Sales tax reform “Quick Fixes” as of 01.01.2020

An EU-wide reform should make the VAT system simpler and less susceptible to fraud, while ensuring that businesses can take full advantage of the single market. The European Commission has been working on the far-reaching restructuring of VAT law since 2016. The reform is intended to facilitate intra-Community trade in the European Union. In essence, this is to be achieved by abolishing the VAT-free movement of cross-border supplies between traders and by taxing a supply only in the country of destination.

We will inform you about the 2020 vat reform

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Mit unseren Softwarelösungen sind Sie auf die Vorgaben der Mehrwertsteuer Quick Fixes z.B. die Umsatzsteuer-ID-Prüfung bestens vorbereitet. Gern beraten wir Sie!

Wer ist von der Reform “Quick Fixes” betroffen?

Die Mehrwertsteuerreform (MwSt.-Reform) beim Warenverkehr im Binnenmarkt betrifft alle Unternehmen mit grenzüberschreitenden Umsätzen.

Da die Mehrwertsteuerreform ohne Übergangsfristen unmittelbar ab dem 01.01.2020 gilt, sollten Unternehmen noch 2019 prüfen, welche Änderungen im Erklärungs- und Rechnungsstellungsprozess sowie bei den in ihren Systemen hinterlegten Informationen zu Lieferanten, Kunden und Geschäftsvorfällen – z. B. Umsatzsteueridenfikationsnummer (USt-ID) – notwendig sind.

Quick Fixes Quick Overview

• Introduction of the mandatory examination of the VAT ID number as a substantive condition for the exemption from tax in the case of intra-Community supplies and the obligation to submit the correct and complete summary declaration
• Uniform rules on proof of documents for intra-Community deliveries
• Uniform simplifications for intra-Community deliveries of goods via consignment warehouses
• Uniform rules governing series transactions

The sales tax reform no longer links the Quick Fixes to the introduction of a certified taxable person as originally planned. This status should be the fifth measure for entrepreneurs to benefit from simplifications in the resolution of VAT situations. As a prerequisite for certification, it was planned that companies would have to demonstrate, in addition to solvency, a reliable and functioning internal control system, which has not yet been described. According to the European Parliament’s report of 25 January 2019 (plenary session document A8-0028/2019), however, the status of the Certified Taxable Person is still likely to be pursued with the European multi-annual tax reform.

Conditions for exemption from intra-Community supplies

Regulations on book and document documents

In order to exempt an intra-Community supply, the trader must, in principle, prove that the goods have actually entered the rest of the Community.

The Ecofin Council therefore agreed to include in the implementing regulation uniform evidence of the application of the tax exemption of intra-Community supplies. Where the evidence required by Article 45a is available, it is now consistently presumed in all Member States that intra-Community supplies have been made.

Entrepreneur arranges delivery to customer

For the exemption, the trader requires either two document documents of category 3a, or one proof of proof of category 3a and 3b. Both evidence must have been issued by different parties and must not contradict each other.

• Category 3a: Documents relating to the transport or dispatch of the goods, e.g. signed CMR consignment, air freight bill, invoice of the carrier
• Category 3b: Other documents, such as insurance policy, which proves payment for the carriage or dispatch of the goods; official document issued by a notary confirming the arrival of the goods in the Member State of destination; receipt of the receipt issued by a warehousekeeper;

Customer picks up delivery from the company

In the case of collection, in addition to the above-mentioned supporting documents, a kind of EU confirmation of receipt is required: a written declaration by the purchaser that the goods have been dispatched or transported by the purchaser or transported by a third party on behalf of the purchaser and in which the Member State of destination of the goods is indicated.

Content: the date of issue; the name and address of the purchaser; quantity and type of items; arrival date and location of the items; the identification number of the vehicle in the case of delivery of vehicles; the identification of the person receiving the goods on behalf of the purchaser.

Alternatively, however, it should be possible to continue to use the national detection possibilities, such as the confirmation of receipt.

Effects on deliveries via consignment warehouses

As of 01.01.2020, consignment warehouse deliveries are considered as tax-exempt “continuous” deliveries in the Member State of departure and intra-Community acquisition in the Member State in which the warehouse is located if the goods are taken within 12 months.

From the German point of view, this regulation of VAT reform is a considerable simplification, since although intra-Community delivery to the consignment warehouse is currently exempt from tax, the purchase of goods in Germany is not.

However, in the context of simplification, additional recording and control obligations must be fulfilled in accordance with Article 17a of the MsStSystRL.

Conditions for exemption

• The goods are delivered to a consignment warehouse in another Member State and then delivered to another company
• There is a contract for the consignment warehouse
• The supplier has a VAT ID Number. in the country of departure and has no registered office or permanent establishment in the member state of destination
• The customer is already known at the time of shipment and has a VAT ID number in the country of destination
• The special recording obligations are taken into account e.g. supplier keeps register with customer, goods, storage etc., customer keeps register with the received goods
• A summary notification is made as consignment warehouse turnover by the supplier
• The goods must be taken from the consignment warehouse within 12 months of storage

Impact on series transactions

With the VAT reform, there is an innovation in this area: for the first time, rules on so-called serial transactions are included in the VAT System Directive (Article 36a VATSystRL), i.e. in the event that an item is delivered in the chain. Unfortunately, the VATSystRL only regulates the case in which an intermediary transports the goods from the first supplier to the last customer:

• If the intermediary sends or transports, the delivery by the first company shall be deemed to be a moving and potentially tax-free supply
• By way of derogation, the delivery by the intermediary to the subsequent customer is the moving and potentially tax-free delivery if he has the VAT ID to his supplier. issued to him by the Member State of departure

The cases in which the first company in the chain is transported or the last customer picks up the goods (collection case) are not regulated.

Outlook: the “final system” of VAT reform

Concrete arrangements for the “final system” are not yet in place, although implementation is planned for 2025. The following topics are currently being negotiated and are very likely to become part of the new VAT law:

• Taxation in the country of destination / Delivery to the EU
• One Stop Shop
• Simplifications for Certified Taxpayer / Certified Taxpayers. Similar regulations as for the AEO-Z are under discussion here.