Changes in German VAT law - Implementation of new special warehousing scheme (also consignment)
On 2 October 2018, the Economic and Financial Affairs Council (ECOFIN) agreed on immediate measures to harmonise the European VAT system (so-called quick fixes). Most of the quick fixes were adopted by the European Council on 4 December 2018. The “Act on the Further Tax Promotion of Electricity Mobility and on the Amendment of Further Regulations“, which was passed by the German Bundestag and Bundesrat, was recently published and the associated changes take effect from 1 January 2020. The most important changes concern:
- Intra-Community supplies and ‘new’ documentary evidence;
- Chain transactions; and
- Consignment warehouse.
With regard to the cross-border stocking of consignment warehouses, previously there were only national regulations for VAT purposes. These regulations had no basis in the EU VAT Directive, and this led to different simplification regulations in the various EU Member States, as well as different burdens of proof, which were accompanied by distortions in competition. With the new regulations (Art. 17a VAT Systems Directive and Section 6b German VAT Act), certain registration and declaration obligations of the supplier in the country of destination no longer apply. In the future, under the following conditions, an intra-Community supply of goods to a purchaser can be assumed when the following conditions are met:
- The goods are taken to a consignment warehouse in another EU Member State in order to be subsequently delivered to another entrepreneur;
- The supplier is neither established, nor creates a permanent establishment, in the EU Member State (the destination) to which the goods are transported;
- The identity and the VAT ID number of the customer are already known to the supplier at the time the goods are transported;
- The buyer uses the VAT ID number issued to it by the destination EU Member State for the consignment transactions with the supplier;
- Both the supplier and customer keep a special register; and
- The goods are withdrawn out of the consignment stock within 12 months after storage.
The intra-Community supply of goods by a supplier and the intra-Community acquisition by a customer shall take place only at the time of the withdrawal of the goods from the consignment warehouse. In this way, the VAT registration of the supplier in the country of destination can be avoided. The purchaser may be replaced by another taxable person within 12 months of the arrival of the goods in the EU Member State of destination, if all other relevant requirements have been met and the supplier records the change of purchaser separately in accordance with Section 22 Subsection 4f German VAT Act (substitution of the customer). If one of the conditions of the consignment warehouse regulation is not fulfilled within 12 months of the end of the transport of the goods (for example, there is no timely removal, destruction, theft, or loss of the goods), the original transport of the goods shall be regarded as a deemed intra-Community supply of goods with a deemed intra-Community acquisition (both referred to as a deemed intra-Community transfer of goods) on the day of that event and this must, therefore, be declared by the supplier both in the country of departure and in the country of destination. Thus, for the supplier, this results in an obligation to register in the country of destination. However, in order to avoid the registration obligation for smaller incidents, in their explanatory notes the EU commission states, with reference to the VAT Committee, a rule for small losses might be useful. The VAT Committee takes the view that small losses, especially if these losses are arising from the nature of the goods, from unforeseeable incidents or from an authorisation or instruction from the competent authorities, should not lead to a registration obligation. Furthermore, the VAT Committee (by a large majority) agrees that small losses should be characterised as losses that amount to below 5% in terms of value or quantity. It is advisable to check if Member States did make use of this suggestion when introducing this new consignment stock regulation.
A deemed intra-Community transfer of goods will not take place if the following conditions are met:
- The supply out of the stock did not take place and the goods are returned to the EU Member State of departure within 12 months after the end of the transport of the goods from the EU Member State of destination; and
- The entrepreneur records this return separately within its registers.
In such a case, the outward and return transport of the goods will have no effect on VAT.
German tax authorities announce an interim solution for filing the required notifications
Until now, it has been questionable how and whether the German tax authorities can technically make it possible for taxable persons who use the newly introduced consignment scheme referred to in Section 6b of the German VAT Act to submit the necessary notifications starting in 2020 as part of the so-called EC-sales lists. The German tax authorities announced in a recent circular that, for organisational reasons, it was not possible to integrate the required notification for the consignment stock regime into the current technical solution for filing EC-sales lists. However, to enable all taxable persons to comply with their legal obligations, the German tax authorities introduced an (online and offline) interim solution by setting up a separate form that must be populated. This form can be completed directly on the webpage of the tax authorities or it can be downloaded and sent via DE-e-mail. In both cases the German tax authorities will provide a transmission confirmation.
Given these changes, entrepreneurs using the consignment stock scheme and those performing further intra-Community supplies of goods or services need to be aware that two separate filings are required.