With effect from 1 January 2020, new simplification rules were introduced1 to regulate the VAT treatment of call-off stock across the EU. The explanatory notes to the EU directive2 introducing the changes, define call-off stock as a situation in which a taxable person dispatches or transports goods to a stock in another member state for an intended acquirer whose identity and VAT identification number are known at the time of the transport or dispatch and who has the right to take goods out of this stock at his own discretion, at which time the property on the goods is transferred.
Up to 31 December 2019, the supply of call-off stock was not subject to any simplification procedure in Malta. In fact the VAT Act3 provided that the transfer by a taxable person of own goods forming part of his economic activity, from Malta to another EU member state was to be treated as an intra-community supply (ICS) of those goods for consideration and should have been reported as such in the VAT return and recapitulative statement. Although some EU member states automatically applied the simplification prior to 1 January 2020, the Commissioner for Revenue authorised such simplification procedures in Malta, only on a case-by-case basis.
The VAT treatment of call-off stock is included in the ATX-MLA syllabus and is examinable from June 2021 onwards however, the treatment prior to the introduction of the new rules will not be examined in ATX-MLA and any questions will focus on the VAT treatment from 1 January 2020 onwards.
With effect from 1 January 2020, through the enactment of new Item 17A, Second Schedule to the VAT Act, the transfer by a taxable person of goods forming part of his business assets to another member state under call-off stock arrangements shall not be treated as a supply of goods for consideration. The simplification procedure is intended to avoid the taxable person being required to register in the other member state at the point when the goods are transported to other EU member state, as long as a number of conditions, listed below, are satisfied:
a) the goods are dispatched or transported by a taxable person, or by a third party on his behalf, to another member state with a view to those goods being supplied there, at a later stage and after arrival, to another taxable person who is entitled to take ownership of those goods in accordance with an existing agreement between both taxable persons;
b) the taxable person dispatching or transporting the goods has not established his business nor has a fixed establishment in the member state to which the goods are dispatched or transported;
c) the taxable person to whom the goods are intended to be supplied is identified for VAT purposes in the member state to which the goods are dispatched or transported and both his identity and the VAT identification number assigned to him by that member state are known to the taxable person referred to in point (b) at the time when the dispatch or transport begins;
d) the taxable person dispatching or transporting the goods records the transfer of the goods in a call-off stock register4 and includes the identity of the taxable person acquiring the goods and the VAT identification number assigned to him by the member state to which the goods are dispatched or transported in the recapitulative statement;
e) the taxable person to whom the call-off stock is dispatched, must withdraw the goods within 12 months, in order for the simplification procedures to apply.
Therefore, the initial movement of the goods between the taxable person in the first member state and the taxable person in the other EU member state, is ignored. Moreover, if the transfer to the taxable person in the other EU member state, of the right to dispose of the goods as owner happens within 12 months, the taxable person who dispatched/transported the goods is considered to make an exempt with credit ICS of goods in the member state of dispatch. The taxable person to whom the goods were dispatched is deemed to make an intra-community acquisition (ICA) of the goods in the member state of arrival, at the time of withdrawal.
2.1 Goods not withdrawn within 12 months from dispatch
If within 12 months after the arrival of the goods in the member state to which they were dispatched or transported, the goods have not been supplied to the taxable person for whom they were intended and are not returned to the taxable person in the member state of dispatch, a transfer of goods shall be deemed to take place on the day following the expiry of the 12 month period. In such a case the supplier in the member state of dispatch must report an immediate ICS, whereas the taxable person in the member state of arrival must immediately report an ICA. However, if the goods are returned to the taxable person in the member state of dispatch within 12 months from initial dispatch, and such return is properly reflected in the call-off stock register, then no supply is deemed to take place at any stage of the goods movement.
2.2 Goods supplied to a different taxable person
If within 12 months from the date of dispatch, the goods are supplied to another taxable person, no transfer is deemed to take place (and there is no need for the seller to report an ICS and the buyer to report an ICA), as long as all the conditions listed in Section 2 above are met, and the substitution of the old taxable person with the new taxable person is recorded in the call-off stock register. In such a case, the 12-month simplification period will not be reset, and the final transfer must still occur within 12 months from the original dispatch by the taxable person in the first EU member state.
2.3 Call-off stock simplification conditions no longer satisfied
If within 12 months from the date of dispatch, any of the conditions listed above, are no longer satisfied, a transfer of goods is deemed to take place. Cases where this may occur are, if the goods are:
In such a case, the supplier in the member state of dispatch must report an immediate deemed ICS in the member state of dispatch, followed by a deemed ICA in the member state of the goods arrival. This would mean that the taxable person in the first member state would be required to obtain a VAT identification number in the second member state and subsequent supplies in the second member state would be subject to the latter member state’s VAT.
If the goods are destroyed, lost or stolen, the call-off stock conditions shall also be deemed to be no longer satisfied on the date that the goods were actually removed or destroyed, or, if it is impossible to determine that date, the date on which the goods were found to be destroyed or missing.
Whereas the VAT treatment of call-off stock is examinable in full at the ATX-MLA level, the examining team will aim to assess candidates’ knowledge through the application of the VAT provision to a practical case study. In this context, candidates are expected to be aware of the obligation to maintain a call-off stock register but are not expected to have an in-depth knowledge of what detail should be maintained in such a register.
Written by a member of the ATX-MLA examining team
Footnotes
(1). Through a new Article 17a in Council Directive 2006/112/EC.
(2). Council Directive (EU) 2018/1910.
(3). Second Schedule, Item 17(1) to the VAT Act, with exceptions in Second Schedule, Item 17(s).
(4). Provided for in paragraph 1(k) of item 1 of the Eleventh Schedule to the VAT Act.