The Proof For Exchanges Within The EU: Tax Update - 04.03.2013

  1. INTRODUCTION

    With a recent interpretation the Italian Tax Agency has disclosed its approach on the elements that sellers have available to prove the actual physical transfer of goods to the member state of the purchaser.

  2. THE PRINCIPLE OF TAXATION IN THE COUNTRY OF DESTINATION

    The temporary regimen for EU exchanges has been enforced starting from 1993 by the Directive 91/680/CE for the achievement of the an internal market and the removal of customs.

    The adopted measures aim essentially to facilitate the free circulation of goods with the European Community.

    In particular, for exchanges of goods within the Union between VAT subjects, it has been enforced the principle of taxation in the country of their destination, therefore those exchanges are exempted from taxation in the country of origin.

    Failing those formalities and fulfilments with custom characteristics, the correct application of the exemption principle is transferred to specific formalities (verification of the VAT number of the European customer within the VIES archive, invoice's VAT exemption with inclusion of the identifying code of the foreign counterpart, submission of INTRASTAT forms and arrangement of proper documentation by operators involved in the exchange).

    Article 138, paragraph 1 of the Directive 2006/112/CE states that: “Member States exempt sales of goods shipped or transported out of the domestic territory but within the European Community, from the seller to the purchaser or on their behalf, in favour of another VAT subject, or a non VAT subject, which acts in a Member State different form the one of delivery or goods' transportation”.

    The European rules has been enforced in Italy with article 41, letter c. 1) of the Law Decree nr. 331/1993, under which are considered EU exchanges: “the costly sales of goods, transported or shipped to the territory of another Member State, by the seller or by the purchaser, or by third parties on their behalf, toward purchasers VAT subject or not subject, associations and other organizations not subject to VAT.”

    The EU law cross-refers to the other Member States the recognition of those conditions legitimating the application of the taxation at destination, although foreseeing that the same can't enforce more restrictive and less favourable measures of those foreseen for export exchanges.

    The national discipline does not prescribe any specific fulfilment for the national seller to prove the goods' transportation or shipment toward the destination's Member State. This is justified by the intent of the EU legislator to achieve one of the fundamental principle of the EU treaty, that is the free circulation of goods within the territory of the Union.

    However it must be considered that in order to have an exchange within the Union not taxable for VAT, all the below mentioned requisites must be respected:

    the exchange of mobile goods must be “on payment”;

    the purchaser must acquire the ownership of goods exchanged;

    actual movement of goods from Italy to another Member State;

    both the seller and the purchaser must be economic...

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