Updated on February 10, 2022
Chain transactions were subject to new Value-Added Tax (VAT) rules from January 1, 2020. These rules help traders decide how to transport goods inside their own country in some cross-border supply chains.
Most of the time, chain transactions happen when there are a lot of people who sell the same thing to each other, but only one person in the same country transports that same thing.
When the goods have been:
from one European Union (EU) Member State to another EU Member State can be moved.
a chain of people and things moves directly from one person or thing to another.
Transported by the intermediary operator or by a third party on behalf of the intermediary, as the case may be
A section called “further guidance” has more information about how VAT is applied to the chain transaction rules.
In the EU, there are businesses in different Member States (MS) that are able to trade with each other (EU). In terms of Value-Added Tax (VAT), there are thought to be two transactions that took place.
An internal community (ICA) and the supply of an internal community (ICS).
Goods that have ICS on them will have to pay VAT. An ICS is when one business sells goods to another business in a country that is part of the European Union. When someone buys something, they have to pay VAT on their own to the government. They have to pay VAT on their own, as if they had sold something.
This part is about:
There are different tax rules in the EU for goods made by the ICS (EU)
Keep in mind when you make an ICS.
This is how the EU makes sure that the goods people buy come from different places.
Sales tax: People who buy new ways to get around from another Member State must pay VAT.
Zero rate of VAT on ICS of goods
A lot of things start with transportation: ICS is where things are sold and bought.
ICS can’t pay Value-Added Tax as long as these things happen (VAT).
So, in order to use this service, the customer has to be tax-registered in another Member State Find out their VAT number and keep it somewhere safe. This way, you can do business with them and make money together (including country prefix)
if you sell something, you must write down your VAT number and the number of the person who paid for it on the bill, too. To send or move goods from one Member State to another, there must be a VIES return.
Five things must happen before you can charge your customer the correct amount of Irish VAT for their goods.
It’s important to send in the correct VIES return form to get the 0% rate!
Someone from another Member State may not understand VAT. Revenue may not be able to show that they did. They may not be able to prove it. They might not be able to show it. Those who buy things from the supplier in this case will have to pay VAT, which is tax (Value Added Tax).
There are going to be rules for zero-rating as soon as they are set up
People who buy things at a store can get their VAT back. This means that the supplier can then change their VAT return as long as they want to.
Put two things together so they look like three things.
Sales made by people who pay Value-Added Tax (VAT) come from three different European Union Member States. A Member State (MS1) sells goods to people in another Member State (MS2) (MS2). It goes to a third Member State (MS3).
In order to make it easier for traders and the tax authorities to deal with transactions that go through three places, there is a rule that they need to follow. Having VAT registration in the EU is a requirement for this measure to work.
In general, simple things work this way:
You don’t have to pay to get electricity from company A to company B.
In the VAT information exchange system (VIES), this is what the report from company A to company B says about how they spent their money.
It doesn’t matter if company B has given its VAT number to company A. If it has, it bought something in the same country as the company (ICA). When you file your VAT, think about this ICA.
B gives C a service that isn’t taxed. VAT report: It says that this person gave Company C a service. Company B’s VAT in Member State 3 is deemed to have been paid for by C.
A credit is taken out of company C’s tax return when it can get back VAT at the same time.
In a deal, there are more than three businesses.
In this case, the method of simplifying can only work if it is used. People who work for more than three businesses will have to follow strict rules, like when two businesses in the same country sell to each other again and again. When you visit at least one of the places you go, you might have to register.
Evidence required for ICS of goods
Documentation is needed to show that goods were sent and taken out of the State.
Presumption that goods have been moved
It can be assumed that the supplier of goods has certain documents that show that the goods have been sent and moved.
Further guidance has more information about what documents are needed.
There are times when the supplier doesn’t have these documents. This doesn’t mean that the Zero rate doesn’t apply. If there is enough proof that the goods were sent and transported, the Zero rate can still apply. The proof you need will depend on who set up the transportation. There are examples of evidence that could be used to show that the transportation took place in that way on the next pages. This page:
Proving goods have been transported without engagement of presumption of transport
It can’t be used when a transporter has not given any proof that he or she is going to move something. if there is enough proof that goods were sent and moved, the zero rate can still be used. A lot of what you need to show will depend on who is in charge of the transportation. Next, there’s a list of all the different things that happen.
The transportation was set up by the supplier, and it was all set up and done.
It’s very important for a supplier to keep all the paperwork that shows what happened to the goods and how they were shipped as soon as possible.
There are some:
To show that money came from a foreign bank to pay for a supplier’s bill, the bill of lading is used to show that.
It was transportation that was planned by the customer, not the company.
It’s up to the business customer to decide whether or not they want the goods moved. Make sure that goods are sent or moved to another EU Member State if they want to do this.
Proof from the customer is very important for the supplier to have, so they should keep it. If you want to show that you bought the goods in another Member State, you should make a copy of this paper. This might happen:
Copies of the warehouse receipts or delivery dockets would be good to have in this kind of case, too.
To keep track of how the customer got their goods, it should also be kept.
You need to know a lot about this flight, like the number of flights and how long it will take the ship to sail.
Issues for suppliers to be aware of
Suppliers are told to be even more careful, and they have to be extra careful. suppliers should make sure that the five conditions for zero-rates are met when they sell and deliver to other Member States. As in this, there can be a lot of doubt about what to do.
It’s been a long time since the customer has met the supplier. The customer will pick up and move the goods. This is how it works:
In this case, there was no warning or communication between the customer and the supplier about the transportation. The customer pays with money.
There is a problem with the type or amount of goods being bought, taking into account where the goods are going.
Suppliers need to be very careful if one or more of these things are in the mix.
If there’s any doubt, the supplier should charge the Irish Value-Added Tax (VAT) on the goods that he or she sells (VAT). If the conditions for zero-rating are met later, the customer can get back the VAT they paid to the supplier from the supplier and pay it back to the tax office. They can change their VAT return for that time.
It is possible that the supplier isn’t sure if the VAT registration number that the customer has given to the supplier is real. To make sure the customer’s VAT registration number is correct, the supplier should use a tool that checks the number with the help of the VAT number. Before the zero-rate can be used, the customer’s VAT number should be checked.
People who sell things should do everything they can to make sure the conditions for zero-rating are met. There will be no extra fees for vendors who have taken these kinds of steps, even if one of their deliveries turns out to have problems after they’ve made it. There are exceptions to this rule, though. If a supplier hasn’t taken all the reasonable steps, the tax that they owe will be taken back from them. The following are some ways to keep your business from being caught up in VAT fraud:
Getting in trouble for making false claims
In order to make false claims about zero-rating, there are penalties that you can be hit with.
In this list, we have the penalties:
Goods that have not been sent or moved outside of the State can be taken and forfeited.
The fine for each time you use the wrong VAT number could be €4,000. A fee is also added to the tax that would be charged.
You could be arrested. This is what you should do. You should know this.
This is a list of possible civil and criminal penalties. They can range from €126,970 to five years in prison.
Supplies of excisable goods to other Member States
Value-Added Tax (VAT) must be paid by anyone who sells excisable goods to someone in another Member State. Sales of excisable goods will always be taxed in the Member State where the goods first arrive.
In what way are excisable goods different from other goods?
As you can see, excisable goods are:
Alcohol and alcoholic drinks, like wine, beer, cider, and spirits.
Tobacco products, like cigarettes, are an example.
There are two types of tobacco for making cigarillos: one for rolling and one for making pipes.
There are a lot of mineral oils in the world (motor and heating fuels).
Further guidance has more information on how excisable goods are taxed.
ICS of a new means of transport
Intra-Community supplies are when you give someone a new way to get around in another Member State, like a car, so they can get where they need to go (ICS). There is a new way to get around. You can drive, boat, or fly. Whenever the customer buys an entirely new way to get around, the customer must pay Value-Added Tax (VAT) in the Member State where they are going.
When new transportation means are sold to a person in another Member State, this is part of this. When someone first comes to a country, VAT is paid there.
However, if the customer comes to pick up the new car in that state, the dealer should charge VAT to cover the costs. Tell the dealer when you can show that VAT has been paid in your Member State. To make sure that everything is done right, they should give back all of the money that was charged for VAT. The dealer can then change the amount of VAT they owe in their VAT return for the period, so they pay less or more.
Keep all of the paperwork, such as the following:
There must be proof that the new way of transportation was registered in a different Member State and a copy of the receipt that shows VAT was paid.
New ways to get around VAT are shown in the table below.