Already considered the practical impact of the 2020 "VAT quick fixes"?

As of the 1st of January 2020, some limited changes (the so-called "VAT quick fixes") will be implemented in EU VAT legislation with the aim of solving four practical VAT problems in international trade.

Before raising some practical considerations and question, please find a concise description of the VAT quick fixes.

1. Call-off stocks: simplification and harmonization

Today, it has become common for suppliers to store their own goods in a warehouse or another location of a customer abroad. To avoid VAT formalities abroad, as of the 1st of January 2020, the transfer of own goods in the context of such a stock will no longer be treated as a deemed intra-Community supply of goods for consideration. Under certain conditions and as long as the goods are actually sold to the customer within 12 months, there will be a direct intra-Community supply of goods from the supplier to the customer.

2. Allocation of transport in chain transactions

In situations where consecutive supplies of goods take place between several taxable persons in different Member States and where only one (intra-Community) transport takes place, it must be investigated to which relation the transport can be allocated. After all, the VAT exemption for the intra-Community supply of goods can only be applied on one sale in this chain. From 1 January 2020 on, transport in a chain transactions will be allocated to the transaction in which the sale takes place to the party who is contractually responsible (himself or via a third party) for the transport of the goods. However, if the latter party communicates its (own) VAT number in the member state of departure of the goods to the supplier, the transport will be allocated to the subsequent commercial transaction in which the intra-Community transport of the goods takes place.

3. Valid VAT number of the customer: material condition for the application of the VAT exemption for intra-Community supplies

Currently, obtaining a valid VAT number from the customer (in another EU Member State) is a formal requirement for the application of the VAT exemption for intra-Community supplies of goods ("substance over form" principle). From January 1, 2020, the receipt of a valid EU VAT number from the customer and the submission of an intra-Community declaration are considered as a material requirement. If these conditions are not met, the supplier must apply VAT to his invoice, as the application of the VAT exemption for intra-Community supply of goods is no longer allowed.

4. Simplified proof of intra-Community transport

The fourth "quick fix" aims to resolve the practical difficulties business face with the required proof of intra-Community transport. This "VAT quick fix" implements a rebuttable presumption that an intra-Community transport has taken place when a taxable person can present two (or more) non-conflicting proofs of transport issued by two independent parties.

Practical impact and considerations

Although the changes are limited, they have a major practical impact. Enterprises should:

1.  assess the impact of these changes on the current VAT treatment of their trade flows.

         A few of the many questions that may arise are:

• Is the transport currently allocated in accordance with the new rules?
• Which contractual transport agreements are currently in force with my suppliers and customers?
• Do the new rules on the allocation of transport in chain sales create VAT registration obligations for my company in other EU Member States?
• Does my company have call-off stocks abroad? Should the current VAT treatment be reconsidered?
• Should my ERP master data and ERP tax logic be changed?

2. examine whether new procedures should be implemented in the organizational structure, for example with regard to obtaining or archiving transport documentation, periodical        verification of the validity of customers' VAT numbers, investigation of the absence of conflicts in the proof of transport, etc.;

Crowe is ready to investigate what impact your company will experience from the VAT quick fixes or to assist with the implementation of new procedures and (commercial) guidelines. Do not hesitate to contact your Crowe contact person if you need assistance with this.