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EU VAT Four Quick Fixes - planning issues

  • Jan 14, 2020 | Richard Asquith

On 1 January, the EU introduced four 'quick fixes' to the B2B VAT regime to reduce the compliance burden and VAT Fraud.

Below is a summary of planning issues for the amendments, with links to previous blogs giving details of the changes.

Quick fix 1. Call-off stock

Businesses with stocks in other EU member states at a customer’s disposal, ‘call-off’, should review if they are VAT registered to support this. If they are, then they will probably be able to deregister, and follow the new supporting reporting requirements.

Where businesses are holding stock in another EU member state to sell to multiple customers, or the goods are being imported into the EU to the customer’s country of residence, then the VAT registration is probably still required.

Quick fix 2. Chain transactions

Businesses with cross-border chain transactions in their supply chains, including a supplier, intermediary and customer in different countries, need to review the VAT status of the intermediary. The new rules provide simpler guidance on how to treat the VAT; but businesses must ensure they are now following it correctly.

Where there is the extra complication of more than three parties in the chain, it is important that the genuine intermediary is identified. This should not be the first vendor, but the party responsible for the transport of the goods.

Quick fix 3. Proof of cross-border transportation

Businesses should ensure they have proper processes to collect the two pieces of documentary proof, plus adequate storage and retrieval facilities in the case of audits. Staff may require some basic training on the obligations, and their role in fulfilling the obligations.

In particular, where the customer organises the transport of the goods, supplier staff will need to be aware that they must obtain written assurances, with evidence, within 10 days of the movement.

Businesses should therefore consider how to automate requests and follow-ups for this. Businesses should be prepared from a customer communications and process point-of-view to charge domestic VAT if the above conditions are not met.

Quick fix 4. Valid customer VAT number

Businesses should be prepared to not only collect customers’ VAT numbers, but also to validate them for zero-rating a sales invoice. Staff should understand how to verify any VAT number via the EU’s public VIES online database. Where this produces a negative result, customers should be requested to provide an up-to-date VAT certificate. Ideally, this should be done in the new customer set-up process.

For any larger business which typically stores customer VAT numbers in its ERP master data, it should instigate a 6-monthly review and re-validation process to avoid problems with deregistered numbers. Businesses that transact with multiple subsidiaries of customers, or with those with multiple foreign VAT numbers, should review how their system allocates transactions to individual VAT numbers. It isa common mistake for this process not to be robust, which may result in VAT liabilities under the new rules.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara
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