VAT Quick Fixes 2020: Quick Fix #2
As mentioned before, the VAT quick fixes as agreed by the European Council will take effect as from January 1, 2020. These quick fixes will be outlined in more detail by our Sr. VAT Specialist Daniëlle van der Meulen - Idema in multiple blogs.
In her previous blog she described the quick fix relating to the harmonization and simplification of the rules for providing proof of intra-Community transport of goods. Read here the first blog "VAT Quick Fixes 2020: Quick fix #1".
In this 2nd blog, we go in further detail on a second quick fix that relates to the simplified treatment of call-off stock in the European Union.
The proposal provides for a simplified and uniform treatment for call-off stock arrangements, where a vendor transfers stock to a warehouse at the disposal of a known acquirer in another Member State. This change will have impact on ERP settings and businesses need to establish the consequences before 2020.
VAT treatment call-off stock
Often, suppliers hold stock at the premises of their customers in order to meet delivery times. However, this stock is still in the ownership of the suppliers and when located in another EU Member State, this stock could trigger a VAT registration obligation for the supplier in the EU Member State where the stock is actually located.
In order to avoid the foreign VAT registration, most EU Member States have implemented simplifications based on which the supply to the customer is not seen as a domestic supply at the time the customer takes the goods from the local stock but as a intra Community supply from the country where the goods were originally transported from. However, today not all Member States have implemented such a simplification and also the conditions for applying the simplification differ per Member State.
The new rules determine that the transfer of the goods without a title transfer is not considered as a deemed intra-Community transaction for the supplier, instead there is one intra-Community supply in the member state of departure and one intra-Community acquisition in the Member State of arrival at the time the customer takes the goods from the stock. There is a time limit of 12 months for the simplification to be applicable and the following conditions need to be met:
- Goods are dispatched or transported by a taxable person, or by a third party on his behalf, to another Member State with a view that those goods shall be supplied there, at a later stage and after arrival, to another taxable person who is entitled to take ownership of these goods in accordance with an existing agreement between both taxable persons;
- The taxable person dispatching or transporting the goods has not established his business nor has a fixed establishment in the Member State to which the goods are dispatched or transported;
- The taxable person to whom the goods are intended to be supplied is identified for VAT purposes in the Member State to which the goods are transported or dispatched and both his identity and the VAT identification number assigned to him by that Member State are known to the taxable person referred to in point (b) at the time when the dispatch or the transport begins;
- The taxable person dispatching or transporting the goods records the transfer of the goods in a register and includes the identity of the taxable person acquiring the goods and the VAT identification number assigned to him by the member state to which the goods are dispatched or transported in the recapitulative statement (EC Sales Listing).
If the conditions are not met, the supplier will still need to register for VAT in the Member State where the stock is held. At least this will provide for an uniform arrangement but can be more strict in some EU Member States that already apply a simplification today. As said the call off stock arrangement will need to be assessed in order to establish the VAT treatment as from January 1, 2020.
Read more about the quick fixes
Would you like to read more about the quick fixes? Find below Daniëlle's blogs about other quick fixes.
Quick fix #1: harmonization and simplification of the rules for providing proof of intra-Community transport of goods
Quick fix #3: conditions zero VAT rated intra-Community supply
Quick fix #4: new rule for chain transactions
Quick fix #5: quick fix on call-off stock and losses