By Richard McGlashan, Equiom Tax Services
The European Union (EU) is introducing new rules collectively referred to as ‘VAT quick fixes’ with effect from 1 January 2020. These quick fixes relate to harmonising the rules on cross-border trade within the EU, and are summarised below.
Proof of transport of intra-EU supplies of goods
The existing rules state that supplies of goods between two EU Member States are zero-rated for VAT in the Member State of the supplier. The recipient is responsible for accounting for VAT on the supply.
However, from 1 January 2020 the supplier will have to possess two separate forms of evidence from two independent parties that the goods have left the Member State.
If the acquirer is responsible for transport of the goods – likely to be the case where they are delivered to, for example, a yacht which then removes the goods from the Member State – the acquirer must also provide the vendor with a written statement that the goods have been transported by the acquirer by the 10th of the month following the date of supply.
If any of these conditions cannot be met, the supplier will have to charge VAT on the goods, which may be then difficult or impossible for the recipient to recover.
Zero-rating of intra-EU supplies of goods
In order for a supplier to zero-rate a supply of goods, they must obtain the customer’s valid EU VAT registration number, and must declare the sale in their EC Sales List (sometimes called a Recapitulative Declaration). This is just a clarification of the existing rules and should already be being followed in all cases. Customers can provide suppliers with their VAT registration number, which they can verify using the EU’s VIES system. It is the supplier’s responsibility to declare the sale correctly in their EC Sales List.
Call-off stock is where the supplier transfers goods to another Member State for an identified acquirer, without transferring ownership of the goods at the point of the delivery.
Currently, suppliers engaging in such an arrangement must VAT register in the Member State to which the call-off stock is transferred. This will no longer be the case; under new rules the recipient will be required to account for the VAT in the Member State of destination.
A chain transaction is one that involves successive supplies of goods, with only a single intra-EU movement of those goods. Where three parties are involved, this is referred to as triangulation. Currently, it is unclear as to which link in the chain can be ascribed VAT zero-rating as an intra-EU supply.
The new rules state that where the goods are transported directly from the first supplier to the last customer in the chain, the zero-rated intra-EU supply shall be ascribed to the supply from the first supplier to the intermediary. However, where the intermediary is registered for VAT in the Member State from which the goods are dispatched and is responsible for the transport, the intra-EU supply shall be ascribed to the supply by the intermediary to the final consumer.
For more information on the above topics contact our experienced VAT Manager Richard McGlashan.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.