From 1 January 2020 a new European Union Directive (nicknamed „Quick Fixes”) will enter into force. Among several changes, rules that regulate the customer VAT numbers has been reformed. Under the new reform, obtaining a valid VAT number that the customer provides to the supplier will be regarded as a material requirement for applying the 0% VAT rate. If the supplier fails to include the customer’s VAT number on the invoice, it should not be possible to apply the 0% VAT rate. In addition, filing of a cumulative declaration is also required to invoke the 0% VAT rate. The Directive puts higher administrative burden on undertakings, since it expects a constant inspection mechanism for the validity of the customer’s VAT number at the time of sale.
In order to be eligible for the 0% VAT rate on intra-community sales, the supplier should be able to provide evidence that the goods were dispatched from one EU Member State to another. Under the new Directive, it will be assumed that goods were transported to another EU Member State if the supplier can provide at least two independent, non-contradictory documents evidencing the transport of the goods. The supplier will also be required to check the identity and VAT identification number of the potential customer in the VIES (i.e. the EU Commission’s VAT Information Exchange System) portal. In conclusion, the implementation of an automatized system which would cover the arrangements involving chain transactions could be a time-saving solution, which could result in that certain EU VAT registrations become redundant.
By Eszter Kamocsay-Berta, Managing Partner, KCG Partners Law Firm