Allocation of transport in supply chains

Your company is involved in a cross-border supply chain (e.g. ABC type) starting in Germany and the middleman is in charge of the transport. In such a case, determining which supply is eligible to the VAT exemption is a tricky exercise.

In order to put an end to divergent interpretations by the Member States on this issue, a new rule was introduced in the VAT Directive on 1 January 2020 (one of the Quick Fixes).

The German Law even goes a bit further than the VAT Directive and provides rules for cross-border supply chains to non-EU countries.

Supply chain ABC

Supply chains where the goods are transported directly from the first seller in the chain to the final purchaser, often gave rise to discussions as to the imputation of the transport. The VAT exemption can indeed apply to one single supply only, i.e. the one which the transport is allocated to.

Quick Fixes implemented in Germany

Following the introduction of the Quick Fixes (as per 01/01/2020), when the middleman B is in charge of the transport, the intra-EU transport is deemed to take place in the first relationship (A-B). However, if B provides A with a VAT ID number of the country of departure, the transport is then allocated to the second relationship (B-C). This rule is applicable to cross-border supply chains withing the EU only.

In Germany, the legal text goes a bit further as it also covers supply chains with exportation outside the EU. It states that the transport outside the EU is ascribed to the second relationship (B-C) if B acts under a German VAT ID number (Umsatzsteuer-Identifikationsnummer) or a tax number (Steuernummer).

There are indeed two kinds of registration numbers in Germany. The “Steuernummer” is received by all businesses having a VAT liability in Germany (e.g. because of domestic supplies of goods). In addition, an “Umsatzsteuer-Identifikationsnummer” is granted to businesses performing intra-EU transactions.