Brexit and call-off stock arrangements
With the Brexit transition period having ended on 31 December 2020, the EU VAT rules no longer apply in the UK (except in Northern Ireland for the supply of goods). However, it is possible that sellers transported goods under the call-off stock regime from the EU to the UK, or vice versa, before 1 January 2021, but the customer did not take ownership of the goods (or return the goods to the supplier) until after 1 January 2021. This article looks at the guidelines recently announced by the EU VAT Committee in these situations.
Overview of call-off stock arrangements
Call-off stock arrangements are a term used to describe the situation where a VAT-taxable supplier transfers its goods to a customer’s warehouse/storage facility in another EU member state and the customer can “call-off” (i.e., obtain ownership and pay for) the goods at a time of its own choosing. Simplified call-off stock arrangements have applied in the EU since 1 January 2020. Under the simplification rules, subject to certain conditions, the supplier is not required to register for VAT purposes in the member state where the goods are transported; instead, once the customer removes the goods from the facility, it reports an intra-Community acquisition and at the same time the supplier reports an intra-Community supply.
One of the conditions that must be fulfilled to apply the call-off stock simplification rules is that ownership of the goods must be transferred to the customer within a 12-month period. If the goods are not transferred, the supplier will be required to register and report a deemed intra-Community acquisition after expiration of that period. Goods can be returned to the member state of departure within the 12-month period, in which case it will not be necessary to report an intra-Community acquisition.
Goods supplied during 2020 but ownership taken after the end of the transition period
- Where goods were transported from the UK to an EU member state under a call-off stock arrangement on or before 31 December 2020 but the acquirer did not take ownership of the goods until on or after 1 January 2021, the VAT Committee unanimously agrees that this will constitute an intra-Community acquisition of the goods and the acquirer must declare the acquisition in its VAT return and indicate the goods acquired in the call-off stock register; in this case, the UK supplier cannot report an intra-Community supply because the EU VAT rules no longer apply in the UK.
- In the opposite situation, where goods were transported from an EU member state to the UK before the end of the transition period, but the acquirer did not take ownership of the goods until on or after 1 January 2021, the VAT Committee almost unanimously agrees that the supplier should not mention the acquirer’s VAT identification number in the recapitulative statement. We also assume that the supplier does not need to report an intra-Community supply, although EU member states may require the supplier to report the supply in its VAT return. Nevertheless, the VAT Committee is of the almost unanimous view that the supplier must keep proof of the supply made for purposes of the right to deduct input VAT.
Return of goods under call-off-stock arrangements
- If goods transported before the end of the transition period from the UK to a member state are returned to the seller after the end of the transition period, the VAT Committee almost unanimously agrees that the return will be considered an export of goods. The VAT Committee is almost unanimously in agreement that the intended acquirer must make the corresponding annotation in its call-off stock register to reflect the removal of the goods and the exact situation of its stock.
- If goods transported before the end of the transition period from a member state to the UK are returned after the end of the transition period, the VAT Committee unanimously agrees that this return will be considered a reimport of goods that is exempt from VAT and that the supplier should not include any information on this return in its recapitulative statement, but must make the corresponding annotation in its call-off stock register.
Relevance of VAT committee guidelines
Although the EU VAT Committee is advisory in nature and cannot take legally binding decisions, its positions—even when anonymous—are important and relevant for businesses. It should be noted that some member states are introducing domestic legislation that adopts the committee’s guidelines, so that the guidelines have the force of law (e.g., the Dutch State Secretary of Finance recently published a decree related to call-off stock arrangements and Brexit in which he adopted the guidelines of the VAT Committee).