Eleven European countries have approved the quick fixes made to four EU council directives which will be in effect from 1st January 2020. All EU Member States will be required to adopt these EU VAT changes, regulations, and administrative provisions necessary to comply with the Directive by 31 December 2019.
The list of countries who have approved the 4 EU quick fixes so far include Austria, Belgium, Bulgaria, Croatia, Denmark, Finland,Germany, Hungary, Lithuania, Malta and Slovenia.
The four EU quick fixes to the legislation are as follows:
- Call-off stock: The text provides for a simplified and uniform treatment for call-off stock arrangements, where a vendor transfers stock to a warehouse at the disposal of a known acquirer in another member state;
- The VAT identification number: To benefit from a VAT exemption for the intra-EU supply of goods, the identification number of the customer will become an additional condition;
- Chain transactions: To enhance legal certainty in determining the VAT treatment of chain transactions, the texts establish uniform criteria;
- Proof of Intra-EU supply: A common framework is established for the documentary evidence required to claim a VAT exemption for intra-EU supplies.
Background to these EU VAT changes
The current EU VAT system, which was introduced on a temporary or transitional basis back in 1993, in general is based on the taxation of supplies of goods and services in the country where the supplier is established.
The new definitive VAT system will be based on the taxation of goods and services in the country of consumption. Definitive VAT system will be introduced from July 2022 (expectation). It will replace the temporary system that was introduced in 1993 and introduce a new system known as the ‘destination’ system, whereby the supply of goods and services will be taxed in the country of consumption.
In the meantime, the EU has agreed a number of quick fixes designed to simplify the existing VAT system in relation to international trade. The Council of the European Union, in its conclusions of 8 November 2016, invited the European Commission to make certain improvements to the Union VAT rules for cross-border transactions with regard to the role of the VAT identification number in the context of the exemption for intra-Community supplies, call-off stock arrangements, chain transactions and the proof of transport for the purposes of the exemption for intra-Community transactions.
In light of the request made by the Council and that it will take several years for the definitive VAT system for intra-Community trade to be implemented, these specific measures, intended to harmonise and simplify certain arrangements for businesses, are appropriate.
Sources: VAT Update & Ksenia Cipek, Dame of Honour.