EU Quick Fixes – Cross Border movements of goods

BLOG24th Jan 2020

With the focus being firmly on Brexit, UK businesses could be forgiven for not being aware of EU changes that came into effect on 1 January 2020.  These have significant implications for cross border EU trade in the lead up to Brexit.

The following four VAT initiatives came into force on 1 January 2020.  These “quick fixes” are intended to make the EU VAT system more definitive by harmonising and simplifying some of the uncertain areas surrounding how VAT is treated on cross-border transactions within the EU. These 4 initiatives are the first step in a series of reforms which will see moves towards greater harmonisation and streamlining of the EU’s VAT system.


Call-off stock

This initiative relates to the movement of stock from one EU member state to a warehouse in another, where there is the intention to make a domestic sale. Usually, this scenario creates a “call-off stock” situation and the supplier may be liable for VAT registration in the country in which the sale will take place.

This has long been a complicated setup, with different member states having different rules about simplifications. The new rule creates a harmonised simplification that all EU member states will need to apply, as long as conditions are met. When it applies, the supplier will not have to register for VAT in the member state where the call off stock is held.

What does this mean for Business?

This a positive move in many ways, as it saves businesses the trouble of investigating and setting up different processes to manage member states’ varying requirements. It might also mean that VAT registrations in some nations are no longer necessary. However, the conditions that must be met for this fix to apply are numerous and could create further complications. Also, if any of the conditions cease to be met, the simplification no longer applies, and businesses may find a sudden need for EU VAT registrations.

Chain transactions

Chain transactions are a steady feature of modern business. A chain transaction occurs when goods move from a supplier in one member state to a customer in another, and along the way ownership passes between several different parties. The complication in a supply chain is identifying which transaction counts as cross border (there can be only one), and which are therefore domestic in either the member state of dispatch or of final delivery.

This solution intends to simplify chain transaction issues.  In a three-party chain (A-B-C), the first supply (A to B) is treated as the cross border supply, providing that the intermediary (B) has organised the transport.

This quick fix also gives the intermediary (B) the ability to treat the first supply as a local sale with the subsequent sale being the intra-EU supply. In order to do this, the intermediary must provide a local VAT number to the original seller (A). This option removes of the requirement for the intermediary (B) to register in the Member States of Destination.

What does this mean for Business?

This amendment gives greater certainty for businesses on how to manage chain transactions, and therefore there’s a much better chance of applying the correct VAT treatment and avoiding unfortunate cash flow issues. However, it’s essential that businesses understand the position of each party in the chain and continually review to ensure that any changes are accounted for.

Furthermore, following Brexit, it will no longer be possible for UK companies to participate in simplified triangulation. As a result, UK companies acting as intermediaries in intra-community movements may wish to consider registering in countries where their major suppliers are based to avoid them having to register in all Member States of destination of their goods.

However, in addition to registration, the UK intermediary will also need to arrange the transport of the goods to avoid having to register in the Member State of destination.

Mandatory use of VAT numbers

The EU VAT Directive has been rewritten to add additional conditions which must be met to zero rate a cross border movement of B2B goods. This will affect all businesses involved with the intra-EU supply of goods, so is directly relevant to any business considering moving into Europe.

As well as being required to show the customer’s VAT number on the invoice, in order to zero rate, the UK supplier must also submit an EC Sales List.

What does this mean for Business?

This will generate a lot of additional administration for businesses. It will mean that businesses will have to consult and use VIES – the EU VAT number validation system – regularly.  As it can take significantly longer for the VIES system to be updated than national systems, this may create difficulties for businesses.

In addition, businesses will need to ensure that they also have robust processes for the completion and submission of EC Sales lists as these now also impact on the VAT treatment of the supply.

Evidence of intra-EU supplies

This initiative also aims to harmonise rules around zero rating, this time dealing with the evidence needed.  At the moment, there is a lack of uniformity across the EU about evidence a business must provide to prove that it can zero rate an intra-EU supply of goods. This creates significant challenges for businesses, which must understand different rules and often must provide a range of different documentation and records across the various member states.

Under the changes, there is a presumption that a movement of goods has happened if certain conditions are met and evidence is held.

Suppliers must be able to produce two items of non-contradictory evidence, prepared by two different independent parties, to prove that a supply is destined for another EU Member State.  If the acquirer is responsible for the transport, the acquirer must also provide the supplier with a written statement that the goods have been transported by the acquirer or on the acquirer’s behalf by the 10th of the month following the date of supply.

Acceptable forms of evidence include signed CMR documents, bills of lading or an insurance policy for the transport of the goods.

What does this mean for Business?

Provided that the necessary evidence can be obtained, this will provide more certainty for businesses.  However, in the absence of this evidence, HMRC are likely to be more inclined to raise and enforce assessments.

What about Brexit?

Depending on the final terms of Brexit, some of these changes may no longer affect UK based businesses when the UK leaves the EU. However, as the changes came into effect from 1 January 2020, UK businesses need to take actions now to remain compliant.   In addition, regardless of Brexit, many UK businesses will continue to have an interest in the movement of goods across the EU.  These businesses will need to be aware of and comply with these changes. 


If you have any queries please contact Alistair Duncan, or your usual AAB contact.