Affected companies and professionals should prepare in time for the changes impacting on intra-community transactions, more precisely, for changes affecting proof of intra-community supplies. This is because from 2020 the European Union will be introducing standard forms to prove tax exemption. The changes are closely connected to the VAT quick fixes, which will be a part of Hungarian legislation from 2020. So you could rightfully ask whether a signed CMR document (international waybill) is in itself not enough to apply for the zero tax rate?
Implementing Regulation of VAT Directive amended
The new rules pertaining to proof of intra-community supplies are prescribed by the amendment to Implementing Regulation 282/2011/EU for VAT Directive 2006/11/EC of the European Council. The European Commission issued some draft explanatory notes on 29 September 2019 to interpret the amendments. Let us take a look at the changes affecting the proof of intra-Community supplies as of 1 January 2020.
The Council is introducing rebuttable presumptions from next year in Implementing Regulation No. 282/2011/EU to provide a practical solution for business entities and assurances for tax authorities. Pursuant to the changes, the following documents must be approved as evidence of dispatch or transport:
a) documents relating to the dispatch or transport of goods such as a signed CMR document or note, a bill of lading, an airfreight invoice or an invoice from the carrier of the goods;
b) further documentation:
- an insurance policy relating to the dispatch or transport of the goods or bank documents proving payment for the dispatch or transport of the goods;
- official documents issued by a public authority, such as a notary, confirming the arrival of the goods in the Member State of destination;
- a receipt issued by a warehouse keeper in the Member State of destination, confirming the storage of the goods in that Member State.
To prove an intra-community supply it is not necessary to provide all the above documents, just a combination of them as described below.
Documents required for intra-community supplies arranged by vendor
If the supply is arranged by the vendor, or by a third party on his behalf:
- for the zero tax rate at least two items of non-contradictory evidence referred to in point 1 need to be provided, which were issued by two different parties that are independent of each other, of the vendor and the acquirer (e.g. a signed CMR document and an invoice issued by the carrier), or
- the vendor is in possession of any single item referred to in point 1 together with any single item of non-contradictory evidence referred to in point 2 confirming dispatch or transport, which were issued by two different parties that are independent of each other, of the vendor and the acquirer (e.g. a signed CMR document and a receipt issued by a warehouse keeper in the Member State of destination).
Documents for intra-community supplies arranged by acquirer
If the supply is arranged by the acquirer, the vendor must obtain:
- a written statement from the acquirer stating that the goods have been dispatched or transported by the acquirer, or by a third party acting on behalf of the acquirer, and identifying the Member State of destination of the goods: that written statement shall include the date of issue, the name and address of the acquirer, the quantity and nature of the goods, the date and place of the arrival of the goods, in the case of the supply of means of transport, the identification number of the means of transport and the identification of the individual accepting the goods on behalf of the acquirer; and
- the documents detailed above are also necessary if the transport of the goods is arranged by the vendor.
The amendment prescribes a documentation requirement for the acquirer too in certain cases. This is because in earlier cases taxpayers were often faced with difficulties when the acquirer was unwilling to provide a certificate on the actual receipt of the goods in an intra-community transaction.
Current practice needs to be reconsidered
Based on the explanation for the changes we can say that a taxpayer failing to comply with the above conditions does not automatically mean that the zero tax rate cannot be applied, but in such cases, the taxpayer must prove the intra-community supplies in a way that is straightforward and acceptable for the given tax authority. It follows from the above that taxpayers have to rethink their current practices, and signed CMR documents may no longer be enough to prove intra-community supplies, other evidences must be provided as well.
During preliminary consulting on value added tax WTS Klient Hungary helps you identify lawful VAT practices in sales chain transactions and compile the documents necessary for tax exemption regarding intra-community supplies. Feel free to contact our colleagues if you need help or have questions with regard to proving intra-community supplies.