VAT numbers and ECSL returns will become a material requirement to qualify intra-Community supplies as zero-rated. The EU will harmonize VAT rules on four key areas of international trade. Most businesses involved in intra-Community trade should review and take action from these changes. This article is part of a series of Marosa articles about the changes announced. On January 2020, four changes will be introduced at EU level to simplify and provide legal certainty over VAT rules on international trade.
- EU wide simplification on consignment stock. A harmonized simplified regime will apply.
- More importance of customer´s EU VAT number. It will become a material requirement for zero-rated intra-Community supplies.
- Simpler proofs on intra-Community supplies. Less and more flexible record keeping.
- Uniform rules on chain transactions. Additional guidance on where to allocate the intra-Community transaction in chain transactions
VAT number as material requirementIn order to make a zero-rated intra-Community supply, current rules establish that businesses must prove that goods were moved from the dispatch EU country to another EU country of arrival. In addition, the supplier should prove that the sale was made to a business. The latter requirement is typically met when providing the customer´s VAT number, however, the European Court of Justice issued multiple decisions allowing businesses to support their zero-rated IC-supplies with alternative evidence. As from 1 January 2020, stating the customer´s VAT number will become a material requirement for zero-rated intra-Community supplies. Also, the submission of ECSL returns reporting the relevant transaction will become a material requirement for a zero-rated intra-Community supply. In our view, there are two main consequences of this change:
- Businesses must ensure that all client VAT numbers in their master data have been entered and validated in the VIES EU database.
- Businesses must ensure that all intra-Community supplies are correctly captured by the system and reported accordingly in the ECSL return. This is important, as ECSL returns were often regarded as informative, less important, tax returns. However, after 2020, there is a big risk on failing to complete these returns correctly.