Germany has just joined the Member States providing a simplified regime for the call-off-stock sales between taxable persons (B2B) within the European Union (1). However, the question is the future of such regimes in the short term, considering the development of the European VAT system as envisaged by the European Commission.
The call-off stock is a scheme by which a supplier build up a stock for the purpose of selling it to a known acquirer, the goods being sold progressively when taken from the stock by this acquirer at his own discretion. In a domestic framework, the sales on a call-off-stock basis do not create real issue. Problems occur when the supplier build up the stock in a Member State with goods coming from another one (2).
From a VAT point of view, the call-off-stock sale is analyzed as 3 successive events. A business transferring own goods to another Member State for building stock is deemed to perform a (VAT exempt) intra community supply in the Member State of departure (3). It is also deemed to make a (taxable) intra community acquisition in the Member State where the goods are shipped to. In General, the business transferring the goods is required to VAT register in this country. The supplier makes domestic sales (taxable also in this country) each time goods are taken by the acquirer from the stock.
The simplification generally consists in ignoring the stock and considering that the supplier performs a VAT exempt intra community delivery and the acquirer a taxable intra community acquisition. As a result, the supplier does not need to be VAT registered in the country where the stock is located.
However, such a simplification does not exist in all the EU countries and when it does the application depends on conditions different from one country to another (4).
For the purpose of reaching an uniform application of the VAT rules within the Single Market, the commission proposed to modify the Directive 2006/112 (5) by including a simplification (as described above) but only for call off stock arrangement between “certified taxable person” (6).
If this proposal is followed, the Member state will have to implement the change into their legislation by December 31, 2018 at the latest.
What is the future of the simplification in place in some Member States? We can imagine several simplified régimes, one exclusively available to certified taxable persons and some others applicable under national regulations. However, considering the motivation of the commission on this matter, the simplifications ruled by the Member State should disappear.
If so, only call of stock arrangements involving certified taxable persons could be governed by simplification measures. Except some appropriate transitional provisions, this could increase the number of registrations at least at the beginning. Anyway the message of the commission is clear: the status of certified taxable person will be a key element in the VAT system and it is better to get certification as soon as possible …(7).
(1) Decree of October 10, 2017 from the German Federal Ministry of Finance following a decision of the German Federal Court of October 20, 2017
(2) Issues may arise but of a different kind when a stock is built up outside the European Union or with goods coming from non EU countries. Our subject here is limited to stocks located in a Member State and built with goods coming from another one.
(3) Article 17 of the VAT directive 2006/112
(4) According to the country where the stock is located, the application of the simplified regime is subject to specific conditions and especially depends on where and/or how long the goods are stored.
(5) Proposal of October 4, 2017 for a council directive amending directive 2006/112/EC as regards harmonizing and simplifying certain rules in the value added tax system and introducing the definitive system for the taxation of trade between Member States COM (2017) 569 final.
(6) In the same proposal of October 4, 2017, the commission provides for the opportunity for the businesses to acquire the quality of “certified taxable person” (in other words the quality of reliable tax payer) under certain conditions; This new concept in the field of VAT is modeled on the status of Authorized Economic Operator (AEO) existing for custom. The quality of certified taxable person should be an essential element of the definitive VAT system that the Commission wishes to progressively implement with effect from 2022 to replace the current transitional VAT regime. In the meantime, this status would allow for access to some simplifications applicable to complex operations like sales on a call-off-stock basis.
(7) Our article “the definitive VAT system in Europe: are you a reliable taxpayer?” 7 November 2017 (alain-renouf-avocat.com)