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Changes in chain transactions

In accordance with the draft amendments to the VAT Act, as of 1 January 2020, changes implementing the directive 2018/1910 will be introduced in regards to the delivery of goods under the so-called chain transactions.

As a result of the introduced changes, the tax settlement under such transactions will be unified throughout the EU.

The nature of the conditions allowing for the application of a 0% rate for intra-Community supply of goods will be changed to include the EU VAT number of the buyer and to submit the correct summary information in the course of intra-Community trade. So far, despite the existence of such conditions in the VAT Act, they were treated by courts as formal requirements, but from January 1, 2020 they will become substantive conditions, and thus will have to be met so that the taxpayer can apply a 0% VAT rate.

In addition, significant changes will occur in determining the delivery that will be able to use the 0% rate (cross-border delivery). As a general rule, in the supply chain, the delivery that will be able to use the 0% rate will be the delivery of the seller who delivers to the intermediary operator. According to the definition of the intermediary operator, included in the draft amendments to the VAT Act, it is a supplier within the chain, other than the first supplier, who dispatches or transports the goods either themselves or through a third operator acting on their behalf.

The project also introduced a derogation from this principle. The dispatch or transport shall be ascribed only to the supply of goods by the intermediary operator where the intermediary operator has provided their supplier with the VAT EU number issued to them by the Member State from which the goods are dispatched or transported. In this case, its delivery will have a cross-border nature.

Some doubts may arise from a situation that does not arise directly from the proposed regulations, i.e. a situation where the first entity will dispatch. The doubt arises from the fact that according to the definition, the intermediary operator makes the shipment and cannot be the first supplier in the chain. However, the proposed art. 22 par. 2a of the proposed regulations refers only to the situation in which the delivery is made to an intermediary operator. There is no case in which the first entity makes a dispatch or transport of goods. However, according to the justification to the draft amendments to the VAT Act, when the organizing entity is the first or last entity in the chain, there is no real doubt that the movable delivery should be attributed to the delivery by the first entity or delivery to the last entity in the chain.

Planned date of entry into force: 1st January 2020

Status of work on the act: governmental works

Gerard Goliasz

Tax Specialist

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