New EU Rules impacting intra-EU Supply Chain
Agreement was reached at a meeting of the Economic and Financial Affairs Council regarding a new Directive called “Quick Fixes” on October 2nd 2018. They are aimed at simplifying the VAT obligations affecting chain supplies in the following ways:
- The transport will be evidenced according to concrete parameters tackling arbitrary positions of national Tax Authorities;
- The allocation of transport to a supply in triangulation and in 4-or-more-partners situations is clarified avoiding disputes with Tax Authorities;
- A unified call-off stock scheme will be applicable throughout the EU;
- The VAT registration number of acquirer becomes a legal requirement for zero-rated intra-EU supplies.
The Council is expected to adopt the directive once the European Parliament has given its opinion. These rules should come into effect on 1st January, 2020. However, their inspiration could probably already be used if necessary in current disputes with Tax Authorities. Should you be currently involved in such disputes anywhere in Europe, our VAT expert is available to discuss the issue.
Concept of “Exporter” under the customs regulation
The definition of the exporter has been amended in order to allow greater flexibility to business partners in the choice of the person which may act as exporter. According to the new definition, the exporter must (1) have the power to determine that the goods are to be taken out of the customs territory of the EU and (2) be established in the customs territory of the EU. The third condition, which stated that the exporter had to hold a contract with a consignee in a third country, has been withdrawn.
E.U. COURT OF JUSTICE
Exempt importation in case of subsequent intra-EU supply
The VAT exemption on importation immediately followed by an intra-EU supply is subject to communication by the importer of the purchaser’s VAT identification number. It may however happen that following a change of circumstances after the importation, the imported goods are supplied to a taxable person other than the person whose VAT identification number was stated on the import declaration. According to the E.U.C.J., the VAT exemption still applies provided the conditions for the exemption of the subsequent intracommunity supply are met (20 /06/2018, C-108/17).
Right to deduction in case of payment on account ( advanced payment)
A potential buyer may not be refused the recovery of VAT relating to a payment on account in respect of goods where that payment has been made and received and where, at the time that payment was made, all the relevant information concerning the future supply was regarded as known to that buyer and the supply of those goods appeared to be certain. However, that buyer may be refused that right if it is established, having regard to objective elements, that, at the time the payment on account was made, he knew or should reasonably have known that that supply was uncertain (31/05/2018, C-660/16 and C-661/16).
The question arises as to which extent that ruling could be at variance with the below-noted ruling of 27/06/2018 in which the Court denies the recovery on the “mere” ground that the supply didn’t take place.
Right to deduction where there is no actual delivery
In order to deny a taxable person in receipt of an invoice the right to deduct the VAT appearing on that invoice, it is sufficient that the authorities establish that the transactions covered by that invoice have not actually been carried out (27/06/2018, C-459/17 and C-460/17).
Again, the E.C.J. emphasizes, even though negatively in this case, that substance prevails over form in terms of VAT recovery.
E-invoicing and real-time reporting for resident businesses only
The e-invoicing and live reporting obligations, which are supposed to cover all Italian domestic sales invoices as from 2019, will be applicable, contrarily to the initial plan, to resident business only. In other words, non-established businesses having an Italian VAT number only (no fixed establishment) will not be subject to these new requirements.
E.U. Commission asks Italy to change its rules on the supply of services relating to the importation of goods
The E.U. Commission decided to send a letter of formal notice to Italy concerning the fact that it adds further conditions for the exemption from VAT of services relating to importation of goods. The Italian legislation currently requires that for the exemption from VAT to be applied to ancillary services relating to the importation of goods, not only their value must be included in the taxable amount, but also that VAT is actually charged on them at the customs stage at the time of importation. This goes against the VAT Directive.
E.U. Commission calls on Germany to align its administrative practice regarding 9th Directive VAT refund procedure
The E.U. Commission decided to send a reasoned opinion to Germany asking it to bring its VAT refund rules into line with E.U. legislation. In some cases, Germany currently refused to refund VAT applied for by taxable persons established in another Member State as it considered that the information provided was insufficient without having requested additional information from the applicant. This led to refunds being denied even when applicants fulfil the substantive requirements as laid down by the E.U. law.
Reduced VAT rate to increase
The Dutch reduced VAT rate, which notably applies to foodstuffs, hotel accommodation and restaurants, should be raised from 6% to 9% as from January 1st, 2019.