Amendment to VAT Act for 2020 (quick fixes): new developments in Brussels

The European Commission has published extensive draft explanatory notes on quick fixes. These include examples of how to declare changes in customers or refunds of goods within consignment (call-off) stocks in EC Sales Lists and new stock records, and how to deal with chains of transactions where transport is arranged by a middle party in the chain. They also discuss situations in which documents confirming the transport of goods into another member state cannot be obtained as required by a Council regulation.

Will the rules for exempting intra-community supplies from VAT and for consignment (call-off) stock arrangements be simpler and uniform in the entire EU after the quick fixes? The question of how to prove the transport of goods to another member state and thus fulfil one of the conditions for being able to claim the exemption of such a supply from local VAT is currently being discussed all over Europe. Consignment warehouses are also commonly used in cross-border undertakings. In particular, the automotive industry will not do without them.

At the time of our editorial deadline, however, a Czech draft amendment to the VAT Act effective from 2020, implementing these quick fixes, had already been waiting for its first reading in the Chamber of Deputies for two months. Hopefully, we will be able to tell you more during KPMG Business Institute’s training course in November. During our interactive workshops, you often ask about a new structure of EC Sales Lists to re-set your accounting software sufficiently in advance.  

In its explanatory notes, the EC confirms the possibility of using call-off warehouses in the context of ‘commissionaire’ arrangements. It also draws attention to the ‘double’ reporting of sales through call-off warehouses in EC Sales Lists, in which the supplier must declare both the physical transfer of their own goods to a call-off warehouse and their subsequent delivery. The structure of EC Sales Lists will have to be significantly amended as a result of these changes to the system. The question of how a tolerance limit for at least natural losses will be determined should remain within the powers of individual EU member states (see the previous issue of our Tax and Legal Update.   

Another topic discussed in the explanatory notes are chain transactions and the attribution of transport in chain transactions. We already know that the new rule will only apply to transport arranged by a middle party, either on its own or by a third party authorised to do so by them. The explanatory notes confirm that in such cases, any potential contract with a carrier must be entered into by the middle party that will also bear the risks of losses or destruction during transport. In the case of a greater number of carriers and/or transport suspension, it is necessary to consider whether it still involves only one single instance of transport. The notes provide a number of clues that should be taken into consideration. 

Finally, in its notes, the Commission also describes a number of cases in which payers do not receive the correct set of documents proving the transport of goods to another member state pursuant to Council Regulation No. 282/2011.