The amendment of the VAT Act which brings significant changes to VAT Consignment Stock arrangements and for intra-Community trading of goods in general entered into effect on 1 September 2020. It implements the so-called Quick Fixes which should further harmonize the rules applicable to intra-Community supplies of goods. Last month, the Financial Administration published an official information brief concerning the amendment, outlining the approach of the Financial Administration to individual areas.
Conditions for Exemption of Intra-Community Supplies of Goods
A new condition for the application of the exemption is that the Supplier must know the Customer’s VAT ID number granted by another Member State, at the latest upon the date when the Supplier becomes obliged to declare the supply to another Member State (i.e. upon the date of issue of the tax document or by the 15th day of the month following the month when the intra-Community supply of goods took place, in case that the tax document has not been issued by that time). Another new condition for the exemption of the intra-Community supply of goods is to record the supply in the EC Sales List.
Proof of Intra-Community Transport
The harmonized EU rules now apply to the proof of intra-Community transport. Under the new rules, intra-Community transport is presumed to have been proven if the Supplier applying for exemption has the following documents, which can be placed in two categories, at its disposal:
- A documents directly concerning the dispatch or transport of goods (i.e. a signed CMR document or the bill of lading and invoice from the carrier),
- B documents representing supporting documents - i.e. transport insurance policy, bank document proving the payment for transport, official documents issued by public authorities (such as by notary public) confirming the termination of transport or the warehouse keeper’s confirmation that the goods have been taken over.
If the transport is being arranged by the Seller (or on the Seller’s account), either two A documents or one A document and one B document are required as successful proof of transport. These documents must be issued by two different parties independent of each other. If the transport is arranged by the Buyer, the Seller must have (in addition to the said documents) a written statement from the Buyer concerning the transport, by the 10th day of the following month.
The afore-mentioned rules are based on the EU Council implementing regulation to which the amendment of the VAT Act now refers. In their official information brief, the Financial Administration presents the new rules only as a new option for providing proofs of transport, namely in cases when dispatch or transport of goods is arranged by the Customer. According to the Financial Administration, the current options for providing proofs of transport are not concerned by the new rules and the Supplier may prove the physical transport or dispatch of goods to another Member State also by other means of proof, the same as until now.
Chain Transactions
The cases where the transport is being arranged by the intermediary operator in a chain are treated under the new rules. In such cases, it is clearly stipulated that the transport will be primarily attributed to the supply to the intermediary operator arranging the transport. Only if the intermediary operator arranging the transport gives the VAT ID number granted by the Member State where the transport began to its Supplier, the transport will be attributed to the next supply (i.e. supply by the intermediary operator arranging the transport to its Customer). Attribution of transport of one of the supplies in a chain transaction means that only that supply is treated as an exempted intra-Community supply; other supplies in the chain transaction are treated as local taxable supplies.
Change of Consignment Stock Treatment for VAT Purposes
The new rules for supplies of goods through Consignment Stocks in other Member States (i.e. stocks from which goods are supplied to Customers who are known in advance) represents one of the most significant changes. A Customer purchasing goods from a Supplier from another Member State under the Consignment Stock arrangement is now not obliged to declare the acquisition of goods from another Member State until the goods are actually taken from the Consignment Stock (not already at the point of stocking of the goods by the Supplier to the Consignment Stock, as has been the case until now). The goods may now be stored for 12 calendar months. During that period, the goods must be taken from stock and subjected to VAT by the Customer, or transported back to the country of origin; otherwise, the owner of the goods stored in the Consignment Stock will become obliged to register itself for VAT in the Member State where the consignment stock is located. For the purposes of the new Consignment Stock treatment, both the Buyer and the Seller must keep special records of the movements of goods; the Seller must also record the physical movements of goods to Consignment Stocks in other Member States under a special section of the EC Sales List.
Any further information or questions in regards to changes to VAT Consignment Stock arrangements can be answered by our tax experts.
Jana Pytelková Svobodová
ASB Czech Republic, s.r.o.
Senior Tax Manager
jsvobodova@asbgroup.eu
Zuzana Studničková
ASB Czech Republic, s.r.o.
Senior Tax Consultant
zstudnickova@asbgroup.eu