Status: Approved
Date of entry into force: 1 January 2020
Scenario before 1 January 2020
Scope of the quick fix
A chain transaction can be defined as successive supplies of the same goods with only one intra-Community transport between two Member States.
Scenario before 1 January 2020
In A-B-C supplies, the issue was whether, in our example above, A was doing the intra-community supply of goods or B, in which case, B would have to be registered in Member State 1 (see diagram above) and A would have to charge VAT to B (as performing a domestic supply). This had to be analysed on a case-by-case basis in order to determine when the transfer of the right to dispose of the goods as owner occurred.
Scenario from 1 January 2020
The quick fix introduced a default rule whereby the intra-Community transport of goods shall be ascribed only to the supply made to the intermediary operator (i.e. A-B) where the same goods are supplied successively and those goods are dispatched or transported directly from the first supplier to the last customer in the chain. However, the intra-Community transport of the goods shall be ascribed only to the supply of goods made by the intermediary operator (i.e. B-C) where the intermediary operator has communicated to his supplier the VAT identification number issued to him by the Member State from which the goods are dispatched or transported. Therefore, for the quick fix to apply regarding chain transactions, it is necessary that the intermediary operator communicates to his supplier his VAT identification number in a Member State different from the one from which the goods are transported.
For the simplification to apply, the following requirements have to be met:
– involvement of at least three parties in the chain transaction;
– goods must be moved from one Member State to another. Other chain supplies (e.g. exports) remain excluded. Moreover, the simplification for triangular transactions is not affected with this quick fix;
– the transport of the goods must take place directly from the first supplier to the last customer in the chain; and
– the transport of the goods has to be made by the intermediary operator.
Definition of intermediary operator (article 36a(3) of the VAT Directive)
A supplier within the chain (other than the first supplier in the chain) who dispatches or transports the goods either himself or through a third party acting on his behalf. Neither the first supplier nor the last customer in the chain can be the intermediary operator. The first supplier is expressly excluded by the wording of the definition, and the last customer is not a supplier within the chain.
Our VATinsights:
- This quick fix enhances legal certainty for operators, since it allows to assume (provided certain conditions are met) the transport of the goods to be attributed to one supply within the chain of transactions.
- In more complex scenarios (i.e. more than 3 parties involved – e.g. A-B-C-D-E, and several physical flows of goods), it is necessary to dissect all the transactions in order to identify which ones meet the requirements to apply the quick fix.
- The requirement that the intermediary operator must organize the intra-community transport can result in the following issues:
- Determination of who bears the risk of loss or damage of the goods during the transport,
- need to have a continuous transport resulting in a single transport of the same goods,
- keep proof of the organization of the transport
- When the intermediary operator communicates a VAT id number in the Member State of departure of the goods – a proof of this communication is necessary to be kept.
- It is also possible that the same intermediary operator communicates different
- This quick fix interacts with the quick fix on the zero-rate treatment to intra-community supplies of goods.
Suggested reading:
Jordi Sol Rosa, 2020 Quick Fixes: Simplification or More Complexity for Businesses? – The Explanatory Notes, 31 Intl. VAT Monitor 3 (2020), Journal Articles & Papers IBFD (accessed 30 May 2020) – https://www.ibfd.org/IBFD-Products/Journal-Articles/International-VAT-Monitor/collections/ivm/html/ivm_2020_03_e2_4.html
Relevant documents and links:
Implementing Regulation 2018/1912
National transposition measures communicated by the Member States concerning VAT quick fixes
Explanatory Notes on the EU VAT changes in respect of call-off stock arrangements, chain transactions and the exemption for intra-Community supplies of goods (“2020 Quick Fixes”)