The quick fixes are intended as an interim solution, while the EU Commission continues to work on a “big hit”: the final EU VAT system. The EU’s common VAT system is laid down in the Council Directive on the common system of value added tax. This goes back to the 6th EC Directive, which came into force shortly after the creation of the European single market in 1993. Right from the start, these regulations were intended as a transitional solution.
A lot of time has passed since then. With the triumph of digitalisation and the globalisation of the economy, business models have emerged which were not adapted to the old regulations. In order to stem the associated loss of revenue from VAT collection, four quick fixes came into force on 1 January 2020:
1) Until now, many different regulations on consignment stocks applied in the EU. These have now been standardised: whereas previously retailers only had to register for VAT purposes on the basis of a warehouse located in another EU country or fulfil reporting obligations there, this is now no longer necessary. However, the regulation only applies to one warehouse at a time – and not again if the goods are subsequently taken to other warehouses in other EU countries.
2) For the first time there is now an EU-wide regulation for chain transactions. This does not change anything in Germany, because the regulation corresponds to the administrative concept that has been practiced in this country for a long time.
3) The tax exemption of intra-Community supplies is more strictly regulated: Intra-Community supplies are now only tax-exempt if the supplier indicates the VAT idenfication number issued to the customer in the country of destination. The supplier must check its validity.
4) In order for intra-Community deliveries to be exempt from VAT, the supplier must prove that the goods were actually delivered from one EU member state to another. This proof has been simplified: Now it suffices to have two non-contradictory transport documents from independent parties, such as consignment notes or carrier’s invoices.