June 13, 2022
VAT in the Digital Age program, currently being built by the European Commission, aims to streamline the VAT reporting and compliance in the EU. One pillar of this program is the movement of own goods between the EU states. This section of the VAT policy is now under review, with several scenarios proposed for optimizing the VAT reporting process.
As of now, it is expected that regulation of movement of own stocks will fall under the OSS scheme – the One-Stop-Shop for the single VAT return. As a result, it will remove the burden of multiple VAT registrations when goods are moved between countries before the sale. Once the proposals are implemented, the OSS, now used for administering B2C transactions, will likely be extended.
This is excellent news for online marketplaces and small businesses dealing with many administrative tasks due to the current reporting system.
The standard procedure of declaring movement of own goods includes double-fold registration VAT transactions. The transportation of goods must be reported in the country of departure and the country of arrival. In the VAT report submitted to the origin country’s tax authorities, the movement of own stocks is filed as exempt supply and in the destination as an intra-community taxable sale. The company must register for VAT in the arrival country to report it as a taxable sale.
Three main scenarios can be adopted to simplify VAT reporting for the movement of own goods.
The first solution is based on the changes in Digital Reporting Requirements in the EU that could adjust how information is processed and shared among countries. Following this scenario, the VAT registration in the arrival country could be lifted, and the own movement of stock transactions could be held non-taxable, with self-invoicing becoming the primary evidence of the activity. In such cases, the sale from the arrival country would have to be registered either as a B2C domestic sale via OSS or as a B2B reverse charge. This procedure would require additional provisions as the VAT registration order would be disturbed.
In contrast to the first solution, extending OSS to include moving own stocks would allow for keeping transactions – arrival and sale – taxable. Such a solution would call for submitting all information to the VAT origin country via OSS in order to get access to the VAT deduction. The OSS records would be used as a database, and now additional taxation would occur. It could also be agreed that the second transaction would not be taxable, making the intra-community acquisition tax-exempt but allowing for deductions in the later stages anyway.
If the acquisition is considered taxable, the movement of marketplace goods prior to the sale could also be recorded using the Deemed supplier rule. This solution would grant an advantage to marketplaces that could report the movement of goods as a domestic B2C sale and would B2B report charge. However, such a solution favors marketplaces and could sometimes discriminate against ole sellers.
If the taxation of the intra-community acquisition was lifted, the Deemed supplier’s obligation would be to record the information in OSS.
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