The consequences of the revision of the VAT Directive in the field of quick fixes. Part.1

We are looking at the revised provisions of the Goods and Services Tax Act (VAT Act, hereinafter ‘uVAT’) and the Tax Penal Code in relation to between the use in international trade of contract warehouses (call-off stock).

Novelization project [1] Goods and Services Tax Act (VAT Act, hereinafter ‘UVAT’) and the Tax Penal Code of 7 October 2019 to be implemented Directive 2018/1910 to 4 December 2018 amending Directive 2006/112 as regards the harmonisation and simplification of certain provisions in the value added tax system concerning the taxation of trade between Member States (hereinafter ‘VAT Directive’).

The changes will include rules for the use of call-off stock, chain transaction documentation and the application of the rate. 0% VAT on intra-Community supply of goods (the so-called ‘WDT’).

Supplies made using call-off stock warehouses – the existing solution

The call-off stock procedure has not yet been directly regulated by the VAT Directive, but it was possible to introduce such simplification in national legislation. In Poland, storage of goods with the use of warehouses of consignation works from 1 December 2008.

From 1 January 2020 The transfer by the taxable person of goods forming part of the company's assets to another Member State under the call-off stock procedure will not be considered as a paid supply of goods. In addition, the warehouse owner will be able to use the stored goods for commercial activity.

The existing provisions of the VAT Act on Consignment Warehouses should be replaced by regulations compatible with EU law.

Shipments from Poland to the territory of another EU country, as EU VAT payers, will be required to submit summary information on movements of goods to the tax office in the call-off stock procedure.

In the current state of the law, the Consignment Magazine is regulated on such a basis that, at the time of the transfer of the right to dispose of the goods as the owner, the tax obligation does not arise when the goods are moved to the warehouse, but when the goods are removed from the warehouse; the goods belonging to the VAT payer are moved from a Member State other than the territory of the country to the territory of the country and the goods transferred to that warehouse are intended for a particular buyer.

When using the warehouse, the date of entry of the goods in the warehouse, the date of collection or re-location shall be recorded. Before first the entry of goods into the warehouse must be informed by the head of the tax office of his intention to keep it. The goods stored must not be used by the buyer to conduct a commercial activity.

In addition, a VAT taxable person wishing to use a warehouse may not be registered in Poland as active or exempt. The transfer of own goods to the Consignment warehouse allows the supplier to recognise the intra-Community supply of goods (hereinafter: ‘WDT’) only when the right to dispose of the goods as the owner is transferred.

New regulations – warehouse in Poland

This amendment implies in its draft the introduction of Chapter 3a of the VAT Act, the rules of which will regulate the rules of the call-off stock storage procedure located within the territory of the country, and 3b regulating transactions carried out outside Poland within the European Union.

Both taxpayers sending goods from Poland to another EU country and who are recipients of goods moved from another EU country to Poland in the call-off stock warehouse procedure are obliged to keep records of such goods.

In addition, the owner of such a warehouse is also obliged to keep records of the description and number of goods entering and leaving the warehouse, together with the dates of both operations, as well as those destroyed, lost or stolen.

The call-of stock procedure will only occur when the total execution four conditions:

• the goods are dispatched or transported by the taxable person to or on behalf of value added tax from the territory of a Member State other than the territory of the country for delivery at a later stage and upon their arrival to another taxable person entitled to acquire the right to dispose of such goods as the owner, for the purposes of this Chapter, hereinafter referred to as ‘the purchaser’, in accordance with the agreement previously concluded between those taxable persons;
• the value added tax taxable person sending or transporting the goods does not have a place of business or a permanent place of business within the territory of the country;
• the purchaser is registered as an EU VAT taxable person and his name and tax identification number preceded by an PL code shall be known to the VAT taxable person sending or transporting the goods at the time of dispatch or transport;
• the VAT taxable person sending or transporting the goods records the movement of the goods in the records, and gives the NIP in the information corresponding to the summary information.

This procedure allows the taxable person in the course of an intra-Community transaction to avoid the obligation to register for VAT purposes in the Member State of the consignee.

Upon fulfilment of the above conditions, the intra-Community acquisition of goods (hereinafter: ‘WNT’) shall be deemed to have taken place in Poland at the time of the transfer to the purchaser of the right to dispose of the goods as the owner, which should occur before the expiry of the 12 months from the day the goods were found in the warehouse. It is important that, at the time of transport of goods, the supplier should be aware of the person who bought the goods and should be registered in the EU VAT system at that time.

If before expiry 12-a monthly period shall be changed to another taxable person, such replacement shall not result in an obligation to identify the WNT, provided that:

• • the VAT taxable person sending or transporting the goods has no establishment or permanent establishment in Poland;
• • the taxable person replacing the purchaser is registered as an EU VAT taxable person and his name and the tax identification number preceded by an PL code are known to the VAT taxable person sending or transporting the goods at the time of the replacement;
• • the VAT taxable person sending or transporting the goods shall indicate in the information corresponding to the summary information of the NIP of the substitute taxable person;
• • the replacement was registered by the VAT taxable person sending or transporting the goods in the records.

It should be borne in mind that if the buyer is replaced, then the time limit 12 the months for the transfer of the right of disposal shall not be subject to extension, i.e. its course shall be retained from the moment the goods are placed in storage.

Where, before the expiry of that period, any of the conditions mentioned in the replacement and the inclusion of a transaction in the call-off stock procedure cease to be fulfilled, the WNT should be recognised at this point.

This results in the requirement to register a supplier in Poland for VAT purposes, as it is treated as if the supplier was moving his own goods, so he is obliged to recognise and account for WNT.

If, on the other hand, the right to dispose of the goods stored has been transferred to a person other than the purchaser or its substitute, the conditions in question shall be deemed to cease to be fulfilled immediately before such action.

This will also be regulated in the case of shipments to a country outside the EU or to another Member State from which the shipment was originally carried out and the right to dispose of goods transported to a call-off stock warehouse in Poland has not been transferred.

This rule will also apply to the destruction, loss or theft of goods moved – the conditions are no longer met on the date on which the said accidents occurred or were found to have occurred.

If the mandatory deadline is exceeded 12 months to transfer the right to dispose of the goods, then WNT should be recognised on the day following the expiry of the period in question. Here too there will be an obligation to register in Poland for VAT purposes and to settle WNT by the taxable person who carried out the shipment of goods.

Where within the time limit 12 Whereas there has been a re-location of goods to the Member State of dispatch without the transfer of the right to dispose of them and the taxable person sending them has registered their re-location in the accounting records of goods supplied under the call-off stock procedure, there is no intra-Community acquisition.

Account should also be taken of the obligation to inform the tax authority. Well, the taxable person keeping the warehouse to which goods will be introduced in the call-off stock storage procedure, within the time limit 14 days from day first the entry of goods into the warehouse in this procedure will have to submit by electronic means to the head of the tax office a notice of the keeping of the warehouse used in the call-off stock procedure containing the following data:

• • the name of the warehousekeeper;
• • the tax identification number used;
• • the address of the establishment or permanent establishment;
• • the address at which the warehouse is located.

If the above requirements are not met, the head of the tax office within the time limit 14 the date of receipt of the notification shall be required to call on the taxable person to supplement the elements of the letter.

If, during the running of a call-off stock warehouse, the information contained in the notification is changed, the taxpayer will be required to send an update to the warden within/from the date of their occurrence. However, the omission of this act by the VAT taxable person will not render the call-off stock procedure invalid.

New regulations – delivery from Poland to warehouse in the EU

In the first mentioned in chapter 3b of the draft amendment of uVAT, we have a regulated analogous situation of the shipment of goods from Poland to a warehouse called call-off stock in the territory of another Member State. Here we will not recognise the intra-Community supply of goods (hereinafter: ‘PDT’). In order to maintain the call-off stock procedure, the following cumulative fulfilment is required: four conditions:

• the goods are dispatched or transported by a taxable person registered as an EU VAT taxable person, or on his behalf, from Poland to the territory of another country for delivery at a later stage and upon their arrival to a VAT taxable person entitled to acquire the right to dispose of those goods as the owner, in accordance with the agreement concluded between those taxable persons;
• the supplier has no establishment or permanent establishment in the territory of the Member State to which the goods are moved from the territory of the country;
• the VAT taxable person for whom the goods are dispatched or transported is identified for intra-Community transactions in the territory of another Member State and his name and identification number for intra-Community transactions assigned to him in the territory of that Member State shall be known to the supplier at the time of dispatch or transport;
• the supplier records the movement of the goods in the records and gives the identification number in the summary information.

Here too, the WDT is recognized by the supplier in the territory of the country by analogy as with the WNT for the receipt of goods in Poland recognized by the buyer – the decisive moment is the transfer of the right to dispose of goods as the owner to the VAT taxable person to whom they are to be supplied, made within the time limit 12 months from the date of arrival of the goods in storage. Similarly, the requirements for the situation of replacement of the consignee are presented in a mirror:

• • lack of establishment/permanent place of business of the supplier in the territory of the State of receipt;
• • the substitute taxpayer is identified for intra-Community transactions in another EU country and its data is known to the supplier at the time of the replacement;
• • the supplier shall indicate in the summary information the EU VAT identification number of the substitute;
• • replacement shall be recorded by the supplier in the records.

Effects of the infringement 12-the monthly deadline is similar to that of WNT in Poland: the shipment of goods takes place at the time of cessation of any of the above conditions during the period, the transfer of the right to a person other than the established consignee or his/her deputy causes him/her to be deemed not to fulfil the mandatory conditions directly by such an act, when the goods are dispatched to a territory other than Poland, then the conditions cease to be fulfilled immediately before the beginning of the shipment/transport, destruction, loss or theft have the effect of ceasing the fulfilment of the conditions on the date of such occurrence and the absence of the right to dispose of the goods results in the diagnosis of the WDT on the day following the expiry 12-the monthly deadline.

Similarly to the shipment to Poland, in the absence of a transfer of the right to dispose and to relocate goods within the time limit 12 no intra-Community delivery occurs here with the verification.

Registration obligations

Shipments from Poland to another EU country, as EU VAT payers, will be required to submit summary information on movements of goods to the tax office in the call-off stock procedure.

This information shall be submitted electronically every month by the latest 25-on the day of the month following the month in which the tax obligation arose and the goods were moved.

This information should include the name and address of the consignor's taxable person and his tax identification number as given in the confirmation by the head of the tax office used for the notified movements, together with the relevant and valid VAT identification number for intra-Community transactions assigned to him in the territory of the Member State to which the goods were moved.

Unfortunately, this gives rise to a duty on the part of taxpayers sending goods to a call-off stock warehouse in an EU country outside Poland to double-submit summary information, for one because of the movement of goods, and second because of the requirement to report on intra-Community supply.

Transitional provisions indicate that to goods entering the warehouse before the day 1 January 2020 the provisions shall apply before the amendment, but until the day following that 24 months after they were deposited.

Part 2 Article HERE

Author: Konrad Kłos, Junior tax consultant, office Russell Bedford in Katowice