Unified rules for call-off stocks

With upcoming end of the year, we are approaching not only the end of our tax series about the so-called quick fixes, but also to the beginning of the effectiveness of this amendment which is referred to as the biggest change in VAT in the last decade. 1 January 2020 will bring, among other things, the following changes:

• new conditions for the application of the tax exemption for the supply of goods to another EU Member State, namely knowledge of the acquirer’s VAT ID No. and decalration of the delivery in question in the European Sales List;
• stricter rules on proving the transport of goods to another EU Member State;
• unification of rules for allocation of transport within the so-called chain transactions; and
• uniform rules for call-off stocks.

In previous issues of our Crowe News, we have looked in detail at the new rules relating to the transportation of goods, namely stricter rules for proving the transport of goods to another EU Member State and the uniform rules for the allocation of transport within the so-called chain transactions. In the final part of our series, we will take a look at the rules for storage of goods, specifically in the so-called call-off stocks.

Generally, delivery of the goods to the warehouse in another EU Member State in order to ensure further sale of local customer in the country of determination is usually subject to the registration (or at least identification) to the VAT in the country of determination. However, in order to decrease the administrative costs led by the effort to avoid unnecessary VAT registration of EU based tax payers in the country of final consumption, it is allowed in specific situations to mitigate this obligation. It is a specific regime, when the supplier supply the goods to the warehouse in another EU Member State while these goods are determined for particular, in advance known customer and whether the access to the warehouse is allowed only and specifically to these specific customer, i.e. of the regime of so-called call-off stock.

Currently, this regime is set up in the Czech Republic in a way that the supply of goods from another EU Member State to the Czech Republic can be considered as the acquisition of goods by a particular customer already as of the day of its relocation the goods to the warehouse in the Czech Republic (even if the goods is not yet taken out of the warehouse). The customer then self-assesses the VAT on the acquisition of the goods at the moment of delivery into the warehouse, which also requires issuance of a tax document in the full amount of the value of the transferred goods. When goods are removed from the warehouse (and thus as of the actual transfer of the right to treat the goods as owner), no VAT declaration is required and only commercial invoices (i.e. NO tax documents) are issued between business partners.

From 1 January 2020, the entire taxation system for call-off stocks will be completely changed and harmonized across the EU.

The customer will now pay VAT, respectively declare the acquisition of goods from another EU Member State only at the moment of actual removal of goods from the warehouse, i.e. at the moment of the actual transfer of the right to treat the goods as owner. Therefore, it will no longer be necessary to split the moment of reporting the delivery/receipt of goods and the actual purchase of goods, and therefore, to report the tax document separately from subsequent so-called commercial invoices.

To make this issue a bit more complicated, this simplification brings new administrative requirements, namely set up of a time limit for the goods to be stored in a call-off stock and the need to keep records on the supplier's side.

From 1 January 2020, the period for which goods in a call-off stock may be stored without the need to register the supplier in the country of location of the call-off stock (and therefore in the customer’s country) shall be 12 calendar months during which the goods must be removed and thus taxed.

As regards the evidence, which is obligatory for the supplier for using the VAT regime of call-of stock, the following information should be included:

1. the EU Member State from which the goods were dispatched or transported;
2. the date of dispatch or transport of the goods;
3. the VAT identification number of the taxable person for whom the goods are intended, issued by the EU Member State to which the goods are dispatched or transported;
4. the Member State to which the goods are dispatched or transported;
5. the VAT identification number of the warehouse keeper, the address of the warehouse where the goods are stored upon arrival, and the date of arrival of the goods in the warehouse;
6. the value, description and quantity of the goods that arrived in the warehouse;
7. the VAT identification number of the taxable person substituting the customer, provided such substitute has happened and no conditions for application of call-off stock are violated;
8. the taxable amount, description and quantity of the goods supplied (removed) and date when the goods was removed;
9. the taxable amount, description and quantity of the goods supplied (removed) and date when any of the conditions for violation of application of call-off stock has occurred;
10.  the value, description and quantity of the returned goods and the date of the return of the goods, if applicable.

As regards the evidence, which is obligatory for the customer for using the VAT regime of call-of stock, the following information should be included:

1. the VAT identification number of the taxable person who transfers goods under call-off stock regime (supplier);
2. the description and quantity of the goods intended for him;
3. the date on which the goods intended for him arrive in the warehouse;
4. the taxable amount, description and quantity of the goods supplied to him and the date on which the acquisition of the goods from another EU Member State was carried out, i.e. the date of removal of goods from the warehouse;
5. the description and quantity of the goods, and the date on which the goods are removed from the warehouse by order of the taxable person referred to in point (a);
6. the description and quantity of the goods destroyed or missing and the date of destruction, loss or theft of the goods that previously arrived in the warehouse or the date on which the goods were found to be destroyed or missing.

When the requirements stated above are not fulfilled, it is not possible to use VAT regime applicable for call-of stock (e.g. situation when the goods are note taken by the customer for the 12 calendar months from the delivery or the goods would be delivered to the different Member State or different customer). Violation shall occur also in case of loss or damage of stored goods. However, the matter of shortages up to the norm and confirm losses and thefts is still unclear.

As we may see, even in this case, the “tradition” when unification and simplification brings with also increase in administration obligations and a lot of questions. Thus, only practical application will reveal whether this new regulation will represent a hypothetical Christmas present or a Trojan horse for the tax payers in question.

Also, it is necessary to say that the end of the year was apparently very

It needs to be be said that the end of the year was obviously difficult for our legislators as well. Therefore, the transposition of quick fixes into Czech legislation will not be effective as of 1 January 2020, since the Chamber of Deputies has not yet discussed it within the first reading. The amendment to the VAT Act is expected to be effective only from the second quarter of 2020.

For the sake of completeness, we would like to emphasize that the above will only affect the modification of the new regulation of the operation of call-off stocks and the rules for the allocation of transportation in chain transactions. On the contrary, the amendment of the directly effective Council Regulation No 282/2011 will certainly come into effect as of 1 January 2020 and therefore, the VAT payers should follow it. The Regulation contains, inter alia, a rebuttable presumption of proof of transportation of goods to another EU Member State provided that the supplier has the prescribed documents in the required structure.