New legal situation
Since the start of 2020, the tax exemption of intra-Community deliveries (materially) requires, in addition, that
- the customer has to be registered for VAT in another Member State and has to use a valid VAT identification number (VATIN) vis-à-vis the supplier (Section 6a(1) no. 4 of the VAT Act [Umsatzsteuergesetz, UStG]) and that
- the supplier has to accurately declare the delivery in a recapitulative statement (RS) (Section 4 no. 1b UStG). Otherwise the deliveries have to be treated as being VATable.
The BMF circular of 9.10.2020 (to adjust the German VAT application decree to these new statutory regulations) has now provided answers to issues that had thus far been unresolved. We would like to highlight three BMF provisions that already have to be applied to all intra-Community deliveries carried out after 31.12.2019.
(1) The use of a foreign VAT identification number vis-à-vis the supplier may also take place retroactively. The retrospective use will have a retroactive effect for tax exemption purposes.
Please note: This simplification is to be welcomed. However, this should not obscure the fact that a tax exemption would nevertheless ultimately be precluded from the outset if, on the date of the delivery, a valid VATIN had not yet been issued to the customer by another Member State.
(2) The requirement for a tax exemption would be deemed not to have been satisfied if, in the RS, the delivery has not been declared correctly, fully or within the prescribed time limit.
Please note: Under Section 18a(10) UStG, an RS that was submitted within the prescribed time limit (time limit = no later than 25 days after the end of the reporting period) but was incorrect or incomplete by mistake may still be corrected within one month. The correction will have a retroactive effect with respect to the tax exemption. However, if an RS is not submitted within the prescribed time limit in the first place then, based on the BMF’s statements, it has to be concluded that a tax exemption would already have been irrevocably precluded.
(3) The tax exemption for intra-Community transfers would likewise depend on these being correctly reported in the RS.
Please note: Unfortunately, the BMF circular does not contain any discussion of those cases where, through an error, intra-Community transfers were only subsequently determined to be such. If the business does not then have a foreign VATIN (which, in practice, is frequently the case) then the transfer would be VATable and, indeed, there would be no legal option that would enable the VAT that arises to be deducted as input tax (= definitive charge). It remains to be seen whether or not the fiscal authority will still provide for a practical solution in this respect.
Recommendation: The tightening of regulations and the BMF circular should prompt the businesses that are affected always to clarify the requirements for the tax-exempted treatment of intra-Community deliveries and intra-Community transfers in in good time before they are executed. Recapitulative statements should always be submitted within the prescribed time limit (and, indeed, even if the permanent extension to the filing deadline granted for the submission of preliminary VAT returns is possibly longer then the deadline for submitting the RS). Irrespective of this, it will still be very important for businesses to regularly check the VATIN used by their customers.