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VAT QUICK FIXES
Exemption for Intra-Community Supplies :Towards a clash with local VAT authorities?
Until last year, a European vendor who sold and delivered goods to a foreign customer established in another EU Member State was entitled to exempt from VAT his sale as an intra-Community supply if he met the following three substantial conditions: 1) the power to dispose of the goods as owner has been transferred to the customer, 2) the goods are physically dispatched from one Member State to another, and 3) the customer is a VAT-able person.
- The VAT exemption will only be granted if the purchaser provides a valid VAT identification number. This VAT number therefore becomes a substantial condition for the application of the VAT exemption rather than a formal requirement as it was the case before. If, due to ignorance or negligence, the customer does not communicate his VAT number in due time, the supplier will have no choice but to invoice the intra-EU supply with local VAT. A legal uncertainty is currently of existence as to whether or not a correction can be made at a later stage and on the potential modalities of recovering this VAT. One immediately spots the cul-de-sac in which some businesses could end. In addition, that is likely to again open the door to discussions as to whether the VAT registration in fact would be a formal requirement explicitly mentioned in the Directive.
- The VAT exemption will be secured if the supplier has fulfilled its obligation to submit the intra-EU sales listing. Thorough attention will have to be given to the rules governing the VAT point in order to properly complete the listing of the relevant reporting period. If the sale is not included in the correct listing or if the listing contains incorrect data concerning the supply, the Tax Authorities will be entitled to deny the VAT exemption and will assess VAT, fines and late payment interests, unless the supplier could duly justify why reporting is incompliant.
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Business interested in carrying out a VAT audit of their international activities can contact Philippe Noirhomme by telephone on + 32 2 210 17 71 or by email at [email protected].
VAT is, in principle, neutral for businesses. The few above-noted examples highlight issues affecting the VAT neutrality that the new VAT rules on the exemption of intra-EU supplies could create. Businesses which are engaged in intra-EU trade of goods should urgently review, their internal procedures in order to prevent from the above-noted VAT pitfalls.