Pitfalls of quick fixes: proving transport and chain transactions

What do quick fixes in this area mean, what are their pitfalls, and how to prepare for them? 

Proving transport to another member state

The issue of proving transport to another member state involves the most extensive and at the same time most complex changes. From 2020, a rebuttable presumption shall apply that transport has been proven if the person claiming the tax exemption has documents at their disposal as requested by the implementing regulation to the EU VAT Directive. For the purpose of the regulation, documents may be divided into two groups: A documents, directly related to the dispatch or transportation of goods, and B documents, comprising other supporting documentation.

A documents include, e.g., signed CMR documents or consignment notes, and invoices from the goods’ carrier. B documents include official documents issued by a public authority confirming the arrival of the goods or receipts issued by a warehouse keeper.

Different numbers of documents will be required for sellers arranging the transport themselves (or for their account), and sellers leaving the transport up to the buyer. Where transport is arranged by the seller (or for the seller’s account), two A documents or a combination of A and B documents must be submitted to prove it, whereas the submission of two B documents will not suffice. In any case, the two documents must not be contradictory and must have been issued by separate, independent parties. At the same time, their issuers must not be dependent on the seller or the buyer. The independence aspect in particular raises questions. 

Where transport is arranged by the buyer (or for the buyer’s account), the seller must also have (in addition to the above described documents) the buyer’s written statement containing all prescribed essentials.
  
Chain transactions

A chain transaction is a transaction in which the right to dispose of the goods as its owner is transferred at least twice within a single transportation of goods. While the regulation of chain transactions is currently within the competence of individual member states, the rules have become quite unified, based on the case law established by the Court of Justice of the EU. The CJEU repeatedly adjudicated that in a chain of transactions, transport shall only be assigned to one supply. The situation is particularly problematic where the transport is arranged for by a middle party in the chain.

This issue has now been addressed by the new regulation. If transport is arranged by a middle party, the transport shall be assigned primarily to the first supply (from the seller to the middle party). Only if the middle party has communicated to the seller a VAT identification number issued to it by the state from which the goods are dispatched, the transportation shall be assigned to the second supply (from the middle party).