Delivery of goods from EU to consignment stock in Germany not necessarily subject to VAT registration duty
Until now, German tax authorities used to consider the delivery of goods from member states to a consignment stock in Germany as a transfer of goods, requiring the supplier’s registration for VAT in Germany. On the date of taking the goods from the consignment stock, the supplier effected a local taxable supply involving the payment of the relevant German tax. Subsequently, subject to meeting general criteria, the customer could claim VAT deduction. However, new information from the German Ministry of Finance changes the procedure in effect so far.
The German Ministry of Finance’s information amending the German VAT Act is associated with a decision of the Federal Finance Court, according to which it is essential to consider the contractual arrangement between individual entities as well as the way in which the entire transaction is carried out, rather than to simply follow the model described above. In many cases, registration for VAT in Germany is not at all necessary.
In accordance with the new information, the tax authorities should view the delivery of goods from member states to a consignment stock in Germany as a single transaction involving the acquisition of goods from another member state. The court nevertheless held that the customer to whom goods are to be delivered must be known at the moment the goods are dispatched. Another condition voiced by the court was that goods in a consignment stock may only be stored there for a short period of time, usually for a few days or weeks. The time condition is a bit vague, so we will have to wait for its real application in practice. The Federal Ministry of Finance’s information also states that the customer should be resident in Germany before the goods are dispatched. It is the customer’s initiative to choose delivery via the consignment stock and, therefore, the customer has unlimited access to the goods.
The tax administration’s information also deals with situations when goods are dispatched to a consignment stock in Germany from countries outside of the EU. Under the previous approach to the delivery of goods to a consignment stock, the right of disposal of goods was only transferred to the customer once the goods were withheld from the consignment stock, even if the customer was in charge of handling all importation technicalities.
The supplier was thus supposed to pay VAT on import, and only the supplier was simultaneously entitled to deduct VAT on import. The new approach changes how these situations are dealt with in practice. If the right of disposal of goods is transferred before the goods are dispatched from a third country and if importation formalities are taken care of by the customer, this should only involve a single transaction with goods: the import of goods. If importation technicalities are handled by the supplier, the existing procedure should be applied.