Call-off stock - EU VAT Quick Fixes

The first of four EU VAT Quick Fix seeks to harmonise the requirement not to VAT register where a seller has sent stock to a customer in another EU member state for their exclusive use on a ‘call-off’ basis. 

Current position – confusion on foreign stock rules 

As part of modern chain-supply procurement arrangements, suppliers will increasingly provide their customers with regular stocks at the customer’s premises for use as required without a commitment to buy. Only when 

the customer removes the stocks does the commercial sale happen. This arrangement is termed ‘call-off’ stock. 

Under current EU rules, the movement of the supplier’s stocks to another EU state obliges the supplier to VAT register in the country of destination. They must then report the stock movement in their domestic return and also in their foreign VAT return as a self-supply. When the customer takes the stock for use, this must then be recorded by the supplier as a domestic sale, with local VAT, and reported in the supplier’s foreign VAT return. 

Currently, some countries do not require
the suppler to VAT register. However, this simplification is not offered uniformly across the EU member states. The EU VAT Directive is silent on this issue. This discrepancy presents a challenge to businesses operating across the EU, and disrupts the smooth operation of the Single Market. 

What’s changing on 1 January 2020 

All member states will be required to withdraw the obligation on the supplier to VAT register in this call-off stock scenario. For VAT purposes, only when the customer takes the stock for use is there a sale. 

This will be an exempt intra-community supply between the seller and customer – a zero-rated dispatch and arrival, respectively. 

The requirements to qualify for this simplification include:

• The supply of stocks should only be to a single customer, and under its control at site (or nearby). 
• The customer does not have a fixed establishment for VAT in the country where the goods were dispatched from. 
• The customer is VAT registered in the country where the stocks are dispatched to. 
• The supplier records the physical movement of the stock in its EC Sales Listing, and both parties must maintain a register of the goods. 
• The stocks must be used by the customer within twelve months of dispatch. If not, then the stock should be returned, or
  the transaction be recorded as an intra- community supply. 

What’s not changing: Consignment stocks 

When a supplier holds stock in another EU member state which are sold or made available to multiple customers, this is termed ‘consignment stock’. 

It can also apply where a distributor, or consignee, resells the goods for the supplier from an EU stock warehouse. 

The obligation to foreign VAT register will remain in place for both these types of consignment stock.