The VAT Directive sets out a number of conditions for exempting from VAT the supply of goods within the frame of certain cross-border transactions. The exemption from VAT for intra-Community supplies is granted to the vendor if three material conditions are met: (1) the power to dispose of the goods as owner must have been transferred to the purchaser, (2) the goods must be physically dispatched from one Member State to another and (3) the seller must be able to demonstrate that the customer is a taxable person acting as such.
Differences of interpretation between Member States in the application of this VAT exemption have created difficulties and are currently a source of legal uncertainty for companies. In order to provide a practical solution for businesses and ultimately improve intra-Community trade of goods, the European Council, at the instigation of the Commission, approved an implementing regulation aimed at harmonizing evidences of transport, which will enter into force on January 01, 2020 in all Member States.
Two rebuttable presumptions will be introduced in the VAT legislation allowing the seller to claim exemption from VAT in respect of intra-Community supplies.
a) The seller is in charge of the transport
It will be presumed that the goods have been dispatched outside of the Member State of the seller and to another European country when the seller who undertakes the transport 1) indicates that the goods have been transported or dispatched by him or by a third party on his behalf and 2) that he is in possession of :
• at least two pieces of evidence as follows:
- Documents relating to the transport of goods such as a CMR letter with signature, a bill of lading in the case of air or sea transport, etc.
- An invoice from the carrier of the goods.
• any single above mentioned piece of evidence combined with one of the following :
- An insurance policy for the transport of 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 warehouse keeper in the country of destination attesting to the storage of the goods in that country.
The pieces of evidence must be non-contradictory (i.e. consistent with each other) and delivered by two parties who are independent of each other, the seller and the buyer.
b) The purchaser is in charge of the transport
It will be presumed that the goods have been shipped outside the Member State of the seller to another European country when the buyer who undertakes to transport the goods from the Member State of the seller to another European country transmits to the seller the same evidence as mentioned above with, in addition, a written declaration from the buyer that the goods have been transported by or on behalf of the buyer and indicating the country of destination of the goods. This document must mention the date of issue, the name and address of the purchaser, the quantity and nature of the goods, the date and place of arrival of the goods and must be communicated to the seller no later than the 10th day of the month following delivery.
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Companies wishing to set up a new internal procedure to enable them to meet the conditions set out in the new European regulation can contact Xavier Brems by telephone on 02/210.17.72 or by email at the following address: [email protected]
The European regulation should come up against the reality on the ground, so the new evidence on intra-Community supplies is likely to have little impact on businesses.
For example, suppose a French company sells and ships goods to a German customer with its own trucks. In this case, at least one basic piece of evidence will not be available since it will not have any CMR letter, bill of lading or invoice from the goods carrier. The French seller could alternatively use a third party carrier. But in this case it will also have difficulty complying with the conditions imposed by the European regulation. The third party carrier will certainly deliver the CMR letter and an invoice to him but this will not be sufficient since the regulation requires that these two documents be delivered by two parties independent of each other! The seller could then imagine combining one of these two documents with a bank statement proving payment for the transport. This solution seems very complicated to implement when the company has to process tens or hundreds of transactions per month, even if it must be acknowledged that it would be easier to implement than the one that would consist for the French company in asking a foreign notary to confirm the arrival of each good in the destination country!
These few pragmatic examples show how impossible it will be for a European company to meet the new requirements of the European regulation.
The French seller will finally have two possible options. Either he succeeds, after much effort and with great luck, in gathering the new documentation required by the European Evidence Regulation. In this case, the conditions for VAT exemption will be presumed to have been met and the tax authorities will not be able to require the production of additional documents. Either the French seller remains unable to collect the new documents and this is the status quo. In this case, he will indeed have to prove the reality of the transport of goods out of France by other means as it is currently the case, with the legal uncertainty that this situation entails.
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