EU VAT Fixes: VAT changes due 1st Jan 2020 – Are you affected?
It was back in February 2019 that the EU Council approved four VAT “Quick Fixes” with the aim to address inconsistencies in the VAT regulations that exist across the EU member states in these areas and result in cost and confusions for businesses involved in international trade.
With the announcement of a new UK Brexit Deadline of the 31st January 2020 these four changes come back into sharp focus as they will be effective from the 1st January 2020.
Centurion have already made representation this week to the British Chamber of Commerce to alert them to the obvious concern that this will bring for UK businesses as to the approach they should plan for.
The four areas of change relate to:
- Simplified Treatment of the VAT rules relating to call-off stock held in other EU states
- Uniform rules to simplify chain transactions
- Mandatory requirement to show the VAT Registration Number to Zero Rate intra-EU sales of goods
- Simplified proof of intra-EU supplies
UK businesses that move or sell goods into the EU or in the case of the simplification of chain transactions are an “intermediary” who is involved in arranging the shipment of the goods are the ones who need to review these changes.
Whilst the simplifications are aimed at delivering a benefit for businesses from consistency of treatment or specific changes to ease trade, they still come with practical implications which will affect the business and administrative processes so it will be important to understand that impact.
Call Off Stock Change:
A UK business faces the need to have to VAT register in some EU states as a result of holding stock in-country. This brings extra costs to the UK businesses.
The “fix” will mean that from January 2020 the movement of goods from the UK to a warehouse in-country will no longer be a deemed acquisition at that point PROVIDED that the goods are called off by the in-country customer within 12 months of arrival.
The acquisition will take place at the point that the customer calls off the stock and it is the customer that then accounts for the Acquisition VAT on their own VAT return. This would remove the requirement for the supplier to VAT register in-country BUT it will only apply if the UK supplier does not have a fixed establishment in that member state where the goods are stored.
If a UK business elects to use this simplification then there will be additional administrative requirements as a register of the goods need to be held and an ESL (Sales list) completed although only the VAT registration number of the EU Customer should be shown not the value of the goods.
A register also needs to be held by the customer as well and any failure to comply with the requirements will see the supplier revert to the risk of a VAT registration in-country being required.
Clearly businesses need to review and understand their current position on call-off stock arrangements.
Where goods are moving through a series of transactions but are dispatched from the original supplier to the ultimate end customer an intermediary can be involved in arranging for the shipment of the goods as the goods pass through different parties and different EU countries. As the zero rating for intra community supplies is only applied to one link in the chain this means that the other intra community supplies are subject to the domestic VAT rates in-country.
Under the new rules the intra community supply (the zero-rated element) takes place in the transaction part where the goods are supplied to the taxable person that arranges the intra community transport or gets the transport arranged.
It should be noted that this “fix” does not cover transactions where the original supplier or end customer is responsible for shipping the goods in a chain. The VAT treatment in that regard can still have uncertainties due to different rules across member states.
Again, Businesses involved in Chain transactions through the EU should now be reviewing the impact this will have. There may be benefits from no longer requiring in-country VAT registrations particularly where they have been the “intermediary” in a chain.
Mandatory use of VAT Registrations:
This should be less of an impact in the UK as HMRC have always required the VAT registration number of the EU customer to be listed on the UK Sales invoice to enable Zero rating of any EU dispatches of Goods. This “fix” formulates the need to hold a valid VAT registration of their EU customer as a MANDATORY requirement.
Simplified Proof of Intra-EU supplies:
In the UK for an EU Dispatch to be zero rated the supplier must, as well as hold a VALID VAT number for its EU customer, also retain proof of the removal of the goods from the UK. The evidence of proof of removal has been a source of difference between member states and this “fix” addresses that point.
There will be a simplified set of documentary evidence required to prove the goods were transported to another member state to evidence zero rating. The supplier must provide at least two non-contradictory evidential documents – prepared independently of each other – i.e. from different sources. These could be:
- the signed CMR documents
- bills of lading
- airfreight invoices
- transport provider invoices
- insurance policy documents covering the movement of the goods
- bank documents showing the payment of the goods
- official documents from a notary or public authority confirming the arrival of the goods
- receipts from warehouse-keeper confirming the storage of the goods in the destination state.
If the customer has been responsible for the transport of the goods, then the customer must give a written statement to the supplier and this must be issued by the 10th day of the month following the supply and include details on:
- the member state of destination of the goods
- customer’s name and address
- description and quantity of the goods
- date and place of arrival of the goods
- ID number of the means and type of transport used and
- The name of the person who accepted the goods at arrival
Having digested this information if you need assistance then Centurion VAT are at the end of the phone. We will need to be alert to news from the UK authorities as to the interaction of these “fixes” within the context of a Brexit Departure date of the 31st January. To receive VAT related update then do please register on our website