Businesses must begin to prepare for EU VAT amendments in 2020
As from 1 January 2020, several ‘quick fixes’ will impact the current VAT system for B2B intra-community supplies. The four short-term ‘quick fixes’ are related to the trade between the member states and deemed necessary to begin to counter VAT fraud.
“This package of proposals is aimed at fixing some of the practical problems we are experiencing with the current VAT rules. Businesses will benefit from the harmonised rules” said Hartwig Löger, Minister for Finance in Austria.
However, these changes are expected to have considerable implications for businesses trading in international goods, and businesses are advised to begin preparations now.
Call-off stock simplification:
A new Article 17A has been added to the VAT Directive. This requires all member states to apply call off stock relief. This simplification currently exists in some but not all member states.
The extension of this simplification provides clarity and harmonisation to the call-off stock rules and conditions around Europe.
EU Cross-border chain transactions:
The new VAT rules will introduce harmonised criteria for determining which transactions in a chain is considered the intra-community supply.
In practice, there is often discussion about which link must be attributed to the intra-Community transport of goods.
Under the new rules, the starting point is that the intra-Community supply takes place in the link in which the goods are supplied to the taxable person that arranges the intra-Community transport or has this arranged.
Documenting Intra-Community supplies of goods:
In order to apply the zero VAT rate on intra-Community supplies, a supplier should be able to provide evidence that the goods were dispatched from one EU Member State to another. Under the new rules, it will be presumed that goods were transported to another EU member state if the supplier can provide at least two independent, non-contradictory documents evidencing the transport of the goods such as a bill of lading or an air freight invoice.
This will provide clarity across member states and simplify the process for businesses.
VAT identification for the application of the zero rates on cross border supplies:
Currently, the zero rates can apply to an Intra Community supply even if the customer does not provide a valid VAT number issued by another member state.
With the “quick fixes” adopted by the Council, from 1 January 2020 the zero rate will only apply where the customer provides a valid VAT number and the VIES/ESL returns are correctly filed.
These quick fixes are intended to provide clarity and simplification for businesses and also to help address the risk of fraud associated with the zero-rating of intra-community trade, while we await further developments in relation to the Definitive VAT System. As these adjustments will apply from 1 January 2020, it clearly follows from the above that businesses should take actions now to ensure they are ready for the upcoming ‘quick fixes’. This requires an in-depth assessment of current internal compliance procedures for VAT and intra-EU trade.
On 26 September 2019, the European Commission published a draft version of the Explanatory Notes in relation to the so-called ‘quick fixes’ which can be referred to for more detailed information on each of the “Quick Fixes”.
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