Amendment to VAT Act in force as of 1 September 2020

Author: Jiri Sindelar

A long awaited amendment to the VAT Act which brings the changes mostly with regard to supply of goods among EU Member States (the implementation of the so-called “quick fixes“), came into force as of 1 September 2020. Due to the direct application of EU VAT Directive, it has been possible to put into practice the new rules based on “quick fixes” already from 1 January 2020. However, the tax administrator is allowed to act according to new rules only from 1 September 2020.

The implemented changes are related to the following issues:

New definition of a common and harmonized rule for the allocation of transportation within the so-called chain transactions;
New condition of having the knowledge of the VAT number of the customer as well as the correct declaration of the supply of goods in the European Sales List introduced for the application of the VAT exemption of the supply of goods to another EU Member State;
Stricter rules for the proof of actual transportation of goods to another EU Member State; and
Unification of the consignment stock regime in the form of call-off stock.

Concerning the chain transactions, i.e. such transaction with goods where during one transport, the right to treat the goods as an owner is transferred at least twice, the transport will be assigned to the supply between:

the first supplier and the (first) mediator, if the goods are dispatched or transported from one EU member State to another EU member State from the first supplier directly to the last purchaser within the chain, then the transport shall be assigned to the supply provided to the mediation entity;
the mediator and its (final) customer, should the mediator inform the (first) supplier about its VAT ID No. assigned by the EU Member State which the goods are dispatched or transported from, it is possible to assign the dispatch or transport only to the supply realized by the mediation entity.

Further, we would like to point out that the VAT exemption for the supply of goods to another EU Member State will be applied only to sales to VAT-registered customers in that EU Member State. The fulfilment of this condition will need to be properly verified through VIES system. Another condition will be to report such supplies correctly by the supplier in its European Sales List.

In this respect, we recommend to all taxpayers to verify that the customer has a VAT number assigned via VIES each time an invoice is issued to that customer. As part of the preparation of the VAT return, we also verify the validity of the VAT number. However, VIES is only able to confirm the validity of this number as of the date of the check (i.e. in our case at the date of preparation of the European Sales List). Therefore, if the VAT number was obtained / lost in the meantime between the supply of goods itself and the preparation of the European Sales List, we are unable to verify the existence and validity of the VAT number in a credible manner.

Should you have any uncertainty about the VAT application by your contracts based on the above described changes, we will be more than happy to assist you. Please do not hesitate to contact us. We are ready to prepare a review of your currently realized supplies and to point out possible tax risks.

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