VAT | 11. August 2020

Interim balance: A review of the tax year so far

The year 2020 put a stop to many plans. The VAT reform is also affected. We have summarised the most important developments - planned and unplanned - for e-commerce in recent months. by

As intended, the four quick fixes for the VAT reform came into force at the beginning of 2020. While the EU continues to work on a definitive VAT system for member states, the quick fixes represent a transition. The regulations for consignment stocks have now been regulated uniformly throughout the EU for the first time, as have the chain transactions. Intra-Community deliveries are now only exempt from tax if the supplier provides a correct VAT identification number of the customer in the country of destination. For this reason, it is necessary to check this VAT identification number. To avoid paying VAT on intra-Community deliveries, the supplier must prove that the goods have crossed the borders within the EU. The proof of delivery has been simplified: two non-contradictory transport documents from the supplier and the purchaser are sufficient. ClearVAT has published CheckVAT, a product for audit-proof verification of the VAT identification number.

EU postpones reforms due to coronavirus pandemic

At the end of May, as a result of the COVID-19 pandemic and its aftermath, the EU postponed the implementation of the VAT package from January 2021 by six months to July 2021. It is a further step towards the definitive EU VAT system and includes various reforms, such as the introduction of a one-stop shop for VAT registration of companies selling goods cross-border. Also online marketplaces will be included in the supply chain and subject to VAT from July 2021. Even if the platform operator only acts as an intermediary between supplier and recipient, he will be treated as if he himself had received the supply and then sent it out. This fiction means that there are two deliveries for VAT purposes.

Reductions of VAT in Europe

In order to stimulate the economy after the coronavirus-induced economic collapse, countries also temporarily lowered national VAT rates. The first step was taken by Germany. Here, the normal VAT rate of 16% and a reduced rate of 5% have been in force since July 2020 and will be applicable for six months. Austria introduced a reduced tax rate of 5%, which applies in particular to sales in the catering trade, as well as to the sale of publications of all kinds (Chapter 49 of the EU’s uniform customs tariff). These changes will apply temporarily from July 2020 until 31 December 2020. In Ireland the government representatives also decided to reduce the standard rate temporarily from 23% to 21%. However, the reduced tax rate remains unchanged. The changes take effect on 1 September.

ClearVAT responds to changes like these with its ClearRules solution, a dynamically updated database of European tax rates.

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