Spain introduces changes to VAT on intra-Community trade

Spain - 02 / 10 / 2020

Spain Tax Commentary

Spain has adapted its VAT law to the EU legislation seeking to simplify and harmonize trading in goods within the EU.

In Royal Decree-Law 3/2020 of February 4, 2020, Council Directive (EU) 2018/1910 of 4 December 2018, and Council Directive (EU) 2019/475 of 18 February 2019 have been transposed into Spanish law. Besides that, consideration must be taken to the provisions introduced by Council Implementing Regulation (EU) 2018/1912 of 4 December 2018.

This transposition has brought the so called “quick fixes” into the Spanish legislation, which simplify and harmonize a few VAT rules applicable to intra-Community trade; namely, the rules on the VAT exemption for supplies of goods dispatchedto another member state, call-off stocks and chain transactions.

We discuss each of these below:

1. VAT exemption for supplies dispatched to another member state

a) Requirements for the exemption: in order for the exemption for “intra-Community supplies” to apply, it was required to be in possession of a VAT identification number assigned to the customer by another member state. This requirement was included in the Spanish legislation, but did not appear in the directive but it is now a specific requirement in both pieces of legislation. On the other hand, it isalso necessary to prove the actual transport of the goods.

A new condition for the VAT exemption has been introduced, which is that that the transaction must be reported correctly on the recapitulative statement for intra-Community transactions.

These amendments seek to convert both the VAT number of the recipient and the correct reporting of the transaction into substantive requirements for claiming the VAT exemption.

b) Proof of transport to another member state: it has also been sought to harmonize the means of proof of transport to another member state through a presumption, rebuttable by the authorities, based on documents defined in the law; and in every case without restricting the option of using other items of proof.

In other words, the reference to evidencing transport using any means of proof allowed in the law has been kept, though the legislation adds presumptions that may be asserted by the trader claiming the exemption on the basis of specific documents of proof. These presumptions are contained in Implementing Regulation (EU) 282/2011 and have been directly applicable since January 1, 2020.

Namely, transport will be taken as proven if the following documents are held:

If the transport is provided by the supplier:

- Transport will be taken as proven where the supplier indicates that the goods have been dispatched or transported by him or by a third party on his behalf and the supplier is in possession of at least two items of non-contradictory evidence relating to the dispatch or transport of the goods such as (i) a signed CMR document or note, (ii) a bill of lading, (iii) an air freight invoice or (iv) an invoice from the carrier of the goods, which were issued by two different parties that are independent of each other, of the supplier and of the customer.

- The presumption is also applicable if they are in possession of only one of the items of proof mentioned along with one of the following documents that do not contradict the document related to transport:
- An insurance policy with regard to the dispatch or transport of the goods, or bank documents proving payment for the dispatch or transport of the goods.
- Official documents issued by a public authority, such as a notary, confirming the arrival of the goods in the member state that is 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.
Similarly to the first group of documents allowable as evidence, these have to be issued by two different parties that are independent of each other, of the supplier and of the customer.
If the transport is provided by the customer:

In these cases, the supplier has to be in possession of a written statement from the customer, stating that the goods have been dispatched or transported by him or by a third party on behalf of the customer, and identifying the member state that is the destination of the goods.

This statement must contain at least: (i) the date of issue, (ii) the name and address of the customer, (iii) the quantity and nature of the goods, (iv) the date and place of arrival of the goods, (v) the identification number of the means of transport (in the case of the supply of means of transport) and (vi) the identification of the individual accepting the goods on behalf of the customer.

This statement must be sent to the supplier by the tenth day of the month following the supply.

Alongside this statement, the customer must be in possession of the documents of proof mentioned above and on the same conditions and with the same order of priority as those described above.

2. Call-off stocks

The amendments related to call-off stocks refer to sales of goods that are sent to another member state by a supplier not established in that member state, and are destined for a warehouse that may belong to the customer himself, for the customer to acquire ownership of them at a later date depending on his needs. These sales must relate in every case to goods sent to a customer who is completely identified (tax identification number, name and surnames, complete business name) from the start.

Under the former wording of the law, these transactions entailed the making of an intra-Community transfer by the supplier in Spain (as the goods’ country of destination), with the resulting identification and procedural obligations, followed by a domestic supply when the customer acquires ownership of the goods.

A few member states, however, had taken measures to simplify these transactions, resulting in divergent treatment becoming the source of multiple practical problems at times.

To give uniform treatment across the European Union specific rules have been defined for these supply arrangements. They determine that these transactions are to be treated as intra-Community supplies from the country of departure and intra-Community acquisitions in the country of destination (Spain); and the taxable events will take place when the customer acquires ownership of the goods.

Additionally, taxable persons are required to report certain intra-Community transactions in their records, and to report on the recapitulative statement (form 349), the movement of goods, their estimated value and the customer’s identification particulars.

If, within twelve months from arrival of the goods (on the day after the end of that twelve-month period), the transfer of ownership to the customer has not taken place or if a condition laid down in the law for the simplification of measures to apply has not been satisfied, the intra-Community transfer will need to be declared with all the implications associated with this.

There will be no such obligation, however, if within the twelve-month period, (i) the goods are returned to their country of departure or (ii) if a new customer is identified. In both cases the specific recording and declaration obligations must be adequately observed.

3. Chain transactions

These amendments relate to successive sales of the same good where a single transport takes place from Spain to the end customer, in another member state.

Take for example a sale of goods from one company (A) to another company (B) and successively from B to a third company (C) in which the goods are transported from Spain to C in France.

In recent years, the Court of Justice of the European Union has ruled several times in relation to transactions of this type on how to determine at which supply the transport must be attributed and therefore is exempt from VAT. The adoption of the court’s interpretations has not been easy in some member states, and it was therefore considered necessary to provide specific rules.

The new rules attempt to simplify the analysis and bring clarity to analysis of the place where the two taxable events take place.

In the described example, the transport will have to be attributed to the supply between A and B (and will therefore be exempt from VAT). B will make an intra-Community acquisition in France, so the supply between B and C will take place in France.

If, however, B provides A with a Spanish VAT identification number, the transport will have to be attributed to the second supply, so that the supply between A and B will be treated as a domestic sale in Spain – not exempt from VAT– and the sale between B and C will give rise to an “intra-Community supply” in Spain and an intra-Community acquisition by C in France.