Vat exempt intracommunity delivery

Vat exemption: EU vat number is must from 2020

The most significant change in the EU VAT system in 2020 was the tightening of the conditions for the application of the Community tax exemption with the ‘ must have EU vat number ‘ criteria, and the proof of exportation of a product to another Member State.

However, a number of questions have been raised, mainly about the interpretation of the Community Regulation. Concerning these issues, the tax authority has published two leaflets, the main points of which are described in this article (Proof of delivery of a product to another Member State for intra-Community supplies from 2020; Conditions for exemption from intra-Community supplies – the latter establishing the obligation to have EU vat number).

 

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Issues related to tax exemption

According to the law, the conditions for the tax-free sales in the Community are as follows:

(1) The product shall be certified as having been shipped to another Member State and shall have been transported by the seller, the buyer or on their behalf.

(2) The goods shall be sold to another person, acting as a taxable person or a non-taxable legal person in a Member State other than that of the dispatch or the departure place of the transport, and the taxable person or non-taxable legal person to whom the sales is supplied shall have a VAT identification number in a Member State other than that of dispatch or departure place of the transport of the goods and communicated this VAT identification number to the seller.

(3) The vendor of the product shall correctly submit his recapitulative statement (“the exemption shall not apply if the taxable person to whom the tax is payable … has failed to fulfill his obligation to submit the recapitulative statement or has done so incorrectly or incompletely”).

In connection with the above, the leaflet sets out two principles (which are more permissive than the first reading of the Directive and Act CXXVII of 2007 on Value Added Tax [VAT Act]).

The first provision relates to the customer’s EU vat number:

“In the absence of the tax identification number of the buyer in other Member States, or in the absence of the communication thereof, the exemption shall not apply. But provided that the tax identification number is subsequently communicated by the buyer (even after the transaction, and tax number was valid at the time the tax became chargeable) and all other conditions for the tax exemption are met, then the seller may apply for the tax-free treatment of the transaction, subject to any necessary adjustments.”

It is worth pointing out that if the customer’s tax identification number in another Member State is only disclosed to the seller ex post, the transaction can be treated as a tax exemption retroactively, subject to the other conditions for exemption.

Most issues – the new condition in the legislation – were raised by the recapitulative statement as a condition for exemption. The tax office leaflet suggests:

“If the taxable person discovers, before commencing the audit, that the recapitulative statement has not been submitted or is incomplete or incorrect, he may rectify it without further justification.”

The lodging of a summary declaration  according to Article 4/A of the VAT Act point I of Annex I is a prerequisite for the treatment of an intra-Community supply of a product as exempt. Where the tax authority finds during an audit that the recapitulative statement has not been submitted or has been incorrectly submitted, it shall provide the taxable person with an opportunity to rectify it, provided that the taxable person certifies that the mistake happened in good faith. If, however, the taxpayer themselves notice the error or deficiency prior to the commencement of the inspection, they may rectify it without further justification.

Proof of delivery of the product

Council Implementing Regulation (CIR) 2018/1912 of 4 December 2018 amending Implementing Regulation (EU) No 282/2011 as regards to certain tax exemptions for intra-Community transactions shall be directly effective and applicable in all Member States from 1 January 2020. This decree was also interpreted by the tax office in a leaflet (Proof of delivery of the product to another Member State in the case of intra-Community supplies from 2020). Three points are worth highlighting:

The first and most interesting question when interpreting the Regulation is the interpretation of the presumption. The Regulation stipulates that if a particular taxable person holds certain documents, he shall be deemed to have dispatched the product: that is to say, they are entitled to a presumption in relation to the dispatch. However, it is not clear how, in practice, the tax office will assess it if the taxpayer does not have all the documents (which are often very difficult to obtain). That is, how does the tax authority act if the taxable person is not protected by the presumption in the Regulation? The prospectus answers this question as follows:

“… If the taxable person supplying the goods is subject to the provisions of Section 45a of CIR and the other conditions for exemption set out in Article 89 of the VAT Act, they may handle the transaction exempt and use these documents to justify the exemption above in the proceedings at the tax office. Thus, if, for example, a taxable person presents documents under the CIR during an inspection, the tax authority may not require additional proof of delivery from the seller unless they are rebutted by the tax office. For example, if the tax authority proves that, contrary to the evidence in the documents, the product has not yet been shipped to another Member State, the presumption is rebutted. In the event the tax office proves that the documents presented do not comply with the requirements of the CIR (eg, they were not issued by an independent party), this means that they do not meet the requirement of Section 45a of the CIR and the presumption of delivery itself is not met. However, in the latter case, the seller shall have other means of proof that the delivery has been completed. ”

If the taxable person presents documents under the CIR, the tax authority may not require the taxable person to provide further evidence to justify the delivery (unless the presumption is rebutted). However, if the presumption is rebutted, the taxpayer may still justify the delivery with other credible evidence as per the article 45a of CIR, or, failing these, any other document evidencing the fact of the delivery.

If the presumption does not materialize, the question arises as to what kind of certificate can be accepted. As regards proof of delivery, the leaflet states:

“However, it is important to underline that the absence of a taxable person’s certification under the CIR does not automatically mean that the delivery of the product is not justified and thus cannot be exempt. Taxpayers will continue to have the possibility, aside from the provisions of the CIR, to prove that the product has been dispatched or transported to another Member State. The latter shall continue to be guided by the tax office leaflet dated 19 June 2013 on how to verify the shipment of the Product to another Member State in the case of intra-Community sales. ”

According to the prospectus, in the absence of the certificates provided for in the new article of the CIR, dispatch may also be justified according to the tax office leaflet previously disclosed on this subject, provided the content and purpose of such other certificates clearly show the fact of shipment to another Member State. It is worth noting that with the above, the prospectus broadens the way of certification, stating that it is not obligatory to apply the regulation (otherwise directly applicable), since the tax office also accepts other documents to prove the delivery.

Another interesting issue was the interpretation of the concept of ‘independent party’, since under the Regulation certificates of delivery can be issued by two parties, independent of the seller and the buyer.

“The CIR does not specify who is to be understood as independent parties for the purposes of this Article. Therefore, to define independent parties, the provisions of Section 259 (13) of the VAT Act shall be applicable, meaning an independent party shall mean a party who is not related to the purchaser or vendor under Section 259 (13) of the VAT Act. ”

Therefore, Section 259 (13) of the VAT Act applies, and according to this – inter alia – related companies are not independent parties. Based on these, for the  CIR 45a., a document from related parties cannot be used as evidence if the taxable person wishes to set up a presumption set out in the regulation.

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