INTRA-EU VAT

Transposition of Council Directive 2018/2010: new changes to the management of intra-EU VAT

Written by Cyrielle Agut

Employment and tax lawyer

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The transposition of this new EU Directive aims to harmonise and simplify three tax aspects of intra-EU transactions, with effect from 1 January 2020.

1. Intra-EU VAT exemption

A significant number of Spanish self-employed workers and businesses carry out intra-EU supplies of goods. Up until 31 December 2019, this type of transaction could be treated as a transfer of goods with subsequent delivery in the EU member state where the goods arrive. From 1 January 2020 onwards, such transactions are treated as intra-EU supplies of goods that are exempt for the supplier in their own member state (i.e. the state from which the goods are dispatched), and as intra-EU acquisitions in the member state of destination (i.e. the state where the goods arrive).

The implementation of this new EU Directive modifies all the rules governing exemptions for intra-EU supplies, as a number of requirements must now be met. These are as follows:

• The acquiring business must retain proof of intra-EU transport.
• The acquiring business must hold an intra-EU VAT Tax Identification Number (NIF) (this can be obtained by registering with the Spanish Tax Authority's Register of Intra-EU Transactions). In addition, this number must appear as active in the VAT Information Exchange System (the VIES system).

If these three conditions are not met, a Spanish business carrying out an intra-Community transaction must issue a sales invoice with Spanish VAT, which must be paid to the Spanish Tax Agency.

2. Call-off stock (consignment sales)

From 1 January 2020, the rules aim to simplify the application of the exemption for call-off stock transfers by treating the transfer of such goods as a single intra-Community transaction, provided the following conditions are met:

• The supplier does not have a permanent establishment in the Member State to which the stock goods are dispatched.
• The supplier must be aware of the intra-Community Tax Identification Number (NIF)-VAT number of the recipient of the goods for VAT purposes.
• In order to apply the intra-Community VAT exemption, the supplier is required to maintain a "call-off stock" register, which must include the identification of the taxable person acquiring the goods.
• The goods must be delivered within a period of 12 months.

3. Chain transactions

A chain transaction is one in which the goods involved pass through several successive supplies — specifically, from the supplier to an intermediary, and then from the intermediary to the end customer.

On this tax point, the directive seeks to establish to whom the transport of the goods will be attributed. This designation will in turn determine which party benefits from the applicable exemption.

In this scenario, the intra-Community supply will be exempt for the intermediary operator where that party notifies the supplier in advance of its intra-Community Tax Identification Number (NIF)-VAT number in the Member State from which the goods are dispatched. Conversely, if the intermediary fails to provide this information, the only exempt supply will be that made by the supplier.

In day-to-day practice, the key considerations for businesses will be:

• Ensure you have your commercial partner's Tax Identification Number (NIF) for intra-EU VAT purposes, so that your tax adviser can file Form 349. If no intra-EU Tax Identification Number (NIF)-VAT number is available, the invoice must be issued at the VAT rate applicable in the supplier's Member State.
• Keep a register of goods transfers carried out under call-off stock arrangements.
• As a general rule, the supply made by the supplier (holding an intra-EU Tax Identification Number (NIF)-VAT number) to the intermediary in chain transactions will be exempt. Alternatively, if the intermediary holds an intra-EU Tax Identification Number (NIF)-VAT number in the supplier's Member State, the transaction between the intermediary and the end customer will benefit from this exemption.
• Share this information with your tax adviser to ensure the simplified exemption rules apply correctly to your intra-EU transactions.

If you would like further information from our team of tax specialists and economists at "GESOFFICE", please get in touch with us using this form.