The importance & challenge of managing the Proof of Intra-community supply of goods
During a VAT audit, auditors are often focused on the “proof of Intra-Community supply”. For obvious reasons!
The EU has a VAT gap of around € 130 billion in missed VAT revenues. Auditors therefore focus on the fact that income due is collected and that evidence (POD) is provided for intra-Community supply of goods with a zero VAT rate.
With the EU VAT Quick Fixes 2020, some harmonization and limitations are defined on what is “sufficient proof”.
Is this your responsibility within your organization? Then the challenge remains to ensure the proof is collected, stored and available during an audit.
Two ways of arranging the transport
When you arrange the transport yourself, two non-conflicting independent documents need to be provided. When your customer arranges the transport, both the difficulty to collect the documents as well as the amount of documents increases. In this case three documents are required to substantiate zero VAT rate intra-Community delivery.
Why is it so important to collect this information?
Collecting this information is key to avoid a VAT claim, interest and penalties over historic intra-Community deliveries. If this is not managed correctly, risks can be astronomical! For example, imagine an audit over 3 years, having a manufacturing plant in Hungary (27%), with sales to all EU Member States. These implications will bankrupt any company!
So, I would like to challenge you to think of the following: Select a random intra-Community supply from 3 years ago. Collect a CMR and one alternative document (e.g. bank payment for transport of goods). Did you succeed to find it? If this turns out to be a challenge, then you better get prepared!
Pincvision POD Service
The best way to prepare yourself is to collect and store the proof of delivery documents as part of a control mechanism in your business process. Gladly, you can count on us! We offer you a “best in class” POD Service on how to collect and store the proof of delivery documents.
We tie the collection process of POD’s into the VAT reporting process by collecting the documents from your LSP’s and your customers. I hope that I triggered you to decide to tackle your challenges. These risks levels can’t go unmanaged if you want to keep running a sustainable and continuous business!
More about the VAT Quick Fixes 2020
Read more about the VAT Quick Fixes 2020 in the previous blog of my colleague Daniëlle van der Meulen - Idema (Sr. VAT Specialist) 'Quick fix #1: harmonization and simplification of the rules for providing proof of intra-Community transport of goods'.