In preparation to the entry into force on 1st January 2020 of the new provisions of the Council Directive (EU) 2018/1910, Council Implementing Regulation (EU) 2018/1912, and Council Regulation (EU) 2018/1909, Legal Notices 249 – 253 of 2019 were enacted into Maltese law on 9th October 2019. Commonly referred to as the quick fixes package, the new provisions aim to harmonise the VAT treatment across the European Union of cross border transactions particularly in instances of call-off stock arrangements, EU cross border chain transactions and exempt intra-community supplies.
Below is a summary of the quick fixes of new legislative provisions.
Call-off Stock Arrangements
Call off stock arrangements occur when a supplier transports goods to his client’s storage facility in another Member State, but the title of ownership of the goods remains with the seller until goods are actually sold to the customer and their title is transferred to the client at a later date.
Before the coming into force of LN 251 of 2019, call-off stock arrangements fell under the provisions of Item 17 of the Second Schedule to the VAT Act, whereby the supplier would have been required to treat the transfer of his own goods to another Member State as an intra-community supply of his own goods for consideration and would have been required to register for VAT in the other Member State to comply with VAT obligations for intra-community transactions.
Through the enactment of LN 251 of 2019, call-off stock arrangements no longer qualify as a supply of goods for consideration hence the supplier is no longer required to register for VAT in the other member state provided that certain conditions are met and that the transaction is recorded in the special register introduced by LN 249 and 252 of 2019 by both the supplier and the customer. Furthermore, a new requirement has been introduced requiring that every taxable person shall also submit information about the VAT numbers of customers to whom he has supplied goods under call-off stock arrangements.
EU Cross Border Chain Transactions
Chain transactions refer to successive supplies of the same goods where the goods supplied are subject to a single intra-Community transport between two Member States. For chain transactions to exist, there must be two or more continuous supplies of the same goods between three or more different parties to the chain.
The Court of Justice of the European Union (CJEU) has consistently ruled that, in these situations, the intra-Community transport of the goods can only be attributed to one of the supplies in the chain, however, the VAT Directive did not provide for any concrete rule for the allocation of the intra-Community transport of the goods hence assessment on how to assign the intra-Community supply of goods to a concrete transaction within the chain had to be done on a case-by-case basis. This situation led to different approaches amongst the Member States, resulting in situations of double or non-taxation. The new provisions in the VAT Directive applicable as from 1st January 2020 address this issue, laying down rules in order to attribute the intra-Community transport of the goods to a concrete supply within a chain of transactions. This provision has been enacted into local VAT legislation through the enactment of LN 250 of 2019.
The new provision introduces the concept of an intermediary operator to chain transactions. An intermediary operator is a supplier within the chain who dispatches or transports the goods either himself or through a third party acting on his behalf but who is not the first supplier in the chain. The new provisions provide that where the same goods are supplied successively, and those goods are dispatched or transported from one Member State to another Member State directly from the first supplier to the last customer in the chain, the dispatch or transport shall be ascribed only to the supply made to the intermediary operator; but by way of derogation, the dispatch or transport shall be ascribed only to the supply of goods by the intermediary operator where the intermediary operator has communicated to his supplier the VAT identification number issued to him by the Member State from which the goods are dispatched or transported.
Exempt Intra-Community Supplies
Under VAT legislation, an intra-Community supply is an exempt subject that the customer identifies himself for the purpose of that supply with a valid VAT number of a Member State other than that where the transport of the goods begins, in our case, other than a Maltese VAT number. This rule is now being complemented with a further requirement. That is if the supplier fails to comply with his obligations to declare the supply in the recapitulative statement required in terms of article 30 of the VAT Act, or if he submits incorrect information, the exemption shall not apply.
In other words, a supplier who fails to comply with the recapitulative statement obligations and exempts an intra-Community supply shall be subject to a VAT assessment.
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