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VAT Quick Fixes

A first set of new VAT rules, called quick fixes, will come into force on January 1st, 2020 for intra-EU trade in goods. These new rules are part of a major VAT reform plan initiated by the European Commission that should lead to a Copernican VAT revolution in Europe in 2020 and beyond.

In about three weeks, this first implementation will notably change the way to treat the following issues: proof of IC delivery (see our previous Flash here), call-off stocks arrangements (see our previous Flash here), chain supplies, exemption of IC supply.

VAT registration thresholds will be applicable to non-established entities as well

EU finance ministers reached a political agreement on an update to already-existing special VAT rules for EU SMEs, which should enter into force in January 2025. The new rules will ensure a uniform domestic turnover threshold of maximum €85,000 for companies doing business only in their own Member State and an EU-wide €100,000 threshold in turnover for SMEs doing business cross-border to be eligible for exemption in another Member State.

More precisely, each Member State would be authorized to exempt the supply of goods and services made within its own territory by taxable persons established in that territory provided their annual turnover, attributable to such supplies in the said Member State, does not exceed a defined threshold. This threshold should be no higher than €85,000 or the equivalent in national currency.

The Member States that put in place such an exemption should also grant that exemption to the supplies of goods and services in their own territory made by taxable persons established in another Member State, provided that the following conditions are fulfilled:
(a) the annual turnover of that taxable person in the whole EU does not exceed €100,000;
(b) the value of the supplies in the Member State where the taxable person is not established does not exceed the threshold applicable in that Member State for the granting of the exemption to taxable persons established in that Member State.

The threshold set by a Member State should not differentiate between taxable persons who are established and those who are not established in that Member State.

Generalised reverse charge mechanism

Czech Republic received the authorization from the European Council to apply the generalised reverse charge mechanism in accordance with Article 199c of Directive 2006/112/EC. This authorization is valid from 1 January 2020 to 30 June 2022.

Article 199c of Directive 2006/112/EC allows Member States to introduce a generalised reverse charge mechanism (‘GRCM’) on non-cross-border supplies of goods and services, providing that the person liable for payment of VAT is the taxable person to whom all supplies of goods or services are made above a threshold of €17,500 per transaction.