VAT quick fixes 2020 part 3: Uniform rules to simplify chain transactions
On 4 December 2018, the Council of the European Union adopted the so-called “VAT quick fixes”. The “VAT quick fixes” aim at simplifying international trade and are to be implemented by the EU Member States by 1 January 2020.
The VAT quick fixes concern the following four changes:
- Simplified treatment for call-off stock
- Uniform rules to simplify chain transactions
- Mandatory VAT identification number to apply the exemption for intra-community supplies
- Simplified proof for intra-community supplies
In this article, we elaborate on the second quick fix which relates to the allocation of transport for chain transaction.
A chain transaction consists of multiple successive supplies of goods involving three or more taxable persons (e.g. party A supplies goods to party B, who in its turn, supplies the goods to party C). For logistical reasons, the goods are sent directly from the first supplier (party A) to the final customer in the chain (party C). In case of chain transactions involving different EU Member States, it is important to identify the supply to which the transport of the goods can be allocated. Indeed, since only one transport takes place, only one supply in the chain can be considered as the intra-community supply. This means that only one supply can benefit from the VAT exemption for intra-community supplies. All other supplies are domestic supplies of goods taking place in the EU Member State of dispatch of the goods or in the EU Member State of arrival of the goods. In practice, it is often not clear which supply of the chain should be regarded as the intra-community supply, especially when the intermediary (party B) arranges the transport of the goods. Therefore, the Council introduced a new rule aimed at simplifying the rules to allocate the transport of the goods in chain transactions.
As of 1 January 2020, the standard rule is that the intra-community transport should be allocated to the supply made to the intermediary, who arranges the transport (in the example the supply by party A to party B).
There will be an exception to this standard rule if the intermediary communicates to his supplier his VAT identification number granted by the EU Member State from which the goods are dispatched or transported. In that case, the transport of the goods should be allocated to the supply made by the intermediary to his customer (in the example the supply by party B to party C).
Please note that this quick fix is only applicable if the intermediary dispatches or transports the goods either himself of through a third party acting on his behalf and for his account. This means that this quick fix is not relevant where the first supplier or the final customer in the chain arrange the transport of the goods.
The Belgian VAT authorities are currently working on an administrative circular letter with respect to the implementation of the quick fixes in Belgium.
If you would like to know more about this quick fix, please contact your local KPMG Tax Adviser.