“Quick fixes” to change VAT practice in the coming year
We would like to inform you that the proposed amendment to the VAT Act, which should come into effect on 1 January 2020 (hereinafter referred to as the “Amendment”) is currently being reviewed.
The goal of the Amendment is the implementation of “quick fixes”, which will significantly change the practice of applying VAT for goods transactions (e.g. the purchase of material, the sale of end products, etc.). Below we present a list of changes that the Czech Republic is obliged to include in the Amendment, for which, in our opinion, it is important to prepare.
- Demonstrating transportation when delivering goods to the EU – One of the most important changes is the definition of the evidence by which the transportation of goods supplied to another EU Member State would be proven in the form of “rebuttable presumptions”. In the matter of evidence, the Amendment refers to the demands specified in the EU Council Regulation that it will be necessary to fulfil, which will often be very difficult. As we have already informed, Mazars has prepared a legal analysis, which will allow you to get more information on the individual conditions and the practical effects. In any case, we recommend personally discussing the individual measures in your company.
- Cross-border chain of supply of goods – Almost every purchase and sale of goods is part of some international distribution chain, for which it is always necessary to qualify the nature of the specific fulfilment in the chain (e.g. cross-border or local operations in the specific country). In this regard, the setting of the INCOTERMS conditions will continue to be of key importance. But it will be necessary to perceive their configuration in the context of the new rules for the “assignment of transportation”, which partially modifies the current practice introduced by the European Court of Justice. The erroneous application of VAT ensuing from the incorrect application of the settings of delivery conditions is currently the subject of considerable retroactive VAT assessments.
- Stricter conditions for the supply of goods to another Member State – It will no longer be possible to apply the exemption when delivering goods to another EU member state if the customer’s VAT number will not be obtained at the defined time and if the operation will not be duly entered in the EU Sales List. Though these measures may not seem all that dramatic, the opposite is true, and it will be important to conform to some of the practical consequences of this new measure.
- Introduction of European “call-off stock” regime – The European “call-off stock” regime, which makes it possible, under the fulfilment of the given conditions, to distribute goods in any EU Member State without having to register for VAT in the given country and bear the additional costs related to this, represents an opportunity for some Czech VAT payers. It cannot be ruled out that your foreign supplier of goods may request the application of the aforementioned regime in connection with the introduction of uniform rules. This is only one of the reasons it may be interesting for you to get closer acquainted with this new regime.
If you are interested in more detailed information, training, prepared materials and/or assistance with the implementation of the aforementioned changes, please do not hesitate to contact us.