A new EU-wide VAT system to improve cross-border trade in selected areas, the so-called “quick fixes”
At the end of 2018, the European Commission approved a proposal for four “VAT quick fixes” which will be effective beginning 1 January 2020, with implications for businesses trading in international goods. Quick fixes were demanded by EU member states in order to improve the every-day functioning of the current VAT system. These solutions concern the following areas:
- Simplified call-off stock
- VAT identification number
- Chain transactions
- Proof of intra-community transportation of goods
Call-off stock
The first solution concerns VAT in the so-called call-off stock system when goods are transferred to a consignment warehouse in another EU member state to be delivered for a single pre-determined client. With the new simplification in place, call-off stock will mean a single supply in a member state where transfer of goods starts and a single acquisition of goods in a member state where transfer of goods ends, i.e. where the warehouse is located. This will prevent the supplier from having a separate transaction – transfer of goods into another member state with the obligation to register in the member state the acquisition of the goods. Call-off stock can only be applied if both parties involved in the transaction are taxable persons.
Under the current rules, this option is not obligatory for all member states, which creates ambiguity and obstacles to the application of simplification.
VAT identification number as a material requirement
A customer’s VAT identification number will become a material requirement for applying the zero VAT rate to the supply of goods to another EU member state. As of 1 January 2020, the zero VAT rate can only be applied if the customer communicated to the supplier his VAT ID under VIES which was assigned to him by a member state other than the member state in which the transfer of goods started. If the supplier fails to state a valid VAT identification number, it will not be possible to apply the zero VAT rate.
Chain transactions
The revised VAT Directive will contain specific provisions on chain transactions. These provisions will establish uniform criteria and legal improvements with the aim of improving and harmonising VAT rules for chain transactions. These criteria will be used to determine to which supply within the chain transaction the transfer of goods is attributable.
A legal presumption will be that in situations when one of the intermediary suppliers within the chain arranged the transfer or had it arranged, such transfer will be attributed to:
- the supply made to this intermediary supplier:
- if he has VAT identification in a member state other than the member state of supply,
- or if he communicated to his supplier the name of the member state where transfer of goods ends;
- the supply made to the following entity within the chain, i.e. supply made by the intermediary supplier if none of the conditions under a) have been met
These conditions can only be applied if all parties involved in the chain transaction are taxable persons registered for VAT purposes.
Proof of intra-community transportation of goods
As of 1 January 2020, the new proposal establishes an obligation to submit specific proof of transport of goods where the zero VAT rate is applied for cross-border supplies, where the supplier must prove that goods were actually dispatched to another member state. For the purposes of applying the zero VAT rate, the supplier must provide at least two evidentiary documents confirming the transfer of goods, e.g. a signed CMR document, official documents issued by a public authority (e.g. notary public) confirming the end of transport, a contract between the seller and the buyer or a purchase order stating the point of destination, etc.
If transport is arranged by the customer, the customer will be obligated to provide the supplier with a written declaration stating that goods have been transported.
