In a world of fast-moving goods, services and global economies, it goes without saying that speed and adaption to change should be embedded in the business model as an inherent part of commercial success. At the same time, changes are reflected not only on the side of consumers and commercial enterprises, but also as part of public and governmental strategies, at both local and regional level. In the present coverage, we will now have a glimpse at the VAT quick fixes considered to be the forerunner of the reformed European VAT system to arrive after 2022.
As part of these strategic VAT changes in public administration policy, it is worth noticing that the Council, in its conclusions of November 8 2016, already invited the Commission four years ago to come up with proposals for improving the VAT system and reducing VAT evasion. Thus, the quick fixes to be implemented in 2020, address the four areas identified some years ago: the VAT identification number, harmonised rules for chain transactions, call-off stock arrangements and documentation obligations to claim exemptions for intra-Community supplies. Following this, the Commission proposed on October 4 2017 amendments to the VAT Directive, and these amendments were subsequently adopted by the Council on December 4 2018.
Given the context above, it appears that the implementation of the quick fixes at country level in Romania is a natural development. The exposure of reasons, as published by the Romanian Ministry of Finance for an internal law to amend the Romanian Fiscal Code, comes quite late to ensure appropriate public policy knowledge dissemination, but still in time to avoid any letter from the Commission or an infringement procedure. Nevertheless, time is still needed for the appropriate training of public bodies, and the application of the tax officials, the Ministry and the Romanian Tax Administration of the relevant concepts and changes.
The Romanian authorities recognise the importance of not considering an intra-Community transaction as the mere movement of goods from the territory of the state to a deposit in another member state. In exchange, the intra-Community transaction will take place when the ownership right over the goods is transferred to the purchaser. Some specific provisions apply in particular cases, as for example destroyed goods, returned goods or if these are not sold within a twelve months frame. This will reduce the necessity to register in each member state but will impose an obligation to keep a journal of transferred goods in the call-off stock process.
In respect of the chain transactions, the transport will be more generally associated with the supply made to the intermediary operator. Some derogations will exist when the intermediary operator communicates the VAT number issued by the member state from which the goods are dispatched. In such a case, the transport will be connected to a supply made by the intermediary operator. Moreover, an intra-Community exempt transaction will be recognised in case of a valid VAT number communicated accordingly and if such transactions are evidenced in the concerning EC Sales listings. Additional obligations in respect of proofs of transport will also be imposed.
On a whole, the new quick fixes appear to aim for a more unitary approach and generalised rules in respect of call-off stock arrangements, intra-Community transactions, chain transactions and the relevant proofs of transport for the movement of goods. It will still, however, be challenging for Romanian administration and the courts of law to apply the provisions in the European context and in the lack of further guidance from the Court of Justice of the European Union (CJEU).
If, so far, the rulings of CJEU prioritised substance over form for intra-Community transactions, it is expected that this will change and any absence of a valid VAT number or of transactions in the relevant listings may be penalised by a reclassification of transactions. Furthermore, if the VAT Directive has not provided any concrete rule and the CJEU has only offered some guidance for the overall assessment for chain transactions, this is likely to change now. So far the Romanian Fiscal Administration has consistently applied the form over substance, but it will be interesting to see how the Romanian courts will start reversing their prior practice.
Niclas Butan
Alex Milcev
T: +40 21 402 4000
