Quick fix #1: harmonization and simplification of the rules for providing proof of intra-Community transport of goods
Quick fix #2: simplified treatment of call-off stock in the European Union
Quick fix #3: conditions zero VAT rated intra-Community supply
Quick fix #4: the new rule for chain transactions
Now it is time to look into some of the details of this ‘simplification’.
Let’s go back to the new rule in short. The quick fix 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.
In order to avoid a VAT registration in the EU Member State where the stock is held for the final customer but still owned by the supplier the following conditions should be fulfilled:
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:
- (a) 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;
- (b) 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 (it is now clear that the supplier can have a foreign Vat registration number in the Member State of arrival);
- (c) 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;
- (d) 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). Basically this means that the supplier reports for ESL when transferring (just the VAT number of the intended customer) and at the time of actual supply (this time with a value).
What if the conditions are NOT met?
If the conditions are not met, the supplier will still need to register for VAT in the Member State where the stock is held. There will be a rather ineffective result in case goods are stolen, destroyed or lost. At the moment the rules say that when goods are lost or destroyed, the conditions for the simplification are no longer fulfilled and the stock owner will need to register in the Member State where the stock was located. A transfer of own goods is deemed to take place at the time the goods were destroyed or when the loss is established. The price to be reported can be set at the purchase price, or in absence of that, the cost price of the goods.
Businesses have expressed their concern on several occasions in relation to this rule since even a small quantity of loss (which in some lines of products is always the case, like fruits, evaporation of certain alcohol products or bulk goods in general) would result in a mandatory VAT registration. Therefore there is a call from businesses and the VAT Committee to set a certain tolerance level in order to have a useful effect.
Of course this should be set throughout the EU and not on a country by county level. What can be accepted as unforeseeable circumstances (e.g. a fire) and acceptable losses due to the nature of the goods so that in those cases no transfer of goods is deemed to take place? With only 6 months to go to get ready and this just being one element that needs further clarification (there are more..), there is an urgency to clarify all these practical aspects of the quick fixes in order for all of these to have the envisaged effect!