On 1 January 2020, the new VAT rules applicable on cross-border trade (intra-community transactions) come into force, following amendment of Directive 2006/112/EC. The aim is to standardise and simplify certain rules regarding the Value Added Tax system. The change comprises three measures that aim to resolve the main problems that currently exist regarding trade among Member States. Member States have to publish the amendments before 31 December 2019 and they will take effect on 1 January 2020.
Subsequently, a substantial amendment to the Law on VAT will have to be made, which will affect the taxation of intra-community transactions.
As such, the simplification and standardisation measures on all VAT treatment, applicable on call-off stock agreements that allow businesspersons to guarantee supply to their clients, depending on the extent of their needs, will be incorporated into the legislation of all Member States. VAT treatment is also standardised when two or more successive deliveries are made through a single intra-community dispatch or transport. The aim is to determine which deliveries are to be classified as intra-community and to which the transportation is associated.
Furthermore, it boosts the importance of the VAT Identification Number, validly incorporated into the VIES, as a requisite for intra-community exemptions and the rules regarding proof of intra-community transport are unified so that the corresponding exemption on the intra-community delivery of goods can be verified. Said rules will be applicable in all Member States.
The future changes are discussed in greater depth below:
Call-off stock are goods initially transported by the supplier from one Member State to a warehouse in another Member State without transferring ownership of said goods. On dispatching the goods to another Member State, the supplier already knows the identity of the natural or legal person who is going to acquire them, which will be delivered to it after arriving and being stored in the Member State of destination.
Currently, this situation entails goods being delivered in the Member State of origin and the existence of a transaction similar to an intra-community acquisition of said goods in the Member State of destination, followed by a national delivery in that State, for which the supplier must have the corresponding VAT Identification Number (NIF-IVA).
The new legislation simplifies and standardises these kinds of transactions, so that when certain conditions are met, they result in an intra-community delivery of goods that are directly exempt in the Member State of origin for the seller and an intra-community acquisition in the Member State of destination for the purchaser.
The conditions to meet are:
- there must be an agreement between both parties.
- the supplier must not have a permanent establishment in the country of destination.
- the goods purchaser must be known at the time of dispatch.
- the transaction should be included in the informative tax for intracommunity operations
- the goods can only be in the warehouse for 12 months.
Chain transactions refer to successive deliveries of goods in one single intra-community transport.
Pursuant to the Directive, free circulation of intra-community goods must only be applied to one of the deliveries, which will be exempt from the corresponding VAT envisaged, while the others are to be taxed and will require the VAT identification of the supplier in the Member State of destination.
Currently, Member States have handled this kind of transaction in different ways.
With the new legislation, when the same goods are successively delivered and they are directly dispatched or transported from one Member State to another from the first supplier to the end-client in the chain, the intra-community dispatch or transport exemption will be applied, by default, to the delivery undertaken by the supplier to the intermediary operator. However, the transport exemption could be exclusively applied to the subsequent delivery of goods by the intermediary operator when it has given the supplier the VAT Identification Number that was assigned to it by the Member State from which the goods left.
Furthermore, there is still no EU regulation regarding the case in which the first or last operator in the chain is responsible for the transport. In this case, national rules remain in force.
Exemption requirements on the intra-community delivery of goods
Currently, the exemption of VAT on the intra-community delivery of goods is dependent on the goods being effectively transported to the territory of another Member State and on the purchaser being a businessperson, professional or legal person who has a VAT Identification Number in a Member State that is different from that of the sender. This aspect can be easily checked through the VIES list if the purchaser has a VAT Identification Number due to having registered on the Register of Intra-Community Operators (RIO), but it is not a requirement in all countries.
With the new European legislation, the exemption application on intra-community good deliveries will be dependent, in addition to the proof of intra-community transportation, on the purchasing businessperson having a VAT Identification Number that has been allocated by another Member State different from the State of origin, which is included in the VAT information exchange system (VIES System); and, additionally, on the supplier correctly including the information relating to said transaction in the corresponding recapitulative statement of intra-community transactions (349 form).
Obviously, as from the entry into force of this amendment in the area of intracommunity transactions, if one of the new requisites is not met, interested parties will have to act as though the client were an individual and issue it an invoice with Spanish VAT, which in any case will be required by the Tax Agency.