As part of the VAT action plan as launched on 7 April 2016, the EU Commission announced a legislative Proposal for the Definitive VAT system for Cross Border EU Trade. This proposal introduces the cornerstones of the Definitive VAT system for Cross Border B2B EU trade. A forthcoming proposal in 2018 will further provide detailed technical provisions in this respect (two step approach).
Whereas the current VAT system is characterized by splitting each EU B2B cross border supply of goods in an exempt intra-Community supply in the Member State of departure and a taxable intra-Community acquisition in the Member State of arrival of the goods, the Proposal foresees in the introduction of one taxable supply in the Member State of destination of the goods, the so-called intra-Union supply. As a first step of the Definitive VAT System the Proposal introduces the concept of a Certified Taxable Person (CTP). CTP concept allows for an attestation that a business can globally be considered as a reliable taxpayer. Only when the intra-Union supply is performed for a CTP the supplier can apply the reverse charge mechanism. Otherwise, meaning when the buyer is not a CTP, the supplier will be liable for the payment of VAT in the destination country through a one stop shop mechanism.
To meet the request of the Council as stated in the Council Conclusions of November 2016, the Proposal also foresees further amendments of the VAT Directive so-called quick wins in respect of the VAT identification number, chain transactions and call off stocks. The Council also requested the Commission to draft a common framework as regards the documentary evidence required to claim an exemption for intra-Community supplies, the latter is included in the proposal amending the VAT Implementing Regulation.
In respect of Call off Stocks, i.e. the situation where a vendor transfers goods to a warehouse at the disposal of a known acquirer to another Member State and that acquirer becomes the owner of the goods upon calling them off the warehouse, the proposed solution consists in considering the call off stock as giving rise to one single supply in the Member State of departure and an intra-Community acquisition in the Member State of arrival if performed between two CTP’s, whereas the application of the VAT exemption for intra-Community supplies is made conditional upon the valid EU VAT registration of the acquirer. Last but not least the Proposal foresees that in respect of chain transactions the transport is to assigned to the supply made for an intermediate supplier if (i) he is VAT registered in another Member State then the Member State of supply (ii) he communicates the Member State of arrival to its supplier (iii) both the intermediate supplier and his supplier are CTP’s.
Regarding Call off Stocks, when it turns that one party in the transaction is not a CTP, it is likely that the vendor will have to VAT register in the country where the warehouse is located and to account for VAT in the destination country. Indeed due to the purpose of the definitive VAT regime, it is unlikely that the Member states will be able to maintain the existing specific regime if any in their territory.
Regarding the chain transactions, when a non CTP is involved the presumption of the allocation of the transport will not apply and, consequently, the parties will have to document and demonstrate to which transaction the transport is allocated and apply the related VATregime to the said transaction (domestic supply, intracommunity supply etc).
The Proposal requires the Member States to apply the provisions as of 1 January 2022.
Following actions are required:
- Detailed mapping of all intra Union Flows
- Such mapping will allow you to measure the impact of the change on your business and adopt an action plan (up-date of the IT systems, adjustment of the invoice template, VAT registration requirement, training of your staff, review of the offers, contracts and agreements, etc)
- Assessment of the opportunity/ possibility to apply for the Certified Tax person status
Bildquelle: Erich Westendarp / pixelio.de