On January 1st, 2020, amendments of Slovene Value Added Tax Act (hereinafter VAT Act) will come into force. Changes were published in Official Gazette of the Republic of Slovenia No. 59/2019 dated October 4th, 2019, and Official Gazette of the Republic of Slovenia No. 72/2019 dated December 4th, 2019. Changes are the result of implementation of several European Union (hereinafter EU) Directives into Slovenian legislation, whereby the most important changes have been introduced with Council Directive (EU) 2018/1910. New rules for special types of transactions and amendments to existing rules have been introduced to ensure a higher level of certainty for taxable persons and to unify certain rules on Value Added Tax (hereinafter VAT) across EU.
Council Implementing Regulation (EU) 2018/1912 (hereinafter Regulation) also enters into force on January 1st, 2020, and is entirely and directly applicable in all EU Member States (hereinafter Member States). Regulation is implementing additional conditions for VAT exemption of intra-Community supplies of goods (hereinafter IC supplies of goods). In order to ensure compliance with EU legislation, Slovenian Rules on the implementation of the Value Added Tax Act will also be amended shortly. The most important changes are summarized below.
I. Call-off stock unification on the European Union level
As of January 1st, 2020, call-of stock arrangement rules will be introduced and/or unified in all Member States. Call off stock arrangements refer to cases where the supplier transfers own goods from one Member State to the warehouse in another Member State for the purpose of subsequent supply of goods to already known customer in this other Member State.
These call-off stock rules simplify cross-border transactions as the supplier does not need to identify for VAT purposes in the Member State of arrival, i.e. where goods are warehoused. Subject to certain conditions, the supplier may transfer goods to a warehouse in the other Member State, whereby the IC supply of goods shall be deemed to be carried out only when the customer shall remove these goods from the warehouse (dispose of them as an owner).
In absence of this option, the supplier would need to identify for VAT purposes in the Member State to which goods are dispatched and stored. Slovene legislation previously allowed for such simplification, however, it was limited to transactions with taxable persons from Member States which also had similar simplification implemented. In line with the new provisions, such simplifications will be available in all Member States, subject to conditions listed below:
- The supplier or a third party acting on his behalf dispatches goods from one Member State to another Member State with intention to sell them to a foreign taxable person.
- The supplier is not established nor has a fixed establishment in the Member State to which the goods are dispatched or transported.
- Recipient of goods is a taxable person identified for VAT purposes in Member State of receipt of the goods, whose identity and VAT identification number (hereinafter VAT ID number) are known to the supplier when dispatch begins.
- Supplier keeps separate evidence of supplied goods and reports the customer’s identity and VAT ID number in EC Sales list (hereinafter Recapitulative Statement).
Goods stored under call-off stock arrangement must be sold within 12 months after arrival in the Member State of destination. If goods are not sold to the customer or returned to the Member State from which they were dispatched, it is deemed that the supplier has carried out a movement of own goods within EU. In this case the supplier has to identify for VAT purposes in Member State where the goods are stored and report deemed IC acquisition of goods. The call-off stock simplification arrangements should be properly recorded by the supplier and customer in order to ensure their correct application. Details of obligations in respect of keeping evidences are defined in Regulation.
II. Chain transactions
Amendments to VAT Act and Council Directive (EU) 2018/1910 are harmonising rules of chain transactions. Chain transactions refer to successive supplies of goods which are subject to a single IC movement; goods are transported directly from the first supplier to the final customer in the supply chain. When goods are supplied to another Member State, a question arises to which supply the IC movement of the goods should be ascribed to. Only this supply should benefit from the VAT exemption provided for IC supplies of goods. The current legislation does not provide specific rules on this matter.
In a chain transaction, whereby goods are transported directly from the first supplier in one Member State to the final customer in another Member State, the dispatch or transport shall be ascribed only to the supply made to the intermediary operator (i.e. to the fist supply). Intermediary operator means a supplier within the chain other than the first supplier in the chain who dispatches or transports the goods either himself or through a third party acting on his behalf. Where the intermediary operator has communicated to his supplier the VAT ID number issued to him by the Member State from which the goods are dispatched or transported, transport shall be ascribed only to the supply of goods by the intermediary operator (i.e. to the second supply).
This rule can be used for triangular supplies (i.e when a transaction is performed between three taxable persons each identified for VAT purposes in a different Member State) and also for other successive supplies that do not qualify as triangular supplies or chain supplies involving more than three taxable persons.
III. VAT exempt IC supplies
The use of VAT exemption provided for the IC supplies will be subject to additional conditions. According to current EU Court of Justice jurisprudence, obtaining a valid VAT ID number of the customer was a formal condition for application of the VAT exemption. Missing or incorrect VAT ID number on an invoice did not necessarily result in rejection of VAT exemption. After new changes come into effect, obtaining a valid VAT ID number of the customer in other Member State will be material requirement, otherwise the supply will not be exempt from VAT in the Member State of dispatch.
IC supplies of goods in line with the provisions of the VAT Act will be exempt from VAT only under the conditions listed below:
- Goods are supplied to a foreign taxable person or a non-taxable legal person acting as such in the other Member State.
- Recipient of goods has to communicate to the supplier his VAT ID number obtained in a Member State other than the Member State from which the goods are dispatched.
- Supplier reports the correct value of supplied goods and VAT ID number of his customer in the Recapitulative Statement.
The transaction cannot benefit from VAT exemption in case of incomplete data or when the supplier did not submit a complete Recapitulative statement. If proper information has not been provided or has been provided belatedly, tax authorities may exceptionally allow for VAT exemption of the supply, however missing data or documents need to be firstly provided to the authorities. To avoid the potential obligation to charge Slovene VAT, the supplier needs to have possession of valid VAT ID numbers of its customers before the IC supply of goods is performed.
IV. Documentation proving intra-Community supplies
Regulation is also setting new criteria for proving dispatch or transport of goods to another Member State. Until now, it was sufficient to prove that the goods left the Member State from which goods were dispatched or transported, however, this practice is changing.
Articles of Rules on the implementation of the Value Added Tax Act that are defining transport documentation will be amended or deleted. In accordance with the new rules, the supplier will have to be in possession of at least two items of non-contradictory evidence, issued by two different parties that are independent of each other, of the supplier and of the acquirer, to prove the movement of goods. Documents that can be used as proof are listed below and divided in two groups for easier clarification:
a) First group of documents consist of direct evidences of physical movement of goods:
i. signed CMR document or note,
ii. a bill of lading and
iii. an airfreight invoice or an invoice from the freight forwarder.
b) Second group of documents consists for example of:
i. an insurance policy relating to the dispatch or transport of the goods, or bank documents proving payment for the dispatch or transport of the goods,
ii. official documents issued by a public authority, confirming the arrival of goods in the Member State of destination and
iii. a receipt issued by a warehouse keeper in the Member State of destination.
The documentary set of documents depends on the fact which party organises the transport. If the supplier is the organiser, then he indicates that the goods have been dispatched or transported by him or by a third party on his behalf. He shall also be in possession of two non-contradictory evidences from group a) or one from group a) and one from group b).
When the acquirer organises the transport, the supplier needs to obtain a written statement from the acquirer, stating that the goods have been dispatched or transported by the acquirer, or by a third party on behalf of the acquirer. The statement shall contain information about the Member State of destination, the date of issue, the name and address of the acquirer, the quantity and nature of the goods, the date and place of the arrival of the goods.
In the case of the supply of means of transport, it shall also contain the identification number of the means of transport and the identification of the person accepting the goods on behalf of the acquirer. The supplier shall also be in possession of two non-contradictory evidences from group a) or one from group a) and one from group b).
V. Other changes
VAT Act amendments also include minor editorial corrections, changes of reporting obligations for acquisitions of means of transport from EU and changes of tax offense penalties.
Amendments of VAT Act are also introducing new super-reduced VAT rate, i.e. 5%, which will be applicable only to supply or loan by libraries, of books, newspapers and periodicals either on physical means of support or supplied electronically.
If any of the described changes affects your business and you think they may prove to be a challenge to you, or you merely need any additional information, feel free to contact our team of experienced consultants any time and we will gladly assist you.
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