VAT ‘quick fixes’

The EU’s ‘Economic and Financial Affairs Council’ has agreed a set of adjustments (known as ‘quick-fixes’) to the EU’s VAT rules, applicable from 1 January 2020, aimed at fixing specific issues pending the introduction of a new ‘definitive’ VAT system. The Council of the EU is expected to adopt the directive once the European Parliament has given its opinion.

The ‘quick fixes’ relate to:

  • call-off stock – the proposals provide for a simplified and uniform treatment for call-off stock arrangements whereby, subject to meeting the substantive conditions, when a vendor transfers stock to a warehouse at the disposal of a known acquirer in another Member State such would give rise to one exempt supply in the Member State of departure and one intra-Community acquisition in the Member State of arrival.
  • VAT identification number – to benefit from VAT exemption for the intra-EU supply of goods, the inclusion of VAT identification number of the customer in VIES will become an additional condition.
  • chain transactions – in determining the VAT treatment of chain transactions (triangulation), the proposals establish that, subject to meeting the substantive conditions, where the same goods are supplied successively and those goods are dispatched or transported from one Member State to another Member State directly from the first supplier to the last customer in the chain, the dispatch or transport shall be ascribed only to the supply made to the intermediary operator. As a derogation, the intra-community despatch or transport mat be ascribed to the intermediary operator if he has communicated the VAT identification number issued to him by the Member State from which the goods are dispatched (or transported) to his supplier.
  • proof of intra-EU supply – a common framework is proposed for the documentary evidence required to claim a VAT exemption for intra-EU supplies, such may include a signed CMR document or note, a bill of lading, an airfreight invoice, an invoice from the carrier of the goods, or other relevant documents (eg insurance policy, notaries, etc.)

What this means

These measures are important, as part of the ‘transitory’ move to a more definitive VAT system (which has been on the agenda since the creation of the Single Market in 1992), in providing consistency and uniformity of treatment in key areas of EU compliance. Businesses with significant cross-border activity across the EU should take note of the procedural issues resulting from this.