Recently, the German tax authorities published the long-awaited circular on the VAT treatment of supplies in consignment stocks or for “shipment on hold” cases. The circular deals with the current case law of the Federal Finance Court (BFH) on consignment stocks and reflects the tax authority´s new position on this topic.
If a supplier delivers goods from abroad to a consignment stock of his customer in Germany, the question arises whether the place of supply is located in the EU-member state of departure or in Germany. In the past, the German tax authorities took the view that the place of supply is located in Germany. As a consequence, the supplier had to become registered for VAT in Germany and to declare German VAT on the supply of goods to his customer. Accordingly, the supplier issued sales invoices showing German VAT.
The circular refers to recent court decisions and makes clear that a delivery from another EU-member state to a consignment stock in Germany does not necessarily lead to a domestic supply of goods in Germany.
However, as ruled by the courts, it is required that the customer is already defined before the transport to the consignment stock begins. In principle, this is the case when the customer already gave a binding order or paid for the goods. It is irrelevant,
- if the goods are first placed in a supplier’s domestic warehouse and are only released to the customer upon receipt of payment ("shipment on hold"), or
- if the goods are temporarily stored (for a few days or weeks) in a domestic delivery warehouse or consignment stock which is set up at the initiative of the customer, and the customer has a contractually unlimited right of access to the goods.
These cases are regarded as short interruptions which do not lead to the termination of the cross border supply of goods.
As a result the customer (and not the supplier) has to report intra-community acquisitions in Germany. The supplier does not carry out a domestic supply in Germany.
* Businesses that supply or receive goods from abroad via consignments stocks in Germany or that use "shipment on hold" procedures should review supply and storage arrangements with their business partners. Agreements could be amended in such a way that the supplier does not carry out domestic supplies in Germany – and so a VAT registration in Germany may not be necessary any longer!
* Note: There’s a transitional phase valid for supplies carried out before 1st January 2018 – until this deadline, the current processes can still be used.
* But: Supplies carried out later than 31st December 2017 fall are subject to the new rules – and VAT invoices to the customers will not be paid, because the customer cannot reclaim as input VAT!