Revisiting the EU VAT “2020 Quick Fixes”

Part 4 – Call-Off Stock Arrangements

This is the last in a series of four blogs providing explanatory detail to the EU’s “2020 Quick Fixes” that aim to standardise certain VAT rules throughout the EU.   Part one of this series focussed on VAT Identification of the Customer, part two provided guidance on the Exemptions of Intra-Community Supplies of Goods and part three, looked at changes around the handling of Chain Transactions which take effect from 1 January 2020.  Here, we discuss the updated guidance around the handling of Call-Off Stock Arrangements which again, are effective from 1 January 2020.  

What is call-off-stock?

The phrase “call-off stock” describes circumstances where a business dispatches goods to a storage location for a customer whose identity and VAT registration number are already known to the supplier at the time the movement takes place, and who is entitled to extract goods from that stock on-demand.  Under the present VAT rules, the physical transfer of the goods to a warehouse in the other Member State results in a theoretical Intra-Community supply of goods by the supplier in the Member State of departure and theoretical Intra-Community acquisition by the customer in the country where the warehouse is located. Any subsequent removal of goods from stock is a domestic supply of the goods in the destination country.  In principle, this would require the supplier to register and account for VAT in the destination country.  Some Member States have simplification measures in place to mitigate VAT cash flow and administrative requirements. 

Quick Fix

Going forward, under specified conditions, physical transfer of the goods between Member States won’t constitute a theoretical Intra-Community supply, and the supplier will never be required to VAT register in the destination country. This is intended to ensure that call-off arrangements are identical in each EU country.  

The specified conditions are:

• Both parties are Taxable Persons as defined in the EU VAT Directive;
• The supplier doesn’t have a physical business establishment in the destination country (but can still be VAT registered there; also, there is no requirement that the supplier has a physical establishment in the country of dispatch);
• The purchaser “calls-off” the goods within a twelve-month period;
• Both the supplier and customer record the goods movement in a register (although the register can in practice be maintained by a third party);
• The supplier records the movement in its EC Sales List or equivalent periodic recapitulative statement;
• The purchaser has a VAT registration in the destination country;
• The purchaser’s identity and VAT registration number are already known at the time the goods are dispatched;
• The goods are moved from one EU Member State to another (i.e. the transaction does not involve an in-country movement, or imports or exports between an EU Member State and a non-EU country);
• Goods that cannot be readily tracked on an individual item basis are identified in the stock system;
• If an agreement between a supplier and customer ends, a new agreement with that customer or another must start on or before the contract end date for the call-off simplification rules to be maintained.

Normally, if any goods are lost, stolen or destroyed following their arrival into storage in the destination country, the call-off stock arrangement ceases to be fulfilled and the simplification can no longer apply.  Here, the dispatcher would be required to VAT register and account for VAT in the destination country.  However, it’s anticipated the revised rules will include a provision to ensure this doesn’t need to happen if the value of the items lost, stolen or destroyed is below a tolerance threshold.

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.