Part 2: The Exemptions of Intra-Community Supplies of Goods
This is the second in a series of four blogs providing explanatory detail to the EU’s “2020 Quick Fixes”. This article focuses on updated guidance around the Exemption of Intra-Community Supplies of Goods coming into effect on 1 January 2020.
The EU Implementing Regulation contains a scheme for supplying the evidence required to treat Intra-Community supplies of goods (i.e. between EU Member States) as VAT free. If the supplier arranges the transport of the goods, or the transport is arranged on their behalf, two independently obtained pieces of evidence from the following list are needed to demonstrate that the goods have genuinely been shipped to another Member State. These include:
- Documents that act as proof of dispatch, e.g. a signed CMR/consignment note, bill of lading, airfreight invoice or carrier’s invoice
- An insurance policy covering the dispatch or transport of the goods, or bank documents that prove the payment
- Documents issued by a public authority validating arrival of the goods in the destination country
- A receipt issued by a warehouse keeper in the destination country substantiating their entry into storage.
If instead the customer arranges the transport, the supplier must also obtain a receipt from the customer to confirm that the goods have arrived in the destination country.
Going forward, the terms of the Implementing Regulation will become standardised in all Member States, overriding any existing local national legislation. This should improve legal certainty for businesses in determining when they can zero rate their transactions and will facilitate a uniform cross-border business process to all EU goods movements. If for any reason the tax authority challenges the correctness or authenticity of one or more of the items of evidence, the VAT relief will still apply if the supplier is able to produce alternative documentation to meet the requirement (i.e. a minimum of two other independently obtained items of evidence from the above bulleted list).
Some EU countries have already unilaterally introduced some or all the “2020 Quick Fixes” in their local VAT legislations. However, the EU formalises these measures across the board from 1 January 2020. Businesses are encouraged to analyse the new framework to see how they can in turn make improvements and efficiencies in their Intra-Community goods movement processes.