VAT quick fixes 2020 part 4: valid VAT identification number to apply the exemption for intra-community supplies
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 third quick fix which relates to two new material conditions in order to apply the exemption for intra-community supplies.
Currently, being in the possession of a valid VAT identification number from your customer is only a formal requirement for applying the VAT exemption for intra-community supplies. According to the Court of Justice of the European Union, a taxable person is entitled to apply the VAT exemption if the material conditions of the VAT exemption are met. In other words, the VAT exemption cannot be refused merely because of the fact that the supplier did not receive a valid VAT identification number from his customer. In order to clarify the situation and prevent fraud, the Council has introduced two new material conditions.
As of 1 January 2020, the use of a valid VAT identification number of the customer will be a material condition of the VAT exemption for intra-community supplies. If the customer does not communicate a valid VAT identification number, the supplier cannot apply the VAT exemption and will need to invoice local VAT of the EU member state of dispatch of the goods. This local VAT will in principle not be recoverable for the customer.
In addition, filing a correct EC sales list will also become a material condition. As a result, the VAT exemption may be rejected if the intra-community supply is not correctly or timely reported in the EC sales list.
If you want more information about the quick fixes, you can watch our webcast, or you can contact your local KPMG Tax Adviser.