4. Harmonised proof of Intra-EU supplies
The final quick fix attempts to harmonise the proof of transport rules for zero-rating Intra-EU supplies - ie, the means by which a supplier can evidence the fact that the goods were dispatched from one MS to another. MS currently have discretion as to the type of documentation they will accept as proof of transport which can lead to legal uncertainty and administrative complexity for businesses trading across the EU. Under the new rules, it will be presumed that the goods were transported to another MS as follows:
- Where the supplier arranges transport of the goods:
○ The supplier holds two items of non-contradictory transport evidence issued by independent parties - eg, signed CMR, bill of lading, transport invoice; or
○ The supplier holds one item of transport evidence and one other item of non-contradictory evidence such as transport insurance documentation, a bank statement proving transport payment, notary confirmation of arrival, warehouse confirmation of arrival.
- Where the customer arranges transport of the goods:
○ The supplier holds the evidence set out above, plus written confirmation of the transport from the customer issued by the 10th of the following month and which refers to the MS of destination.
- The tax authorities can rebut the presumption in cases of abuse.
- The current proof of transport rules applied in national laws by MS remain valid.
- It should be the choice of the supplier, and not the choice of the tax authorities, to apply the proof of transport presumption as set out above. However, we wait to see whether any MS replace their current national law with the new presumption which looks difficult to satisfy in practice.
- The Notes highlight that if a supplier or customer use their own means of transport it will not be possible to meet the presumption since the condition of obtaining non-contradictory evidence issued by two different parties that are independent of each other cannot be satisfied. Although the Notes do not expand on this point, presumably the current proof of transport rules applied in national VAT law by individual MS would need to be fulfilled.
- Where the tax authorities’ wish to rebut the presumption, the burden of proof rests with the tax authorities.
Questions for businesses to consider:
1. Do you currently face any issues when it comes to evidencing your Intra-EU supplies of goods based on the current VAT legislation applied in the MS of dispatch - ie, collecting and archiving appropriate documentation to provide to the tax authorities when requested?
2. MS may react differently to the new rules and it will be important to understand how each MS implements these measures in law and in practice - do you have a plan for how you will keep up to date with the requirements?
In response to the nature and complexity of some of the forthcoming changes, businesses should consider the impact on their VAT compliance processes (including foreign VAT registrations, VAT refunds, documentation and evidence requirements), and supply chains in the following ways, in particular:
1. Do the new call-off stock rules impact on arrangements already in place, or do they present opportunities for implementing call-off stock arrangements going forwards?
2. Do the new chain transactions provisions require analysis as to their impact on current supply chains, contracts and order processes between supplier and customer.
3. How best to review and validate VAT ID numbers held in the ERP master data now and on an ongoing periodic basis?
4. Are the current processes and documentation obtained as proof of Intra-EU supplies sufficiently robust to substantiate zero-rating under audit conditions?
In the meantime, we anticipate that by the end of the year all MS will have implemented the quick fix legislation into national law, although in some cases this may amount to no more than a straightforward reproduction (copy-paste) of the relevant piece of EU VAT law (Directive / Regulation) into the domestic statute book. We also expect the Commission’s Notes to be finalised towards the end of this year or at the beginning of 2020. Whilst the Notes should aid legal interpretation, it would also be wise to look out for specific MS guidance to understand how individual MS intend to implement and apply the rules in practice in their jurisdiction. Overall, the picture remains unclear in many areas and complex - as set out above, any significant changes to business operations and processes will need time and careful consideration for their efficient and effective execution.
For a deeper discussion of how these issues might affect your business, please call your usual PwC indirect tax specialist or if you prefer to speak to one of our global indirect tax policy specialists, please contact:
Tom Corbett, Dublin: +353 (1) 792 5462 firstname.lastname@example.org