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Quick Fixes - changes to ICS

As of 1st January 2020 the so-called Quick Fixes, a package of legislative changes, enter into force. Their main objective is to harmonise and simplify some of the regulations regarding the trade between EU member states.

The package will bring numerous changes, with two-fold objective in mind. On one hand, prevent frauds which occur in the intracommunity transactions, and on the other, unify and improve the on-going functioning of the system on the EU level. In the case of 0% tax rate for intracommunity supplies of goods two aspects will be subject to change: the importance of purchaser’s VAT ID and the transport documentation.

Purchaser’s identification number

From the beginning of next year, the purchaser, which the delivery was made for, will have to be registered for the EU transactions’ purposes in the member state other than the country in which the dispatch began. He will also be obliged to provide this identification number to the supplier.

In addition, the right to 0% tax rate will not be applicable if the supplier does not fulfil the obligation to submit the intracommunity listings (VAT-UE) in which the transaction in question is included, or if the intracommunity listing does not contain the correct data regarding this transaction. In the case of errors, the taxpayer will have to justify the infringement in a way accepted by the tax authorities.

Currently, both these requirements (i.e. the purchaser’s identification number and the submission of intracommunity listings by the supplier) have a formal character. Following introduction of the changes they will become substantive requirements, failure to fulfil them may result in   taxation of the transactions.

Transport documentation for ICS

Quick Fixes will also bring in a change and unification of the accepted set of transport documentation which entitles the supplier to apply 0% tax rate. It is worth noting that the changes in this respect stem directly from the Council Implementing Regulation (EU) 2018/1912 of 4th December 2018, which, in practice, means that they enter into force as of the beginning of January in all member states and do not require implementation to the Polish legislation.

Up to now, the catalogue of documents which entitled the supplier to apply 0% tax rate was quite broad, and the practice of respective member states’ authorities varied. In the light of the new regulations, the catalogue was significantly limited and specified.

The implementing regulation introduces 2 groups of evidence:

Group 1 includes documents relating to the dispatch or transport of goods: signed CMR document, a bill of lading, an invoice form the carrier of goods or an airfreight invoice.

Group 2 includes the following documents: an insurance policy with regard to the dispatch or transport of the goods, bank documents proving payment for the dispatch or transport of the goods; official documents (e.g. notarial) confirming the arrival of the goods in the Member State of the destination, a receipt issued by a warehouse keeper in the Member State of destination, confirming the storage of the goods in that Member State.

The presumption that the ICS transaction took place is made if the supplier is in the possession of:

  • At least two documents from group 1 which are non-contradictory and are issued by two different parties that are independent of each other, of the supplier and of the purchaser;
  • Any single document from group 1 together with any single document from group 2 which are non-contradictory and are issued by two different parties that are independent of each other, of the supplier and the purchaser.

If the transport of goods is organized by the purchaser, or by an entity acting on behalf of the purchaser, apart from the evidence listed above, the supplier is obliged to be in possession of a written statement from the purchaser, stating that the goods have been transported and identifying the member state of the destination of the goods. The statement has to include the following mandatory elements: date of issue, the name and the address of the purchaser, the quantity and nature of the goods, the date and place of the arrival of the goods, in the case of supply of means of transport, the identification number of the means of transport and the identification of the individual accepting the goods on behalf of the purchaser. The deadline for obtaining such a statement will also be significantly shortened – the supplier will have to obtain it till the 10th day of the month following the delivery at the latest.

In line with the new regulations, the burden of proving that the ICS transaction did not take place will fall on the tax authorities.

According to experts, the requirement which may prove to be the most difficult to meet in practice is the requirement about evidence being non-contradictory, issued by two parties that are independent of each other, of the supplier and the purchaser. It can also be imagined that in the light of new regulations it may be difficult to obtain sufficient documentation in the case of stock transfers to a warehouse which belongs to the same taxpayer.

As the date of entering the new regulations into force is approaching, it is advisable to analyse if the listed documents are available or possible to obtain, or whether there is a need to change the way of transporting the goods.

Katarzyna Cholewska

Konsultant VAT

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