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Quick fixes: consignment stock arrangements from January 2020?

The amendment to the VAT Act implementing quick fixes will not be effective from 1 January 2020, since the Chamber of Deputies is yet to discuss it even in its first reading. So how should Czech VAT payers involved in the intra-community supply and acquisition of goods proceed starting January 2020? Can they make use of the direct effect of the VAT Directive and proceed in accordance with it? Problems will arise both in situations in which Czech payers withdraw goods from their European suppliers’ consignment (call-off) warehouses located in the Czech Republic, and in situations in which Czech entities own inventories in a consignment (call-off) warehouse in another member state.

An amendment to the VAT Act (Print 572) is expected to be in effect from the second quarter of 2020. The question arises what this delay in the implementation of the EU directive means for Czech VAT payers.

This mainly affects Czech payers who withdraw goods from their European suppliers’ consignment warehouses located in the Czech Republic. The amended directive will be in effect as early as from 1 January 2020. From the same date, amendments relating to quick fixes may also be effective in legislations applicable in the member states in which individual suppliers operate. Czech entities withdrawing goods from call-off warehouses might therefore encounter problems with their suppliers who may ask them to proceed in accordance with the amended EU regulations already from the beginning of the new year. This should be allowed by the EU directives’ direct effect concept.

The inverse scenario under which European customers may ask suppliers to proceed in accordance with the amended regulations may cause even more problems. This involves situations in which Czech entities own consignment warehouses in the territory of another member state with inventories on stock intended for specific European suppliers. In such cases, we recommend contacting the European customers as soon as possible and mutually agreeing on how they should proceed from 2020. From a technical viewpoint, it will not be possible to meet the requirements for the correct reporting of the transfers of goods into consignment warehouses (and subsequent sales) in EC Sales Lists in the manner required by the quick fixes. It is therefore worth considering whether the transition to a new system of consignment stock arrangements should not be commenced only after the Czech amendment enters into effect.

It should also be considered that from 1 January 2020, VAT payers should proceed in compliance with amended and directly applicable Council Implementing Regulation (EU) No. 282/2011. The regulation includes, inter alia, a rebuttable presumption to prove the transport of goods to another member state, according to which transport has been proven if the person claiming the tax exemption has the prescribed documents at their disposal.