Increasingly, at European level, the aim is to homogenize and standardize intra-community transactions, regardless of their nature. This idea is fully confirmed by EU Council Directive no. 2018/1910, Regulation no. 1912/2018, as well as by the last regulations adopted in this respect among the fiscal decision makers. Mirus is following all these changes with interest to provide best tax practices.
As of January 1, 2020, the European directive, suggestively called “2020 Quick fixes”, came into force, quickly implemented by most Member States. Broadly speaking, the directive seeks to establish a single, fully functional VAT regime for intra-Community transactions, regardless of their nature, such as the Customs Union and the European Single Market.
The mentioned remedies refer to the new procedure of VAT exemption regarding the intra-community deliveries of goods, to the procedure regarding the “chain” operations (successive sales), as well as to the simplification of the procedures in the field of stocks at the customer’s disposal.
Romania is one of the EU countries that have rapidly implemented these procedures in daily tax practice, including in the Fiscal Code explicitly mentioning that any provision thereof that may contravene a provision of any treaty to which Romania has acceded, is apply the provisions of the treaty immediately. Therefore, the importance of EU Directive no. 2018/1910 is implied and, although we can talk about certain simplification measures, in fiscal practice the situation is complicated from a bureaucratic point of view.
We find below, in general, the main changes brought by the new directive, within the fields:
- Stock-off stocks
This practice refers to the situation in which the supplier knows in advance the identity of the client and the purchased goods will be provided to him at a later stage of the actual transport, after their arrival in the client’s member state.
Note: the regulations do not apply to consignment stocks, because, by definition, consignment refers to the movement of goods from one Member State to another in order to form a stock and subsequently made available to customers as requested in this regard. . The goods remain the property of the supplier and are not made available to a customer known in advance at the time of transport. Therefore, it is important to know the difference between “stocks available to the customer” – Call-off stocks and “consignment stocks” – Consignment stock.
According to the practical regulations adopted in Romania, for the validity of the stock operation at the customer’s disposal, the following conditions must be met cumulatively:
- The goods are dispatched or transported by a taxable person or by a third party on his behalf to another Member State for delivery in that Member State and on arrival to another taxable person who has a legal right to take possession of those goods. goods in accordance with an existing agreement between both taxable persons;
- The taxable person who dispatches or transports the goods has not established his economic activity nor has a fixed establishment in the Member State to which the goods are dispatched or transported;
- To register their transfer in a register that would allow the tax authorities to verify the correct application of the legal provisions. In the recapitulative statement on intra-Community supplies, purchases and services, that person shall complete the identity of the taxable person acquiring the goods and the registration code for VAT purposes assigned to him by the Member State to which the goods are dispatched or transported.
In conclusion, Council of Europe Directive 2018/1910 obliges all Member States to consider that the intra-Community supply of goods takes place on the date on which the customer withdraws the goods from stock for use, and not on the date of the first delivery, so the supplier is no longer obliged to be registered for VAT purposes in the Member State of destination.
- The ‘chain transactions’ regime (successive sales of goods)
Chain operations refer to successive deliveries of goods which are the subject of a single intra-Community transport.
In Romania, starting with 03.02.2020, they were implemented in accordance with the EU Council Directive no. 2018/1910 new regulations on VAT, namely new measures to simplify chain operations. If until now there were uncertainties regarding the applicability of the VAT exemption, these new measures want to improve the practices in force.
Therefore, Order no. 6/2020 provides that the VAT exemption is allocated to the party providing the transport. More precisely, the transport is assigned exclusively to the delivery made by the initial operator to the intermediate operator. By way of exception, the carriage may also be allocated to the delivery made by the intermediary operator if he communicates to his supplier (the original operator) a registration code for VAT purposes in the Member State from which the goods are dispatched.
These measures want to avoid the use of different approaches by operators, which could lead to double or no charging. Therefore, the allocation of the transport with precision to a single operator that will benefit from the VAT exemption in accordance with the provisions of art. 294 of the Fiscal Code will lead to a standardization of the procedures in the field of chain transactions.
What happens if the transport was allocated incorrectly? The VAT deduction is not guaranteed by simply mentioning the invoice tax. The recent decision of the CJEU thus draws attention to the fact that, despite the principle of VAT neutrality and that of the protection of legitimate expectations, the VAT deduction can be rejected by the tax authorities insofar as VAT has been unjustifiably included on the invoice.
- Exemption from VAT on intra-community supplies of goods
Directive 2006/112 / EC lays down a number of conditions for the exemption from VAT applicable to supplies of goods in the context of certain intra-Community operations. One of these conditions is that the goods must be dispatched or transported from one Member State to another. The divergent approaches of the Member States in applying these exemptions to cross-border operations have, however, created difficulties and a lack of legal certainty among companies. This situation contradicts the objective of consolidating trade within the Community and abolishing fiscal frontiers. Therefore, the homogenization and harmonization of the conditions under which the exemptions can be applied is essential for the proper functioning of the European market.
The measure focuses mainly on the VAT Information Exchange System (VIES), ie the VAT identification code of the person purchasing the goods, assigned by a Member State other than the one in which the transport of the goods begins has become a substantive condition in regarding the VAT exemption. Also, the VIES recapitulative statement has become a mandatory condition and a key element in the fight against fraud at EU level.
Therefore, for the VAT exemption to be valid, correct and to comply with the norms imposed by the new European directive, the following conditions apply:
- The transport is provided by the supplier: in this case, as supporting documents, that the transport evidence – at least 2 (CMR, bill of lading, insurance policy, consignment note, invoice, etc.) to be issued by two different and independent parties both by each other and by the supplier and the customer;
- The transport is provided by the client: in this case, in addition to the previously mentioned documents, a statement is added to explicitly confirm that the transport is provided by the beneficiary of the goods. This declaration must be submitted to the supplier no later than the 10th day of the month following the shipment.
In conclusion, the quick remedies bring both clarifications regarding the chain transactions, but at the same time it complicates the field of intra-community deliveries of goods that fall within the VAT exemption, requiring several documents to justify the effective movement of goods.
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Andreea is a Tax Consultant specialized in Environmental Fund , VAT compliance and Intrastat reporting. She holds a BA in Finance and International Economic Relations from the Academy of Economic Studies in Bucharest and she is fluent in English. Andreea assists the clients in the process of VAT registration, VAT compliance and Environmental fund issues as well as other various advisory matters.