On 1 January 2012, provisions for the documentation required for intra-Community supplies were severely tightened. Following heavy criticism, a new draft of the VAT Implementation Ordinance has been produced, which aims to soften the impact of these stringent compulsory provisions.
In general, the draft amendments resemble the old provisions that applied until the end of 2011 much more than the new ones.
Under the German VAT law, an intra-Community supply of goods is exempt from VAT only if it complies with the requirements that the sale is supported by evidence from the supplier’s accounting records as well as by the delivery documents.
If the taxpayer cannot demonstrate that these requirements have been met, the German tax authorities will treat the intra-Community supply as a domestic supply, which generally is subject to German VAT. Thus, failing to comply with the documentation requirements bears the risk of additional VAT and interest payments.
Current requirements on documentation
The documentation requirements, as stipulated in the German VAT Implementation Ordinance, were tightened with effect from 1 January 2012 to the extent that the confirmation of arrival or entry certificate is the only possible evidence to support an intra-Community supply.
This confirmation of arrival requires that the recipient confirm the place and time of delivery and sign the document (if it has not been sent in digital format). According to the Ordinance, other substantiating documents, such as delivery or consignment notes, are no longer acceptable as proof.
However, after much criticism of these new rules, the Federal Ministry of Finance has issued a “safe harbor” rule that tax payers may invoke. It provides that the tax authorities will still accept substantiating documents under the legal provisions previously applicable until 31 December 2011.
However, this safe harbor rule will expire when the amended provisions are enacted, which is currently expected to be 30 June 2013. In essence, the new regulations will have no effect at all if the taxpayer chooses to use the safe harbor until the amended rules supersede the current tightened regulations.
Significant upcoming changes under the proposed amended rules
The most significant revision of the draft regulations is that confirmation of arrival is no longer the only possible proof for an intra-Community supply. However, the drafted German VAT Implementation Ordinance still views it as the main form of proof.
The confirmation of arrival document itself is not defined by a certain format but by certain items that have to be contained in it. It requires the following details:
- The name and address of the recipient
- The quantity and description of the goods according to custom and usage
- In most cases, the place and month of supply
- The date of issue
- The signature of the recipient or his delegate
- This final requirement is waived if the confirmation of arrival document is transferred and received digitally.