The main goal of the EU reform called Quick fixes is harmonization and unification of popular solutions that have been used for a long time in many EU countries, including Poland. To date, the rules regarding the Call off stock warehouses were not unified across the EU, which in business practice was burdened with a long list of doubts on the side of taxpayers operating sometimes in several different legal regimes. The cause was that these issues were not regulated at the Directive level. From January 1, 2020, this situation will finally change and it will undoubtedly be a good change.
Why the call of stock business is so beneficial? Polish case
The consignment warehouse is a great solution for companies using international trade, especially manufacturing companies or those operating in processing industries. The goods delivered to the warehouse are subject to VAT only when they are picked from the warehouse by the buyer and constitute for him ICA. The warehouse owner pays VAT due “on behalf of” a foreigner. The simplifications provided for the foreign supplier are extremely beneficial, because its business with the domestic buyer is completely invisible to the Polish tax authorities. A supplier registered in another Member State (not in Poland!) is exempted from having to obtain a VAT number in the country where the warehouse is located and is not required to declare and pay VAT on the moved goods. If the goods are not collected by the indicated buyer after 24 months, this buyer is obliged to declare VAT on ICA in his VAT return as if it had actually occurred, unless the goods returned to the supplier’s country of origin.
The fact that the principles of call of stock magazines were not regulated at EU level caused that individual member states introduced autonomous solutions in this respect – often completely different from their neighbors. Let’s have a look at a moment of recognizing the tax point in VAT. Pursuant to Polish regulations, the buyer recognizes ICA in its VAT return at the time of collecting goods from the warehouse. The Czech owner of the consignment warehouse will recognize the tax obligation earlier – when the goods enter the warehouse. Similarly, a source of surprise for a foreign supplier may be the fact that in Poland goods stored in a warehouse cannot be the subject of the buyer’s commercial activity, as such solution excludes the possibility of simplification. The stored goods can be used only for production or service purposes of the buyer’s business.
The unification of rules for consignment warehouses in Europe is a big simplification for entrepreneurs operating across borders.
What will change?
- goods delivered to the call of stock warehouse will be able to be used by the buyer also for the purposes of commercial activities;
- the period during which the goods may stay in the warehouse will be shortened to 12 months. After this deadline, the supplier will no longer take advantage of the simplification, i.e. he will be obliged to settle ICS in the country from which the goods have been transported and accordingly ICA in the country of the warehouse location;
- the supplier will avoid the obligation to settle transaction based on the general rules only if the goods return to the country from which they were previously exported (destination country) and will be reported in the proper records;
- a new obligation to report shipments made for the purposes of the call of stock warehouse will be added and the new template of IC listings is also provided for in the amended Directive;
- Directive will regulate a situation where the originally indicated buyer changes and within 12 months a delivery is made to another entrepreneur operating in the territory of the same country – if the change is reported in the supplier’s records and the conditions for applying the simplification are still met, then the foreign supplier will not have to register for VAT purposes.
What do these changes mean in practice?
For entrepreneurs, the change in regulations is primarily associated with the need to adapt business to the new legal reality. The changes will affect not only VAT settlements. It will be necessary to adapt the amendments in contracts with contractors and company ERP systems. Nevertheless, the changes should be assessed as positive and will certainly increase the popularity of this solution, as well as legal certainty and transparency.