4.2
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VAT ON INTRA-COMMUNITY SALES

VAT on intra-Community sales refers to transactions of goods that are transported to another Member State. These supplies of goods are exempt from VAT if certain requirements are met, such as transportation by the vendor or the acquirer, and the acquirer must be a business or professional identified for VAT purposes in a Member State other than Spain.

In order to validate the supply of intra-Community goods, it is necessary to justify the departure of the goods to another Member State and to check the VAT/VAT number of the purchaser through an intra-Community database called VIES.

Chain supplies (successive transfers of goods) are only exempt from VAT on the supply to which intra-Community transport is linked. Intra-Community supplies must be reported in the VAT self-assessments, the annual tax summary, and the recapitulative declaration of intra-Community operations, among others. In addition, invoices must include the mention "Operation exempt from VAT".

As regards VAT on exports outside the European Union, sales are exempt from VAT if they are supported by appropriate documentation and the goods are transported outside the Community by the seller or a third party.

On the other hand, imports of goods are subject to VAT and the importer becomes a taxable person. VAT on importation should not be considered as a cost of the transactions, as it is deductible. For VAT purposes, intra-Community supplies are supplies of goods which are transported to another Member State. 

These supplies of goods are exempt from VAT if the following conditions are met: 

  • The goods are transported by the seller, by the purchaser or by a third party in the name and on behalf of any of the above to the territory of another Member State. 
  • The acquirer is a business or professional identified for VAT purposes (VAT registration number) in a Member State other than Spain.
  • According to the above, the tax shall be exempted when: 
    • The departure of the goods to another Member State is justified. 
  • This may be proven by the following means: 

In the event that the transport is carried out by or on behalf of the seller, by means of the corresponding contracts of carriage of the goods (CMR consignment note) or invoices issued by the carrier. 

If the transport is carried out by or on behalf of the buyer, by means of the purchaser's acknowledgement of receipt, the duplicate of the invoice stamped by the purchaser or the copy of the transport documents that may be provided by the purchaser (CMR consignment note).

  • Proof is provided that the acquirer has a VAT/VAT number. 

For this purpose, an intra-Community database (known as VIES) can be consulted, which automatically and regularly collects intra-Community VAT/VAT numbers (link). In this way, anyone making intra-Community supplies of goods can validate the TIN/VAT supplied by his customer.

  • In the case of chain supplies (successive transfers of goods), only the supply to which intra-Community transport is associated is exempt.
  • If we sell goods to a customer and the goods are transported directly from my supplier's country of residence (Member State) to my customer's place of business, which is in another Member State than the supplier's and mine (Spain), we are dealing with a triangular transaction.

In these cases, the supply to my client is not considered an intra-Community supply of goods (no VAT-taxable transaction would take place in Spain). (extend TIP triangular operation)

Formal obligations:

  • Intra-Community supplies must be reported in the VAT self-assessments, as well as in the annual tax summary (forms 303 and 390, respectively). 
  • An application must be made to the tax authorities for registration in the Register of intra-Community operators by submitting the corresponding census declaration. 
  • Intra-Community supplies must be included in the recapitulative declaration of intra-Community transactions (form 349).
  • The Intrastat dispatch declaration must be submitted if the volume of intra-Community supplies exceeds the threshold of 250,000 euros.
  • Invoices documenting intra-Community supplies must include the words "Transaction exempt from VAT". 

Regulations:

  • Law 37/1992 of 28 December 1992 on VAT.
  • Royal Decree 1624/1992 of 29 December 1992, approving the VAT Regulation. 
  • Royal Decree 1619/2012, of 30 November, which approves the Regulation governing invoicing obligations.

The complexity in the application of VAT in international transactions has led to a substantial increase in the number of cases considered as tax fraud in recent years. 

In order to avoid non-payment of this tax, the tax regulations establish cases of joint and several liability for the debt in transactions involving several parties. 

These cases of liability are of great importance in international transactions, since the non-payment of the debt by the party obliged to pay it can lead, in the event of fraud, to a trader who has been involved in the transaction becoming jointly and severally liable for the payment of the debt.

VAT ON EXPORTS OUTSIDE THE EUROPEAN UNION:

For VAT purposes, exports are transfers of goods transported outside the European Union. These sales are exempt from VAT, i.e. no tax is due on the sale. 

DEPENDING ON WHO IS RESPONSIBLE FOR TRANSPORTING THE GOODS OUT OF THE COMMUNITY, THERE IS EITHER DIRECT OR INDIRECT EXPORT:
  • DirectThe transferor, or a third party acting on his behalf, is responsible for transporting the goods out of the Community. 
  • Indirectthe goods transferred are transported out of the Community at the risk and for the account of the non-established acquirer or by a third party acting on his behalf (the goods transferred must be presented to the customs authorities within one month of the date of their transfer). 

EXEMPTION FROM THE TAX SHALL ONLY BE GRANTED IF IT IS JUSTIFIED BY THE FOLLOWING DOCUMENTATION:

DIRECT
  • The export SAD that meets the following requirements: 
    • It is duly completed and stamped by the customs office of exit. 
    • The seller is listed as the exporter of the goods.
  • The contracts, bills of sale and sales invoices documenting the transfer of the exported goods.
  • Transport documents (CMR consignment note).
INDIRECT
  • The documentation listed above for direct exports.

However, the SAD at export, sent by the non-established acquirer, must include a reference to the invoice issued by the seller, and the transferor must be listed as the exporter (his VAT number must be indicated).

MORE TIPS:

  • Goods which, on the occasion of their transfer, are sent to the Canary Islands, Ceuta or Melilla are considered to have been transported outside the Community and are therefore also exempt from tax (exports for VAT purposes). 
  • In the case of chain supplies (successive transfers of exported goods), only the supply made by the person named in the SAD as the exporter is exempt. 

Formal obligations:

  • Exports made must be reported in the VAT self-assessments, as well as in the annual tax summary (forms 303 and 390, respectively). 
  • Invoices documenting exports must be endorsed with the words "Transaction exempt from VAT". 
  • The Customs Department of the Tax Agency must issue the exporting company with an EORI number (a number consisting of the letters ES followed by the company's VAT number). This number must be reported on the exporting company's customs declarations. 

Regulations:

  • Law 37/1992 of 28 December 1992 on VAT.
  • Royal Decree 1624/1992, of 29 December, which approves the VAT Regulations. - Royal Decree 1619/2012, of 30 November, which approves the Regulation governing invoicing obligations.

VAT on imports:

Imports of goods are subject to VAT and the importer becomes a taxable person. 

The calculation of the basis includes all the components of the customs value as well as taxes due on importation and ancillary costs incurred up to the first point of destination of the goods in the Community. 

AMONG OTHERS, ARE EXEMPT FROM VAT ON IMPORTS OF:
  • Assets destined for charitable or philanthropic organisations.
  • Biological and chemical substances for research purposes.
  • Goods imported for the benefit of disabled persons. 
  • Assets destined for international organisations. 

VAT is usually settled together with customs duties. In some cases, goods are imported to be bonded to a bonded or non-customs warehouse or to be sent to another EU country.

In such cases, the payment of import VAT shall be deferred in time and place, determined by the time and the market where the products are to be consumed.

Import VAT should not be considered as a cost of transactions, as it gives the right to deduct it. However, may involve a financial cost as it has to be settled at the time of importation.

APPLY THIS TIP TO YOUR PROJECT

CASE STUDY 

Maria is a Spanish entrepreneur who has decided to expand her business selling textile products to other EU countries. Because of this, she needs to be aware of the tax rules and obligations that apply to intra-EU sales, including VAT exemption.

Maria has investigated and realised that she can make VAT exempt intra-Community supplies if the goods are transported by herself, by the purchaser or by a third party in the name and on behalf of any of the above to the territory of another Member State and if the purchaser is a trader or business person identified for VAT purposes in a Member State other than Spain.

Maria has obtained registration in the register of intra-Community operators and has applied to the tax authorities for an EORI number (consisting of the letters ES followed by the company's VAT number) in order to be able to carry out imports. In addition, she has ensured that all her invoices documenting intra-Community supplies include the words "Operation exempt from VAT".

Maria has established a network of suppliers in different EU countries and has agreed with them the terms of intra-Community deliveries of goods. To justify the departure of the goods to another Member State, Maria has requested from her suppliers the relevant contracts of carriage of the goods (CMR consignment note) or the invoices issued by the carrier in case the transport is carried out by or on behalf of the seller. In the event that the transport is carried out by or on behalf of the buyer, Maria ensures that she obtains the purchaser's acknowledgement of receipt, the duplicate invoice with the purchaser's stamp or the copy of the transport documents that may be provided by the purchaser (CMR consignment note).

Maria has also done business with companies outside the European Union and has understood that imports of goods are subject to VAT and that the importer is a taxable person. In this respect, Maria has calculated the base which includes all the components of the customs value, the taxes due on importation and the incidental costs incurred up to the first point of destination of the goods in the Community.

In summary, Maria has applied the VAT concepts for intra-Community sales and imports to ensure that she complies with her tax obligations and avoids possible penalties or fines.

In addition, has established business relationships with suppliers and customers in the European Union and beyond, enabling it to expand its business and increase its profitability.

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