How to prove the delivery of goods to another EU Member State since 1 January 2020?

17 February 2020

Michaela Srpová, Manager |

The risk of not proving entitlement to exemption when delivering goods to another EU Member State increased significantly in the past year. EU Council Implementing Regulation 2018/1912 of 4 December 2018 provided rules on how to prove this correctly. While these rules provide certainty for taxpayers, they can be difficult to grasp in everyday practice.

Even though the procedure to prove to the tax administrator that the supply of goods to another EU Member State has been regulated in Section 64 (5) of the VAT Act since 2004, the risk of failure to prove the right to exemption on such supply of goods, and consequently the obligation to pay tax in the Czech Republic, increases significantly. In this context, tax administrators can be very troubled by the taxpayer, so it is advisable to check the setting of internal processes and the ability to collect evidence preventively.

The basic condition for exempting the supply of goods to another Member State is that the goods have actually been transported to another Member State. The Act stipulates that transport outside the Czech Republic can be proven by a written declaration of the acquirer or an authorised third party, or by other evidence. Since 2020, the proving transport has become more complex, as Article 45a has been inserted in the Implementing Regulation (EU Council 2018/1912 of 4 December 2018), which explicitly regulates the proof that goods have been transported to another Member State. Taxpayers in the Czech Republic also proceed under this EU Council Regulation, as it is a directly applicable regulation without the need for implementation in the national VAT Act.

Article 45a defines documents which are recognised as proof of dispatch or transport. Such documents are a signed shipping document or CMR consignment note, a bill of lading, an air transport invoice, an invoice from the carrier of goods and other evidence proving the transport. This may be an insurance policy relating to the dispatch or transport of goods or bank documents proving payment for the dispatch or transport of goods; official documents issued by a public authority such as a notary certifying the end of the carriage of goods in the Member State of destination; confirmation by the warehouse keeper in the Member State of destination of receipt of the goods certifying the storage of the goods in that Member State. An important requirement is that the documents must be issued by persons independent of the seller and the buyer. On the contrary, it is a natural requirement of every payer that the cost of obtaining evidence be reasonable, which is certainly not the case when using a notary.

If the shipment is provided by a supplier, it should have either the above two proofs of shipment or one proof of shipment and one other piece of evidence, such as a takeover declaration. Where transport is provided by the purchaser, the evidence must be supplemented by a written confirmation from the purchaser stating that the goods have been dispatched or transported by it or on its behalf by a third party, indicating the Member State of destination of the goods. This written confirmation has precisely defined particulars in the implementing regulation: date of issue, name and address of the acquirer, quantity and type of goods, date and place of transport of the goods. The buyer shall provide the Seller with a confirmation no later than the tenth day of the month following delivery. The certificate can be issued for all deliveries for a given month and can also be issued electronically.

The certainty of the taxpayer is that if it has the evidence referred to in the EU Council Regulation at its disposal, the tax administrator cannot refuse it and it is undisputedly proven that the delivery to another Member State took place. A typical situation of such sufficient proof at the tax administrator's control, when the seller arranges for the transport of goods to another Member State, is to present the CMR consignment note and an account statement proving payment for the transport to another Member State.

If the seller fails to submit the evidence referred to in Article 45a, this does not mean that it cannot claim the exemption for the supply of goods, but it must be able to prove the supply of goods to another Member State by means of other evidence. Other means of evidence will have to be used primarily in situations where the transport is carried out using the seller's or the buyer's own vehicle. Other evidence may be, for example, records proving the journey taken by the vehicle transporting goods with the registration number of the vehicle, an extract from the GPS, refuelling documents outside the Czech Republic, tolls paid outside the Czech Republic, or confirmation of receipt of goods from the acquirer, even if it is not an independent entity.

By way of comparison, for example, the Slovak VAT Act lists its own evidence to prove delivery to another Member State. The seller can prove evidence in accordance with the implementing regulation of the EU Council, and if it does not have it or cannot have it, then it shall prove the delivery by means of evidence as set forth in the Slovak VAT Act.

The fact that failure to prove the carriage of goods to another Member State may be a reason for not recognising the exemption of performance in the supply of goods is confirmed, for example, by the relatively recent judgment of the Supreme Administrative Court of 4 November 2019, ref. 7 Afs 209/2019-37. An appeal by the payer at a hearing in good faith that the goods will be transferred to another Member State is certainly not sufficient. The failure to prove the carriage of goods to another Member State was also dealt with in the judgment of the Court of Justice of the EU of 27 September 2007 in case C-409/04 Teleos.

Our recommendation: If you want the proof of delivery to another Member State before the tax administrator to be trouble-free, obtain a properly completed CMR sheet containing the identification of the supplier, customer and carrier and, above all, confirmation from the recipient of the delivery. It already provides 90% assurance that you can prove delivery to another Member State. Securing the audit trail, i.e. linking supplies to another Member State with accounting documents and transport charges, will also make a significant contribution.