Practical pitfalls of quick fixes
An amendment to the VAT Act implementing long-awaited changes to the intracommunity supply of goods (quick fixes) entered into effect on 1 September 2020. We may already comment on the first practical implications for taxpayers and on solutions to problems that have been discussed earlier.
Proving the transport of goods to another EU member state has been a frequent issue discussed since the very beginning. In accordance with the relevant article of the regulation, it is sufficient to submit a required combination of documents issued by at least two different parties that are independent from each other and from the vendor and the acquirer. The term ‘independent’ has now been clarified: independent are parties who are not related to one another through capital or in any other manner. Where the relation through capital is concerned, an independent party shall be a party who holds a less than 40% share in the registered capital or voting rights of another party.
The professional public has recently discussed another issue, in particular one of the conditions for exempting intracommunity supplies of goods from VAT, which is the correct declaration of transactions in EC Sales Lists. Some believe that to be able to claim the exemption, transactions must be declared in EC Sales Lists for the period in which the transactions were carried out, i.e. the period to which they relate under the VAT Act. But this interpretation is in conflict with Section 104 of the VAT Act allowing the reporting of transactions in periods of taxation other than the period to which they relate. The financial administration has not opined on the matter yet. However, we believe that considering the EC’s explanatory notes, it is justifiable to report transactions in EC Sales Lists for a period of taxation other than the period to which they relate.
One of other issues discussed are minor and natural losses in consignment (call-off) warehouses. The original explanatory note on consignment warehouses states that every time when goods are destroyed, lost or disposed of, the taxpayer ceases to meet the conditions for applying the simplification for call-off stock arrangements, and a duty to register for VAT arises. In response, all EU member states filed a joint motion to introduce a tolerance limit of 5% for these minor losses. This tolerance limit for minor losses in both the value and volume of goods has also been affirmed by the General Financial Directorate’s Information on the Amendment to the VAT Act in effect from 1 September 2020.
Moreover, the GFD’s information also states that if taxpayers are unable to submit the required combination of documents proving the transfer of goods to another member state, they may also do so by other means of proof. The GFD also draws attention to the change in declaring VAT-exempt supplies to another member state in VAT returns, newly in relation to the moment the goods were delivered. The deliveries are then declared either on the date a tax document is issued or until the 15th day of the month following the month in which the goods were delivered, whichever the earlier. The reporting of transfers of goods from another member state is done similarly.
We will continue to monitor the situation and will keep you informed about any developments in this area.