A supply of goods to another country is exempt from VAT
A business that sells goods and ships them to another European country makes an intra-Community supply of goods that is exempt from VAT in the country of departure of the transport, as long as it is in possession of all the documents justifying the reality of the transport, which includes, among others: contracts, purchase orders, invoices and payment documents. When the sale takes place under the EX Works incoterm and the customer is responsible for the transport, the VAT exemption becomes at risk and great care is required.
The following rules must therefore be observed in the situation where the transport is organised not by the seller but by the customer himself or by a carrier acting on his behalf.
What documents must the seller keep when the transport is carried out on behalf of the foreign buyer?
Where transport is carried out on behalf of the buyer, the usual commercial documents, supplemented by a duplicate of the usual commercial documents from the carrier, available to the buyer (e.g. a copy of a C.M.R. and the carrier's invoice) may enable the supplier to establish proof of the transport or dispatch of the goods.
In addition, a written order (e-mail, telex, order form, etc.) from the buyer, in which he expressly states that the goods are to be transported to another Member State, may usefully supplement this evidence.
What documents should be kept when the transport is carried out by the buyer with his own means?
Where the transport is carried out by the purchaser with his own means, the evidence set out above must also be sufficient in this case to establish the existence of a transport operation.
However, the absence of a carrier reduces the possibility of establishing the existence of transport. This is why, for example, in Belgium Article 4 of Royal Decree No. 52 provides for a destination document as an additional element of proof, which includes, among other things, the contact details of the seller and the buyer, the description of the goods, the date of issue and the invoice number, the place of arrival of the goods and the date of receipt of the goods. This destination document can also be used when the transport is carried out on behalf of the buyer.
A rebuttable presumption since 1/1/2020
Since 1 January 2020, the VAT regulations have introduced a presumption that goods have been dispatched or transported from one European country to another, unless the administration can prove otherwise, when the supplier is in possession of these proof documents. However, this presumption does not apply where the supplier knew or ought to have known that the goods were not dispatched or transported to another Member State.
When must the seller be in possession of all these documents?
In the first instance, it is the buyer who has most of this evidence. It is therefore up to the taxable supplier to ensure that his customer sends him the necessary evidence. Although the law does not specify a time limit, the supplier must in any case be in possession of all this evidence in the event of an audit by the tax authorities.
If the audit is carried out shortly after delivery and the taxpayer is not yet in possession of this evidence, he must be able to demonstrate that he has taken all the necessary steps with his buyer and that he will be able to provide this evidence in the near future.
What are the consequences if the supplier does not have the required documents?
If the supplier does not have the required documents, he has not fulfilled his obligations to demonstrate that the conditions for the application of the exemption (transport of the goods to another Member State) have been met and the administration will be obliged to claim VAT on the transaction.
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