The Austrian parliament has adopted a comprehensive tax reform for 2020, as well as other reform acts that are of special importance for many entrepreneurs. The changes regarding VAT, in particular, will bring about some organisational modifications and implementations within the scope of the IT systems that should be carried out in good time in 2019. The new provisions are especially important for the transnational movement of goods in the internal market.
TPA’s VAT expert Veronika Seitweger with the most important VAT changes from 1.1.2020!
1. Obligations to provide evidence of intra-Community supplies
For companies to continue to benefit from the tax exemption applicable to intra-Community supplies, obligations to provide evidence of such transactions will have to be observed even more strictly in future, as the amendment turns these obligations into substantive prerequisites for the tax exemption.
- The recipient of the goods or services must have notified a foreign VAT ID number to the entrepreneur performing the contract; said number must be valid and correct at the time of delivery. In case of on-going business relationships, VAT ID numbers must be verified on a regular basis.
- Moreover, the entrepreneur performing the contract must submit a recapitulative statement (RS) about the delivery concerned by the 30th day of the following month.
Consequences in case of non-observance
If these additional prerequisites are not met for any intra-Community supply, said supply will not be tax-exempt. At the same time, the invoice recipient will not be entitled to deduct input tax. Hence, VAT may become a cost factor within the supply chain of entrepreneurs, and no minor one at that, considering the 20% tax rate.
In case of defects or defaults, exemption from tax will only be granted if they are subsequently remedied and can be properly justified to the satisfaction of the fiscal authorities. Legal practice will certainly offer a wide scope of discretion in this respect, which is very likely to be interpreted differently in the individual member states, depending on the respective legal culture.
In the event that the purchaser does not have a VAT ID number, but has already applied for one, the delivery is meant to be tax-exempt nevertheless, provided the purchaser actually obtains the VAT ID number and forwards it to the supplier.
TPA Tip for VAT ID numbers
We recommend to verify the VAT ID number of the purchaser for each delivery in stage 2 and to document said verification in order not to jeopardize exemption from taxation.
Moreover, apart from the domestic obligations to provide evidence that continue to apply, with great variations within the EU (one example is the “Gelangensbestätigung”, or acknowledgement of receipt, in Germany), uniform standards for the provision of evidence of the transport or dispatch will alternatively apply throughout the EU as of 1 January 2020.
Consistently throughout the EU, proof may be provided by means of the evidence listed in the Regulation by two (!) independent third parties. For instance, the freight forwarder’s invoice and the insurance policy may be used as evidence for the movement of goods. The member states are required to recognise these documents as evidence for the exemption from taxation of the intra-Community supply without any further proof.
2. Chain transactions
Chain transactions are transactions where at least three persons are involved (supplier, distributor, buyer), all of them concluding a contract for exactly the same goods. In the process, the goods will get directly from the supplier to the buyer, with at least two deliveries existing under a VAT perspective.
Basically, only one delivery within the chain will be able to claim tax exemption for intra-Community supplies or very frequently also for export. Now, there are uniform rules throughout the EU for the allocation of the “moved” delivery in the chain transaction, which is the only one that is exempt from tax. Especially for the previously most difficult case in cross-border practice, namely the transport taking place for the account of the distributor, legal certainty has now been established.
Distributor and VAT ID number
The distributor can influence the allocation of the “moved” delivery by presenting itself with a specific VAT ID number:
- If, in its dealings with the supplier, the distributor uses the VAT ID number of the country of origin, the tax-exempt (zero rated) intra-Community supply will be the delivery by the distributor to the buyer, provided that all other prerequisites are met.
- If the distributor uses the VAT ID number of any other member state, the delivery to the distributor must be qualified as the tax-exempt intra-Community supply, provided that all other prerequisites are met.
Examples for chain transactions
- If the transport is carried out for the account of the supplier (first entrepreneur in the chain), the latter’s delivery will be the – usually tax-exempt – intra-Community supply.
- If the transport is carried out for the account of the buyer (if the goods are picked up), the delivery to the buyer will be the – usually zero rated – intra-Community supply.
TPA Tip for chain transactions
Recheck your (chain) transactions and try to optimize your workflows in terms of using certain VAT ID numbers. In this way, you may avoid expensive registration procedures in other EU member states. We’ll be pleased to help!
3. Consignment stock
For any stock maintained by the supplier in the member state of the buyer, from where the latter withdraws goods as required, uniform rules have now been introduced throughout the EU as well. These rules are similar to the simplification rule previously applicable in Austria to consignment warehouses maintained in some member states.
If the new provisions apply (see below), moving the goods to a consignment warehouse in another member state is not taxable (anymore), the delivery will only be taxable at the time the goods are taken from the warehouse by the buyer. Said tax must then be paid by the supplier in the country of origin (intra-Community supply) and by the buyer in the country of destination (intra-Community acquisition). Both placing the goods in and taking them out of the warehouse must be documented in the recapitulative statement (RS).
The following prerequisites must be met:
- The seller moves the goods to another member state, intending to deliver them to a purchaser at some later date, and an agreement exists to the effect that the purchaser will acquire ownership of the goods by taking them from the warehouse;
- The supplier is neither domiciled in the country of destination nor does it have any branch establishment there;
- The purchaser is registered for VAT purposes in the country of destination, and the supplier is aware of the purchaser’s identity and VAT ID number;
- The supplier and the purchaser have entered the goods in a register to be kept specifically for the purpose;
- The identity and VAT ID number of the purchaser must be included in the RS;
- The goods are taken from the consignment warehouse within a period of 12 months.
If any of the prerequisites is not met, or if it lapses, the transaction concerned involves an intra-Community transport, and the supplier will be required to register in the country of destination.
TPA Tips for consignment stock
- Goods may be moved back to the country of origin without triggering any taxation. Therefore you should avoid any required registration obligations in other EU member states by sending the goods back in good time, in the event that they are not taken from the warehouse within the 12-month period.
- The proposed purchaser may be replaced by another purchaser without triggering taxation, provided that the above-mentioned prerequisites are still met. Any required duty of registration in other EU member states can also be avoided by replacing the purchaser.
- No tolerance limit has been provided for regarding depletion, theft or loss of the goods. In such a case, registration of the supplier in the country of destination is required to pay tax on the transport. According to accounts received, it is intended to establish a tolerance limit for consignment warehouses in Austria, which is meant to be integrated in the VAT guidelines.
4. Increase of the small business limit
The small business limit will be increased from EUR 30,000 to EUR 35,000 (net). This is associated with an adjustment to the exemption from the obligation to file a tax return.
TPA Tip on the small business limit
If the tolerance limit of 15% has already been “utilized” once within the last four years prior to 1 January 2020, the new tolerance limit applicable as of 01/01/2020 may be utilized nevertheless. However, the final version of the VAT guidelines remains to be seen.
5. New Tax Rate for e-publications
Electronic publications are basically considered to be equivalent to printed works and accordingly are also subject to the reduced tax rate of 10%, unless they entirely or essentially consist of video or music content or serve advertising purposes. The reduced tax rate does not apply to research databases.
6. Input tax deduction for e-bikes
Under the general prerequisites, input tax may be deducted for powered two-wheelers with a CO2 emission value of 0 g/km. This includes, for instance, motor-assisted bicycles, motorcycles with sidecars, quad bikes, electric bicycles and personal transporters with exclusively electric or electro-hydraulic drives.
7. Record-keeping obligations and liability of the platforms
Entrepreneurs who are not taxpayers themselves, but provide an electronic interface – such as a platform – to support the supply of goods or services to private end users, with said supply being taxable in the respective country, must keep records of the sales supported by them.
These records must be made available to the tax office upon request. Platforms supporting a total volume of sales of more than EUR 1,000,000 must transmit these records electronically without being requested to do so. The records must be kept for ten years.
Platforms that fail to comply with their record-keeping obligation or fail to transmit their records in good time will be liable for the tax on the sales supported by them.
TPA Tip for online platforms and e-shops
We also recommend that platforms supporting sales of less than EUR 1,000,000 per calendar year edit the required data continuously, in order to be prepared for any subsequent tax audit in the best possible way.
8. Agriculture and forestry
In the case of farmers and forest managers taxed at the average rate, the transfer of farming and forestry operations or parts thereof will not be considered a taxable transaction as of 1 January 2020. Whether the transfer takes place against payment or without consideration is irrelevant in this context.
Additionally, the possibility to opt for standard taxation will be extended by one year for farmers and forest managers taxed at the average rate. If that option is made use of, the tax return for the previous period of assessment must be submitted at the same time.