in the case of Fast Bunkering Klaipėda UAB that if an intermediary in a supply chain does not have knowledge or control of the goods being supplied until after physical delivery to the customer, then the supply is considered to be made directly from the original supplier to the customer. In this case, the intermediaries that ordered fuel from Fast Bunkering did not take physical possession, so the Court ruled that the supply of fuel was made directly from Fast Bunkering to the vessel operators. This narrow interpretation of what constitutes a "supply of goods" could impact VAT treatment in supply chains involving intermediaries without knowledge or control of goods before delivery. Businesses using intermediaries

1. European Court of Justice ruling in ‘Fast Bunkering’
Wider implications for VAT
treatment of intermediaries
involved in supply chains?
9 September 2015
Indirect Tax Alert
VAT – no. 547

2. Fast Bunkering / Implications for VAT treatment of intermediaries involved in supply chains?
2
Fast Bunkering
Wider implications for VAT treatment of
intermediaries involved in supply chains?
Executive summary
On 3 September 2015, the Court of Justice of the European Union (CJEU) released its judgment in the
Lithuanian case of Fast Bunkering Klaipėda UAB (C-526/13) (FBK).
The case concerns the scope of the exemption (or zero-rating) for the fuelling of vessels used for
navigation on the high seas (bunkering). The Lithuanian tax authorities in this case disallowed
application of the exemption to the supply of fuel by FBK, arguing that the sale by FBK was made to the
intermediaries in a chain and not directly to the operators of the vessels in which the fuel was directly
loaded by FBK. The CJEU agreed that under that interpretation of the facts, the exemption can indeed
not be applied. However, the CJEU continues by observing that it is conceivable – and thus for the
national court to ascertain – that the ‘VAT relevant supply’ (i.e. the transfer of the right to dispose of
the fuel as owner) is made at the moment of loading the vessel. If that is the case, the CJEU states, the
supply by FBK cannot be classified as a supply made to intermediaries acting in their own name,
because they cannot dispose of the fuel as owner. Instead, the supply by FBK should be regarded as
being made directly to the operators of vessel. On that basis, the supply by FBK may benefit from the
exemption.
Background
· FBK supplied fuel, within Lithuanian territorial waters to vessels used for navigation on the high
seas.
· When FBK received an order, the corresponding fuel was taken from the customs depot and
FBK carried out the necessary formalities. The fuel was then sold ‘free on board’ and FBK itself
loaded the fuel into the vessels’ fuel tanks.
· However, the orders were sent to FBK not by the ships’ operators but by intermediaries
established in various Member States, to which FBK invoiced the sales.
· The intermediaries acted in their own name, both with regard to FBK and to the operators of
the vessels, buying from the former and selling to the latter.
· The intermediaries did not take physical delivery of any fuel, their role being essentially to
centralise orders and to ensure payment of the fuel delivered. It was only once it was loaded
into the fuel tanks of the vessels that FBK was in a position to determine the actual amount
transferred and thus to draw up the corresponding invoice.
· Starting from the principle that the sale of the fuel at issue was exempt from VAT, in
accordance with Article 148(a) of the VAT Directive, FBK applied a zero rate of VAT to those
deliveries of fuel.
· The Tax Authorities disagreed with this VAT treatment arguing that since the fuel at issue was
not sold directly by FBK to the operators of the vessels, but to intermediaries acting in their
own name, the latter must be regarded as having sold the fuel to those operators.
Consequently, FBK could not apply the exemption, because that exemption applies only where
there is a supply of goods to the operators of seagoing vessels intended for international
carriage of passengers and/or goods.

3. Fast Bunkering / Implications for VAT treatment of intermediaries involved in supply chains?
3
Court of Justice of the EU – Fast Bunkering
In the case the CJEU held that, where the intermediary (party B) has no knowledge or control in what
has been supplied until after the physical delivery to a vessel, the supply of fuel was made by FB
directly to the customer, the vessel operator. To that end the CJEU points out that from the moment
the fuel is loaded into fuel tanks of a vessel, its operator is generally entitled actually to dispose of it as
if it was the owner. Although the ownership of the fuel was formally (i.e. according to the procedures
laid down by the applicable national law) transferred to the intermediaries and those intermediaries
were deemed to have acted in their own name, those intermediaries were at no time in a position to
dispose of the quantities supplied, since the power to dispose of the fuel belonged to the operators of
the vessels as soon as FBK had loaded it. This meant that the supply of fuel by FBK qualified for zero
rating under Article 148(a) of the VAT Directive.
Wider implications and actions?
The case may have wider implications than only for the bunkering business. It should be noted that the
CJEU does not indicate how the supply performed by the intermediary to the operator should be
qualified, (i.e. a supply of service or a supply of goods). However, the CJEU does seem to narrow the
notion of ‘supply of goods’ for VAT purposes in situations where an intermediary is involved in the
supply chain, in the case the intermediary does not have knowledge or control of what is ultimately
supplied to the customer until that (physical) supply actually takes place. In those cases, the CJEU
seems to suggest that no supply of goods takes place to and by the intermediary.
The judgment could have a potentially significant impact on supply chains where an intermediary does
not, in practice, acquire the right to dispose of the goods as owner (from a VAT perspective). This could
for example apply to certain call off and consignment arrangements and to principal structures
involving LRD’s (Limited Risk Distributors), particularly where flash title arrangements occur.
Since, the judgment is not clear on how the supply performed by the intermediary should be qualified,
and tax authorities of the Member states may take different views on this, businesses involved in
supply chains with intermediate parties, may wish to further consider the implications of this judgment.
We would be happy to discuss the possible consequences of this judgment for your specific situation. If
you think this could affect your business, please do not hesitate to contact one of our tax advisors
below or your regular (Indirect Tax) contact at EY.

4. Fast Bunkering / Implications for VAT treatment of intermediaries involved in supply chains?
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The above is based on our interpretation of
current tax legislation and case law
published to date. This Indirect Tax Alert
provides general information with no
pretence of completeness, and it is not a
tax advice.
Information
For more detailed information about the
matters discussed in this Alert, please
contact one of EY’s tax advisers listed
below.
Indirect Tax
Walter de Wit
Tel: +31 (0)88 407 1390
Email: walter.de.wit@nl.ey.com
Jeroen Scholten
Tel: +31 (0)88 407 1009
Email: jeroen.scholten@nl.ey.com
John Sloot
Tel: +31 (0)88 407 0426
Email: john.sloot@nl.ey.com
Daniel Kroesen
Tel: +31 (0)88 407 8361
Email: daniel.kroesen@nl.ey.com
Niels Tetteroo
Tel: +31(0)88 407 8385
Email: niels.tetteroo@nl.ey.com
Jeroen Bijl
Tel: +31 (0)88 407 1111
Email: jeroen.bijl@nl.ey.com
Sjoerd Harbers
Tel: +31 (0)88 407 3796
Email: sjoerd.harbers@nl.ey.com
Timo Bootsman
Tel: +31 (0)88 407 4876
Email: timo.bootsman@nl.ey.com
Annechien Kruijer
Tel: +31 (0)88 407 2738
Email: annechien.kruijer@nl.ey.com
Ruud Prinsen
Tel: +31 (0)88 407 6100
Email: ruud.prinsen@nl.ey.com
Pieter Tielemans
Tel: +31 (0)88 407 4555
Email: pieter.tielemans@nl.ey.com
EY
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