The correct indication of the VAT ID as a prerequisite for a tax exemption of intra-Community supplies is the 4th and last immediate measure within the “Quick Fixes”, which have been decided by the EU Commission and is valid since 1.1.2020.
Until the past year, the European Court of Justice had held the opinion that a tax exemption of an intra-Community supply may not be refused if only the VAT ID of the purchaser was missing.
Until now, it was sufficient if goods were actually transported from a member state to another and the purchaser was a legal entity liable for VAT in an EU country other than that of the seller. In the course of the “4 Quick Fixes” measures, this is to change and be standardised within the EU states from 2020.
Change from January 1st 2020
From this date, the conditions apply in addition to the material conditions for tax exemption of intra-Community supplies:
- The purchaser’s VAT ID is available.
- The VAT ID is registered in the VIES system.
- The delivery is correctly recorded in the periodic returns.
If any of the above conditions are not met, the intra-Community supply is immediately considered taxable. In case of incorrect periodic declaration of the intra-Community transactions, there is an obligation to correct them retrospectively.
Experience has shown that it is often difficult to obtain and verify the customer’s VAT identification number and that the submission of a correct periodic return is accordingly incorrect or incomplete. Therefore, from 2020 onwards, companies should include all VAT identification numbers of their customers in their ERP systems in good time so that invoices with the correct VAT identification number of their customers are created and EU sales lists with the correct information are generated and submitted.
If in doubt, the VAT identification numbers should be checked in the EU-VIES system before delivery. This will ensure that the VAT exemption is correct at the time of the intra-community delivery and will save you very time-consuming declarations with the tax office.
The Quick Fixes are one of the first changes to the EU VAT system. In the coming years, several changes will be added in the course of the VAT reform.
The current EU VAT system has become outdated and more complex due to the changes, mainly caused by the Internet and the resulting electronic business. For example, annual cross-border VAT fraud amounts to approximately EUR 50 billion. For this reason, an EU VAT reform has been decided that by 2024 the changes will be implemented and uniform laws are to become legally binding in the respective EU member states.
This comprehensive reform can without doubt be considered the most far-reaching changes in the field of VAT in the last 25 years. The EU hopes that it will help to reduce VAT fraud as far as possible.
In addition to stronger protection against tax fraud and simplifications in the handling of EU deliveries, the reform should also lead to cost savings for companies. Although the reforms will last until at least 2024, internationally active companies should inform themselves about the reforms already now with tax consultants.
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