Quick Fixes 2020: Conditions for VAT Exemption on Intra-Community Deliveries
The VAT Quick Fixes redefine the rules of the game and harmonize the conditions for exemption from VAT on intra-community deliveries (ICD) carried out by companies within the European Union. The Quick Fixes 2020 were designed to simplify cross-border transactions and strengthen fiscal cooperation between Member States.
More than just administrative simplification, these “quick fixes” also aim to combat VAT fraud. As such, understanding and rigorously applying these new directives is no longer an option but an imperative necessity for businesses and transportation professionals.
In this article, we provide an overview of the “VAT Quick Fixes 2020“. B2B enterprises, carriers, and freight forwarders: this article was designed to help you familiarize yourselves with these new regulations and optimally integrate them into your intra-community operations.
Understanding the VAT Quick Fixes 2020
The Quick Fixes are rules implemented to simplify and strengthen the conditions for exemption from VAT on intra-community deliveries.
Definition of Quick Fixes
The “VAT Quick Fixes 2020” are a set of measures adopted by the European Union to simplify intra-community transactions and combat VAT fraud. These provisions, introduced on January 1, 2020, aim to harmonize and simplify certain VAT rules for businesses conducting sales of goods between multiple EU member states. The initiative is part of a broader effort by the EU to modernize the VAT system and encourage closer fiscal cooperation among member states.
Measures Introduced for the Exemption of Intra-Community Deliveries of Goods
EU Directive 2018/1910 highlighted three major axes to optimize and clarify intra-community transactions regarding VAT. First, it emphasized the need to increase the importance of the VAT identification number in the context of deliveries between member states. Second, it sought to more clearly define the rules governing “chain” sales. Lastly, a third focal point is the simplification of procedures related to stocks kept under deposit agreements. In this context, we will explore in this article how these improvements have been articulated and implemented through the VAT Quick Fixes 2020.
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VAT Exemption Conditions for Intra-EU Deliveries Provided by the 2020 Quick Fixes
As part of implementing the “VAT Quick Fixes 2020,” companies must comply with three essential conditions to exempt their intra-community deliveries from VAT:
It is imperative that these three criteria are met to invoice VAT-free.
Verifying the Purchaser's Valid VAT Number
Since January 1, 2020, the requirement for the buyer to have a valid VAT number in the destination country of the goods, registered in the VIES (VAT Information Exchange System) database, has become mandatory for suppliers to benefit from VAT exemption on intra-community deliveries.
It is crucial that this number is not only valid but also active at the exact time of delivery; ongoing registration is not accepted as proof.
What are the Risks if the Purchaser's VAT Number is Invalid?
In case of non-compliance, meaning if the buyer’s VAT number is not valid at the time of the transaction, the supplier is obliged to apply the VAT of the departing member state on the invoice. Choosing not to apply this VAT exposes the seller to the risk of adjustments in the case of a tax audit: in addition to penalties, the net amount of your invoice will be considered by the tax authorities as an inclusive amount, resulting in a loss equivalent to 20% of the VAT on your concerned turnover.
Moreover, the application of VAT on an intra-community delivery invoice puts the buyer in a delicate position, depriving them of the ability to reclaim the invoiced VAT and exposing them to the risk of financial sanctions in the destination member state if they do not quickly rectify their situation.
To avoid these complications and ensure secure and regulated collaboration, it is necessary to integrate a systematic verification of your clients’ VAT numbers into your company processes. Use the VIES platform for this verification or our VAT number verification tool. Make it a non-negotiable step in your invoicing procedure to guarantee compliance and peace of mind in all your intra-community commercial transactions.
Check the validity of an intra-community VAT number EU
Validation du numéro de TVA par le VIES :
Etat membre :
Numéro de TVA :
Nom de l'entreprise :
How to Verify Your Client's Intra-Community VAT Number? Quick Fixes VAT: Strengthening Transport Evidence
In the context of the “Quick Fixes VAT 2020”, particular attention has been paid to the evidence of transport for intra-Community deliveries. This is one of the mandatory conditions that must be met to allow for the exemption of VAT on cross-border operations. In this regard, European lawmakers have opted for strengthening obligations concerning evidence of transport to attest to the effective realization of the intra-Community transaction.
Evidence of Transport if the Supplier Organizes the Transport
In this situation, the supplier is obligated to provide a minimum of two non-contradictory pieces of transport evidence from two distinct categories of documents.
The seller may provide two documents from the following list:
In the absence of providing two proofs from the list above, the supplier may provide one document from the previous list and one document from the following list:
If you need further assistance, feel free to ask.
Transport Evidence When the Buyer Organizes Transport
When the buyer is responsible for organizing the transport, they are obligated to provide their supplier with copies of two proofs of transport, under the same conditions as when the seller handles the transport (as mentioned above). In addition to these two pieces of evidence, the buyer must also provide a written acknowledgment of receipt of the goods and send it to their supplier before the 10th day of the month following the transaction. This acknowledgment must clearly indicate:
The absence of these proofs, whether due to an omission, delay, or any other obstacle, has direct tax implications. Without these transport documents, the supplier cannot invoice without VAT and must apply the VAT rate in effect in the country from which the goods originate.
Filing the Tax Statement: EC Sales List
Each month, suppliers are required to file a tax statement for the intra-community deliveries they have made. In France, this is called the VAT Summary Statement (État Récapitulatif TVA or ERTVA), and in other European countries, it is known as the EC Sales List.
This statement lists intra-community deliveries made by a supplier to buyers in other EU Member States, with an important tax purpose: to indicate to European administrations the VAT numbers that will be subject to reverse-charge VAT on these operations.
With the introduction of Quick Fixes in 2020, this regulation has changed, tightening the conditions for exemption from VAT on intra-community deliveries. Now, declaring an operation on the VAT Summary Statement is mandatory for the supplier to claim the VAT exemption: if they do not declare their intra-community deliveries in the EC Sales List, they simply do not have the right to invoice without VAT.
If the supplier fails to submit this tax statement for a given month, they risk facing tax adjustments during an audit. However, the Directive offers some flexibility: if the supplier declares the operation in the EC Sales List of the following period, then the exemption remains valid.
The Quick Fixes Checklist for Intra-Community Delivery Exemptions
Following this checklist will help to ensure that you are in compliance with the regulations, thereby making your intra-community transactions exempt from VAT.
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The Rules Defined by the 2020 Quick Fixes for Stocks under Consignment or Deposit Contracts
Since the implementation of the Quick Fixes, the management of intra-community VAT for consignment and deposit contract stocks has seen significant improvements aimed at simplifying and harmonizing transactions within the EU. Before these changes, this type of stock transfer required the supplier to register for VAT in the storage country (the buyer’s EU Member State). However, with the introduction of the Quick Fixes, notable easing has been observed:
If the merchandise remains stored at the client’s location for more than 12 months, the supplier becomes liable for fiscal and reporting obligations in the storage country:
Changes Brought by VAT Quick Fixes on Chain Sales
Definition of Chain Sales
Chain sales involve commercial transactions that include at least three companies established in different Member States, with only one intra-community delivery of goods taking place. This means multiple financial flows but only one physical flow. That is, the goods are delivered directly from the initial seller or an intermediary to the final customer, without going through the various actors involved in the transaction.
For example, in the triangular sales scheme, although the goods are physically delivered only once (from supplier A to customer C), there are two legal transfers of ownership: the first between A and the buyer/reseller B, and the second between B and C.
It is essential to understand chain sales as they pose particular challenges in terms of VAT, especially to identify the operation exempted from VAT as an “intra-community supply.” The rules for chain sales have been developed to ensure that VAT is correctly applied at each stage of the chain, avoiding both double taxation and non-taxation.
The Contribution of 2020 Quick Fixes on Chain Sales
The rule defined by the Quick Fixes is as follows: Only one sale can be exempted from VAT and considered as an intra-community delivery (ICD); the intra-community delivery is attributed to the supplier who organizes the transport. All other sales are local sales.
Let’s take an example to explain the rule: A chain transaction is made with 4 companies.
In the case where the French supplier (A) organizes the transport:
The delivery between A and B is considered as an intra-community delivery and therefore exempt from VAT. The other operations are considered as local sales in the destination country. The intermediate companies B and C must thus register in Germany.
In the case where the final customer D organizes the transport:
The delivery between C and D is considered as an intra-community delivery and therefore exempt from VAT. B and C must register for VAT in France.
Each intra-community delivery must be reported in a VAT Summary Statement or EC Sales List in the country of origin of the goods.
I hope this translation meets your needs. If you have any further questions or need additional clarifications, feel free to ask.
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