Tax

Harmonization and simplification of certain VAT rules applicable to intracommunity supplies of goods, applicable as of 1 January 2020. Council Directive (EU) 2018/1910

Written on 20 Sep 2019

Council Directive (EU) 2018/1910 amends Directive 2006/112/EC as regards the harmonisation and simplification of certain rules in the Value Added Tax (VAT) system. These amendments concern call-off stock arrangements, chain transactions and conditions to apply zero-rated intracommunity supplies.

Call-off stock

Call-off stocks arise when suppliers transfer stock from one Member State (MS) to another. The goods remain the property of the supplier until picked up by the customer, since these transfers are carried out in order to maintain a stock of goods in the MS of arrival.

The supplier, therefore, carries out a deemed intracommunity supply in its own MS and a deemed intracommunity acquisition in the MS of arrival. As soon as the customer takes delivery of the goods, the supplier performs a domestic supply in the MS of arrival. Under current rules, these arrangements give rise to compliance and formality requirements, for instance the supplier should be registered for VAT purposes in the MS of arrival.

The Directive, therefore, aims at simplifying and harmonizing the formalities with which suppliers have to comply.

Under the new rules, the supplier will perform a direct intracommunity supply in its own MS and the customer a direct intracommunity acquisition in the MS of arrival. These intracommunity transfers will take place as soon as the customer takes delivery of the goods. The supplier will, therefore, not be required to register for VAT purposes in the MS of arrival of the goods.

In order to be eligible for this simplification, the supplier must not be already registered in the MS of arrival. Moreover, the supplier must control and keep a register of goods delivered under this “call-off stock” scheme. An important condition of this simplification procedure is that the customer must take delivery of the goods within 12 months of the arrival of such goods in the corresponding MS.

Should the transfer not take place within this 12-month deadline or should the parties not comply with any other requirements, the simplification scheme will not apply and the initial transfer of goods will be treated as a deemed intracommunity supply and a deemed acquisition.

Chain transactions

Chain transactions refer to consecutive supplies of goods involving several taxable persons but only one transport. Currently, there is controversy regarding the transfer to which the transport should be assigned, in order to consider such transfer as a zero-rated intracommunity supply.

Under the Directive, the first transfer/sale in the chain will be eligible for the zero-rate, provided the final destination of the goods is known and that the acquirer (intermediary operator) does not provide the initial supplier with a VAT identification number of the MS of departure of the goods. Should the intermediary be registered in the MS of departure of the goods, the second transfer will then be treated as the intracommunity supply.

The Directive defines an intermediary operator as “a supplier within the chain other than the first supplier in the chain who dispatches or transports the goods either himself or through a third party acting on his behalf”.

Requirements for zero-VAT intracommunity supplies

In order for intracommunity supplies to be zero-rated, a customer’s valid VAT identification number from another MS will be needed (Spanish VAT law already imposes this requirement, whereas the VAT Directive did not until now). Moreover, the transaction will need to be recorded in the corresponding intracommunity transactions recapitulative statements. The amendment is directed at treating the use of a valid VAT identification number that the customer communicated to the supplier as a material requirement for applying the zero VAT rate.

Transposal of the Directive into domestic law

MS are required to adopt and publish, before 31 December 2019, the required legislation to transpose the measures included in the Directive. These will enter into force as from 1 January 2020.