All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Evaluating the EU VAT Committee’s guidelines on “quick fixes”

Sponsored by Sponsored_Firms_deloitte.png
nut-165083-1280.jpg

Christian Deglas and Michel Lambion of Deloitte Luxembourg examine the EU VAT Committee’s guidelines for the application of the “quick fixes” to the EU’s VAT regulations.

On January 1 2020, the “quick fixes” to the EU’s VAT regulations were transposed into Luxembourg law. These measures aim to simplify, clarify, and harmonise rules applicable to certain intra-Community supplies of goods. The EU VAT Committee (a group of representatives from the VAT authorities of EU member states) recently published guidelines to clarify the application of the rules. 



Although not binding, the guidelines are noteworthy as they reflect the collective view of the national VAT authorities in the EU member states. The most salient ones are examined in the briefing.



Call-off stock



A supplier that has call-off (or consignment) stock in another member state may be exempt from VAT registration in that member state under certain conditions. Based on a strict interpretation of the legislation, the loss of goods under call-off stock arrangements would be treated as a transfer of the goods. However, because losses typically are almost unavoidable, the committee decided almost unanimously (i.e. 24 to 27 member states out of 28) that “small” losses should be acceptable and would not be treated as a transfer of the goods and a large majority (i.e. 19 to 23 member states out of 28) decided that “small” losses should be defined as losses that amount to less than 5 percent in value or quantity of the stock.



The committee decided unanimously that a supplier that is VAT-registered in the member state where the call-off stock is transported may qualify for the call-off stock arrangement simplification (i.e., VAT registration exemption), but not if it has a fixed establishment in that member state (even if the fixed establishment is not involved in the stock). The committee also unanimously decided that the warehouse to which the goods are transported is not a fixed establishment for VAT purposes when run by a third party. However, a large majority of the committee found that the supplier should be treated as having a fixed establishment if the supplier is the owner (or lessee) of the warehouse and it runs the warehouse by its own means. In this case, the supplier will not qualify for the simplification.



Conditions for VAT exemption for the intra-Community supply of goods 



An intra-Community supply of goods between taxable persons is VAT-exempt in the member state of departure under certain conditions. The VAT Committee unanimously decided that the conditions for the exemption must be satisfied at the time that the supply is made. It also decided almost unanimously that the VAT authorities could revoke the exemption retroactively if the supplier has not reported or incorrectly reported the supply in its European sales listing, unless it is able to justify this shortcoming “to the satisfaction of the competent authorities.” Various authorities may interpret the term “satisfaction” differently as it is not defined in the guidelines.

The VAT Committee agreed unanimously that the supplier must indicate the purchaser’s VAT number issued by a member state other than the state of departure for the VAT exemption to apply. The committee noted that this was a substantive condition.



Another condition is that the supplier or the purchaser, or a third party acting on their behalf, must dispatch or transport the goods from one member state to another. The supplier must hold two separate documents proving that the transport occurred. The documents must be chosen from two lists that include, for example, transport, insurance, and CMR (transport) documents. Moreover, the person issuing these documents must be independent from the supplier and the purchaser. 



The VAT Committee decided almost unanimously that any person related by “family or other close personal ties, management, ownership, membership, financial or legal ties” pursuant Article 80 of the VAT Directive should not be considered independent for these purposes. This may be problematic for persons transporting the goods themselves and/or group companies using their own transport company. In fact, the transport documents they issue would not qualify as valid proof of transport even though such documents would be the most obvious proof of transport. Contrary to well-established principles, the way a business is organised may affect the application of the VAT rules.



Triangular transactions



A simplification applies when goods are transported directly from one member state to another but the intermediary buyer/seller is established in a third member state. Under certain conditions, the intermediary does not have to register in the member state of departure or arrival of the goods as would be the case under normal VAT rules. 

The VAT Committee decided almost unanimously that this simplification applies when the intermediary buyer/seller provides to the first seller a VAT number issued by a member state other than the member state of departure of the goods. This implicitly confirms that, as is already the position of various member states, the intermediary may be VAT-registered in the member state of departure to the extent that it provides to the first seller a VAT number issued by another member state. This may be of interest to many businesses involved in the EU cross-border trade. 

Despite their aim to simplify and harmonise the EU VAT rules, the quick fixes leave many questions unanswered. Nevertheless, businesses and practitioners may find some guidance in the VAT Committee guidelines.



Christian Deglas

T: +352 45145 2611

E: cdeglas@deloitte.lu



Michel Lambion

T: +352 451 453 993

E: milambion@deloitte.lu

More from across our site

This week European Commission officials consider legal loopholes to secure minimum corporate taxation, while Cisco and Microsoft shareholders call for tax transparency.
The fast-food company’s tax settlement with French authorities strengthens the need for businesses to review their TP arrangements and documentation.
The full ALP model will be adopted through a new TP regime, which is set to boost the country’s investments and tax certainty.
Tax professionals have called on the UK government to reconsider its online sales tax as it would affect the economy at the worst time.
Tax professionals have called on companies to act urgently to meet e-invoicing compliance targets as the EU plans to ramp up digitisation.
In the wake of India’s ambitious 25-year plan for economic growth, ITR has partnered with leading tax commentators to discuss what the future will look like for India and for the rest of the world.
But experts cast doubt on HMRC's data and believe COVID-19 would have increased the revenue shortfall.
EY’s plan to separate its auditing and consulting businesses might lessen scrutiny from global regulators, but the brand identity could suffer, say sources.
Multinationals are asking world leaders to put a scale on carbon pricing to tackle climate change at the 48th G7 summit in Germany, from June 26 to 28.
The state secretary told the French press that the country continues to oppose pillar two’s global minimum tax rate following an Ecofin meeting last week.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree