VAT Changes in 2020

We would like to inform you that from January 2020 you may be affected by changes in the area of the application of VAT known as “quick fixes” as well as by some other changes when it goes into effect with the amendment to the VAT Act.

For normal business practice, it is absolutely essential to understand the mutual interconnection of the individual changes in the area of VAT that, moreover, must also be interpreted in the context of the jurisprudence the Court of Justice of the EU. We recommend paying attention to the following themes:

  • Cross-border sale of goods – the new rules for “assigning the transport of goods”, together with new substantive and formal conditions for the application of VAT exemptions when delivering goods to another Member State, can now evoke several unexpected tax impacts, especially when choosing unsuitable INCOTERMS conditions. Below we present some of the areas that will need more attention:
    • The results of a delay in the submission of the VAT ID number by your suppliers or a delay in the submission of the VAT ID number to your customers in other EU member states;
    • New legal requirements when demonstrating transport to another EU Member State according to the new combination of mandatory “evidence” and the related effects of the new rules for the allocation of transport (the first practical experiences during individual configurations);
    • The effects of the new possible interpretation of a permanent establishment for the purposes of supply of goods on the territory of other EU Member State (e.g. the potential risk that a warehouse of goods in another Member State will be considered to be a VAT establishment in a wide range of defined cases);
    • The relationship between intra-community supply of goods and the institution of “VAT refunds”;
    • The issue of the effect of the registration of business partners for VAT;
    • The transfer of own goods between two EU member states (from a practical perspective, this area will see considerably stricter conditions).
  • Holding inventories abroad – the given area is undergoing changes effective throughout the EU. The new “call-off stock” regime will be mandatory when all the parameters are fulfilled. Thus, it should not escape the attention of those who are primarily not interested in the application of the simplified approaches. We consider the following to be key areas for resolution/amendment:
    • The text of the business agreements with suppliers and purchasers of goods will be absolutely important (with few exceptions, current agreements for the delivery of goods through consignment warehouses will have to be significantly changed);
    • Determining the moment of transfer of right to dispose with goods as an owner in the stock can have a considerable effect on the proper application of VAT;
    • The influence of any new interpretation of the permanent establishment in call-off stock mode;
    • The influence of deficits or inventory differences for simplifying the procedures.
  • The use of INCOTERMS CPT, CIP, CFR or CIF – for these conditions, and others, it would be good to assess the effects of the judgment by the Court of Justice of the EU in the case of Arex in the matter of determining the moment of the transfer of the right to dispose with the goods as the owner and the effects of the new rules for “assigning the transport of goods.
  • Generalized reverse charge mechanism (GRCM) – The European Commission has already approved a Czech application for the use of GRCM on non-cross-border supplies towards taxable entities above a threshold of EUR 17500 per transaction. The scheme is expected to be introduced in July 2020.
  • Other themes, that have been influenced, or will be in the course of the next year (in some cases due to the judgment of the Court of Justice of the EU):
    • VAT rates,
    • The export of goods to countries outside the EU,
    • The moment of declaration of intra-community supply of goods,
    • Changes to intra-community acquisition of goods,
    • The use of vouchers from a VAT perspective,
    • VAT on bad debt recovery,
    • Re-charging accommodation,
    • A special regime for travel services.

Our VAT experts would be glad to discuss all of the aforementioned themes in more detail, or alternatively it is possible to cover the individual changes in a clear manner during individualised seminars available also in English prepared exclusively for the needs of your business corporation.

Please do not hesitate to contact us with any questions you might have.