EU: VAT Quick Fixes Guide for 2020 and beyond

Since 01.01.2020 the so-called Quick Fixes, an EU-wide VAT reform, have been in force in most member states. These have a considerable impact on international shipping, tax obligations and e-commerce in Europe.

The new regulations mainly concern these 4 areas:

1. VAT exemption for intra-community supplies
2. Documentary requirements for intra-Community supplies
3. Simplified regulations for call-off stocks
4. New regulations for chain transactions

In the following article you will find out what was changed due to those Quick Fixes, what online sellers need to know and how VAT compliance can be ensured in the future.

Latest Update:

The European Commission has sent letters of formal notice to EU member states that have not managed to adopt the Quick Fixes correctly on time.

Currently, 22 EU member states have implemented the Quick Fixes. (Status 09.02.2020)

What is the reason for this EU tax reform?

The long-awaited tax reform, which is one of the largest in the history of the European Union, is intended to remedy past problems often encountered in cross-border trade. Further, the EU-wide tax system should generally be revised and updated.

Therefore, the resulting tax tasks and obligations are not uniform and should be reviewed for each country individually.

Quick Fix 1: VAT exemption for intra-community supplies

Since 01.01.2020, in addition to the EC sales, a valid VAT identification number has become a legal requirement for intra-community deliveries in order to obtain tax exemption. Previously it was only a formal requirement, the validity of the tax numbers thus became even more important than before.

Anyone who fails to comply with the obligation to submit the ECSL or does not do so properly or in full, will be denied the right for an intra-community supply to be VAT exempt.

Quick Fix 2: Documentary requirements for intra-community supplies

For the tax exemption of an intra-community supply, it is necessary that the shipment of the goods to another EU country is proven. The supplier is responsible for providing evidence, but there are no uniform regulations in the individual EU countries yet and this is exactly what the Quick Fixes were supposed to change.

To make proof of transport more efficient and transparent in the future with uniform regulations, the proof of transport to another EU member state must contain at least 2 identical pieces of proof provided by independent third parties.

Shipping documents

• Signed CMR consignment note,
• Bill of lading
• Transport invoice etc.

Further documents

• Insurance policies for the transport of goods,
• Public confirmation of arrival of the goods (notary),
• Bank statements confirming payment for the transport,
• Receipts about storage at the warehouse, etc.

Quick Fix 3: Simplified regulations for call-off stocks

Until the beginning of the year, there was no uniform sales tax regulation for call-off stocks, and this is exactly what this Quick Fix was supposed to change. An EU-wide regulation for intra-community transfers of goods to consignment stores came into force.

Previously, this supply was treated by the supplier as an intra-community transfer and was therefore taxed as an intra-community acquisition by the purchaser. This now only applies from the time the goods are removed from the consignment store and the following additional requirements must be met:

1. The identity (full name and address) of the purchaser must be known to the supplier at the beginning of the shipment.
2. The company has no registered address, company management, permanent establishment, domicile or habitual residence in the country of destination.
3. The purchaser to whom the goods are to be shipped uses his VAT identification number in the country of destination in dealings with the entrepreneur until the start of the shipment.
4. This rule only applies to goods delivered within 12 months.
5. The company records the shipments and fulfils its obligation to submit summary reports.

Quick Fix 4: New regulations for chain transactions

For the first time, series transactions are now defined more clearly, especially when it comes to transport responsibility. The result is that with this Quick Fix the assignment of transport responsibility is clearly regulated, which was not always clear in all cases before.

This has changed:

1. Where goods are dispatched (or transported) by the first trader, the movement of goods must be attributed to the supply of the first trader – the exemption can only be attributed to the first supply.
2. If an intermediary is responsible for the dispatch/transport, then the delivery to this intermediary is considered a moved delivery. However, this only applies if the intermediary has not provided the supplier with his VAT number in the country of departure.
3. If the last recipient in the retail chain transports the item, then this goods movement is assigned to the last recipient – the tax exemption can only be attributed to the last delivery.

Current status in EU member state

Some countries have already adopted the Quick Fixes, others only partially and there are also some differences in the way of implementation.

One of the last major updates was on 04.12, when 11 EU member states adopted the changes. These countries were: Austria, Belgium, Bulgaria, Croatia, Denmark, Finland, Germany, Hungary, Lithuania, Malta, Slovenia and Austria.

As stated at the beginning of this article, some countries already got a formal notice for not implementing the Quick Fixes in time or for not implementing everything correctly. That’s why also some countries that have officially introduced those VAT changes are also affected.

Countries A-F

COUNTRY	STATUS	DATE OF IMPLEMENTATION
Austria	Approved	Tax Reform 2019-2020 – Confirmed
Belgium	Approved	24.10.2019
Bulgaria	Approved	20.11.2019 – Confirmed
Croatia	Approved	29.11.2019 – Confirmed
Cyprus	–	–
Czech Republic	Draft	Delayed to some point in 2020
Denmark	Approved	28.11.2019 – Confirmed
Estonia	Approved	18.12.19 – Confirmed
Finland	Approved	05.11.2019 – Confirmed
France	Approved	29.12.2019 – Confirmed

Countries G-N

COUNTRY	STATUS	DATE OF IMPLEMENTATION
Germany	Approved	29.11.2019 – Confirmed
Greece	–	–
Hungary	Approved	12.07.2019 – Confirmed
Ireland	Draft	–
Italy	–	–
Latvia	Approved	Confirmed
Lithuania	Approved	17.10.2019 – Confirmed
Luxembourg	Approved	Draft from 06.12.2019

Countries O-Z

COUNTRY	STATUS	DATE OF IMPLEMENTATION
Malta	Approved	04.10.2019 – Confirmed
Netherlands	Approved	Confirmed
Poland	Draft	Delayed
Portugal	Draft	–
Romania	Approved	Confirmed
Sweden	Approved	Confirmed
Slovakia	Approved	Confirmed
Slovenia	Approved	Confirmed
Spain	Approved	04.02.2020 – Confirmed
United Kingdom	Approved	So far only Call-of-Stock regulations

Validate VAT ID with VIES

Not exactly a quick fix, but a notable innovation in this context is the obligation to validate VAT numbers in the European Commission’s VAT Information Exchange System (VIES) – in case you haven’t done that yet.

Validation requirements vary from country to country in the EU, but can usually be completed fairly quickly. If you have any questions about the respective procedure, please do not hesitate to contact us.