The way of documenting the intra-Community supply of goods (ICS) changes significantly on 1 January 2020. It is due to the entry into force of a recovery plan to a EU’s directive and a new Council Regulation (EU) (the so-called Quick Fixes). Also the taxation rules within the framework of chain transactions and call-of stock are to be modified.
Until today, the documents necessary to apply the zero VAT rate to ICS have been enumerated in the VAT Act.
From 1 January 2020, documents needed to apply the zero rate to ICS should correspond to the ones listed in the EU Regulation.
The EU Regulation, in general, provides for the following two groups of documents:
- documents relating to the dispatch or transport of the goods, such as a signed CMR consignment note, a bill of landing, an airfreight invoice or an invoice from the carrier of the goods;
- documents not directly relating to the dispatch or transport of the goods:
i. an insurance policy with regard to the dispatch or transport of the goods, or bank documents proving payment for the dispatch or transport of the goods;
ii. official documents issued by a public authority, such as a notary, confirming the arrival of the goods in the Member State of destination;
iii. a receipt issued by a warehouse keeper in the Member State of destination, confirming the storage of the goods in that Member State.
In order to apply the zero VAT rate, an adequate combination of the two documents listed above will be necessary.
In addition, depending on who organizes the transport (i.e. the vendor or the acquirer), the vendor shall have to either prove that the dispatch took place, or obtain a statement from the acquirer confirming the transport (whereas, the regulations provide for a quite short period of time to obtain such a statements from the acquirer).
The new list of documents shall entail the necessity to modify the procedure of documenting ICS. It is advisable to prepare for these changes beforehand, in particular by verifying contracts concluded with contractors in view of the new obligations and by preparing a procedure of amassing evidence that ICS took place.
In the case of a chain transaction, when sales invoices are issued between a few entities and the goods are dispatched directly to the last, final customer, from 1 January 2020, new rules shall be applied with regard to ascribing the transport to the given supply (the so-called ‘transported goods’, for which the zero rate is applicable).
Thus, if the goods are sold in chain of customers and dispatched to a different EU country, according to the new regulations, it has to be verified which supply constitutes ICS (and is subject to the zero VAT rate) in order to avoid possible tax arrears. Other supplies shall be treated as domestic and subject to a normal VAT rate in the country of dispatch or reception.
Starting from 1 January 2020, on the territory of European Union, all the rules regarding keeping call-off stock (consignment at present) are to be unified. It concerns cases in which goods are transferred from one EU country to a warehouse in another country and only then they are taken out and sold from the warehouse.
If such an activity is present in your Company, then it should be checked, inter alia, if the taxpayer fulfils the requirements to benefit from the call-off stock procedure, change the moment of recognizing supplies and intra-Community acquisitions, and sign applicable arrangements with contractors and a third party which has such a warehouse, if necessary.
We remain at your disposal if you would like to get a line on more information about the above changes or discuss their impact on your business.