Intra-Community supplies (ICS)

Updated on February 6, 2022

Overview

Supply and acquisition of commodities between EU Member States (MS) is referred to as intra-Community sale and acquisition (ICSA) (EU). Two transactions are considered to have taken place for VAT purposes:

ICA stands for intra-community acquisition, which is short for “in-house procurement” (ICS).
This section explains how the ICS of products are taxed. An ICS is the supply of commodities from one EU Member State to another EU Member State. In certain cases, the buyer is responsible for calculating and reporting VAT. Rather than paying the VAT themselves, the buyer is responsible for doing so.

This paragraph explains:

in which EU VAT is applied to ICS goods (EU)
when making an ICS, what evidence do you need to keep?
For EU-supplied goods, what does triangulation mean
the VAT obligations when delivering excisable products to another Member State the VAT handling of deliveries of new means of transport.

Zero rate of VAT on ICS of goods

Intra-Community goods must first be transferred from one location to another.

Conditions must be met before VAT (Value Added Tax) can be zeroed off on an ICS.

If the customer is VAT registered in another EU member state, you must get and store their Gst registration number (including country prefix)
You should include both your own VAT number and the customer’s VAT number on the sales invoice. A VIES Returns document must be provided by the provider, and the goods must be exported or transferred to another EU country.
If any of the following five tasks are not completed, you are responsible for charging your customer Irish VAT.

If the VIES return submission criteria is not met, the Zero price cannot be applied to the supply of goods.

When goods are sold and transferred to a VAT-registered individual in another Member State, revenue may be unsatisfied. They might be dissatisfied if they are. As a result, the service provider must pay Irish VAT.

zero-rating is possible in this situation if the conditions for it are met.

VAT paid by the customer is owed to the customer and the supplier can adjust their VAT return to reflect this.

What is triangulation?

In the case of triangulation, three VAT-registered merchants in three different EU Member States get two commodities. Since MS1-based businesses sell their products to an MS2-based merchant, the latter must adhere to EU customs rules, as a result (MS2). The items, on the other hand, are delivered to a third-country merchant (MS3).

The administrative and compliance burdens placed on traders and tax authorities by these triangular transactions have been alleviated by the use of a simplification solution. Three EU VAT-registered traders are required to make this simplification work.

The process of simplification can be summarised as follows:

ICS is free to use between companies A and B.
Taxpayers can find details about the supply on an invoice sent between two businesses via a mechanism called the VAT information exchange system (VIES).
Firm B used firm B’s VAT number to accomplish a European Union transaction (ICA). Company B reports the ICA on their VAT return.
Company C does not have to pay any taxes as a result of this transaction. Company C declares this transaction on its VAT return as a supply received. Companies A and B in Member State 3 are assumed to have accounted for their VAT obligations in Member State 3.
In the event that firm C is entitled to a VAT refund, the credit is applied to the appropriate VAT return.

Evidence required for ICS of goods

Documentation is needed to show that products have been sent and removed from the state.

Presumption that goods have been transported

It is safe to assume that the items have been sent and delivered if the vendor is in possession of particular documentation.

Documentation requirements are detailed in the additional guidelines.

These documents are not required for the Zero rate to apply if the supplier does not have them in their possession. If evidence of dispatch and transportation can be shown, the Zero rate can still be used. Depending on who planned the transportation, the evidence required will vary. To demonstrate that the transportation took place under certain conditions, the following sections provide examples of evidence that could be utilized in that regard.

Proving goods have been transported without engagement of presumption of transport

No, the zero-rate does not inherently suggest the supplier does not have the documentation required to invoke the presumption of transit. If proof of dispatch and transportation can be provided, the zero-rate can still be used. Depending on who planned the transportation, the evidence required will vary. The following sections detail the many possibilities.

Transportation arranged by the supplier

Customers who have purchased products from a supplier who has arranged for their transportation should maintain all commercial documentation relating to the supply and transportation.

The following are a few examples:

invoice delivery docket, such as a bill of lading, which shows that funds have been transferred from foreign banks for payment.

Transportation arranged by the customer

Alternatively, the business customer may choose to deliver the products themselves. For example, if items are transported or sent to another EU Member State, the supplier must be pleased.

The customer’s documentation should be kept by the supplier. This paperwork serves as proof that the items were received in the other Member State. Documentary evidence may include the following in such cases:

receipts or delivery dockets from the warehouse
The customer’s method of transportation for the items should also be documented, such as the following:

Identification number of the vehicle, flight number, and ship’s itinerary.

Issues for suppliers to be aware of

Providers are being advised to be extra careful in order to safeguard the security of their clients. To be eligible for zero-rating, required to meet all five criteria. Can you tell me how you know this is true?

For the first time, a product is sold to a brand-new consumer by an unknown provider.
Without prior notification or correspondence, a cash payment has been made at the supplier’s site.
The company’s interests are not served by making acquisitions that aren’t really necessary.
If the supplier notices any of these red flags, they should be on the lookout.

If there is any doubt, vendors should include Irish VAT (VAT). A VAT refund can be issued to customers who meet all of the conditions of “insignificant”. The supplier can then alter the VAT for a predetermined time period.

The supplier may not know the customer’s VAT registration number. As a result, the provider should use the VAT number validation method to check the customer’s VAT registration number. The zero-rate should only be applied if the customer’s VAT registration number is accurate.

It is the responsibility of suppliers to make sure that all conditions for zero-rating are met. A fault with a shipment will not be punished if it occurs after these steps have been completed. However, the supplier is responsible for collecting any Irish taxes that the buyer owes to the vendor. Visit this website to learn how to prevent VAT fraud.

Penalties for fraudulent claims

Fraudulent zero-rating claims are subject to sanctions.

The following are the consequences:

Takeover of zero-rated items that have not yet been shipped or moved outside of the country.
A €4,000 fine will be imposed for any transaction in which an invalid VAT number is used. This fine is in terms of taxes that would otherwise be due.
Arrest is a possibility.
A fine of up to €126,970 or up to 5 years in jail are possible.

Supplies of excisable goods to other Member States

Value-added tax (VAT) registration is required for any supplier who sells excisable goods to the other Member State. All excisable items are liable to VAT in the Sovereign Nation where they are first sold.

What are excisable goods?

Customs duties are not imposed on the following items:

Alcoholic beverages include wine, lager, cider, and distilled spirits.
Tobacco products include things like cigarettes.
cigars
Tobacco for rolling your own cigarillos and pipes.
Mineral oils and other inorganic compounds (motor and heating fuels).
Unlike non-excisable items, excisable goods are taxed at a lower rate.

ICS of a new means of transport

A new form of transportation can be provided to anybody in another Member State as an intra-community supply (ICS). Vehicles such as automobiles, boats, and planes are all new modes of mobility. Vehicles purchased outside of the country in which they will be registered must be subject to local sales tax (VST).

Buying a new method of transport from another Member State is possible for a private person in another Member State. VAT may be due by the Member Country of arrival in certain circumstances.

However, if the buyer takes up the new car in this condition, the dealer may charge VAT. Tax refunds should be given to buyers who can establish that VAT was paid to a dealer in their Member State. Finally, the shop can amend their VAT liability in their VAT return for the appropriate time period.

The dealer is required to save all documentation of sale, such as invoices and receipts.

for the new means of transportation, a VAT payment receipt and proof of registration in another EU country. For VAT reasons, the following goods are considered “new modes of transportation”: