Exemption of an intra-Community supply
The VAT Directive lays down a number of conditions for exempting intra-Community supplies of goods from VAT.
In particular, the supplier must be able to prove that the goods have been dispatched or transported from one European country to another. He must be in possession of all documents proving that the goods were actually dispatched or transported. These documents include contracts, purchase orders, transport and payment documents.
Two additional presumptions
However, differences in approach between Member States in the application of this VAT exemption cause difficulties and are a source of legal uncertainty for businesses. In order to improve the system, a European regulation ("quick fixes") came into force in all European countries on 1 January 2020 with the aim of harmonising the evidence of transport.
Two rebuttable presumptions now allow the seller to claim exemption from VAT on intra-Community supplies.
Where the seller undertakes the transport, it will be presumed that the goods have left the country of departure of the transport when he has at least two of the following items of evidence:
- Documents relating to the transport of the goods such as a signed CMR letter;
- A bill of loading in case of air or sea transport;
- An air freight invoice or an invoice from the carrier of the goods.
A single piece of evidence mentioned above combined with the following piece of evidence:
- An insurance policy for the transport of the goods;
- Bank documents proving payment for the transport of the goods;
- An official document issued by a public authority, such as a notary, confirming the arrival of the goods in the country of destination;
- A receipt issued by a warehousekeeper in the country of destination attesting to the storage of the goods in that country.
The evidence will have to be non-contradictory (i.e. consistent with each other) and be issued by two parties independent of each other, the seller and the buyer.
The same evidence will be required where the buyer is responsible for the transport of the goods, with the addition of a written declaration by the buyer that the goods have been transported by him or on his behalf, to be provided to the seller no later than the 10th day of the month following delivery.
A European regulation for nothing?
In practice, the EU Regulation is in direct conflict with the reality on the ground, so that the additional evidence for intra-Community deliveries probably has little impact on businesses. For example, suppose a Belgian company sells and ships goods to a French customer with its own trucks. In this case, at least one basic piece of evidence is not obtainable as it will not have a CMR letter, bill of lading or invoice from the goods carrier. Alternatively, the Belgian seller could use a third party carrier. But in this case he will also have difficulty in complying with the conditions imposed by the European regulation. The third party carrier will certainly issue the CMR letter and an invoice ... but this will not be sufficient since the regulation requires that these two documents be issued by two independent parties! The seller could then imagine combining one of these two documents with a bank statement proving the payment of the transport. This solution seems very complicated to put in place when the company has to deal with dozens or hundreds of transactions per month, even though it must be admitted that it would be easier to implement than one that would consist of the Belgian company asking a foreign notary to confirm the arrival of each good in the destination country!
From these few real-life examples, it is difficult to see how a European company can reasonably meet the requirements of the European regulation.
The expert's eye
In the end, the seller has two possible options. Either he manages, after much effort and with a lot of luck, to gather the new documentation required by the European regulation in terms of proof. In this case, the conditions for VAT exemption will be presumed to be met and the tax authorities will not be able to demand the production of additional documents. Or the seller remains unable to produce the new documents and the status quo applies. In this case, he will still have to prove the reality of the transport of the goods out of his country by other means as is currently the case, with the legal uncertainty that this situation entails.