The German Ministry of Finance has curbed a concession on the German VAT treatment of wholesale cross-border supplies.
Reduced German VAT import simplification
Currently, supplies from wholesalers to customers across EU borders are zero rated as intra-community supplies. The customer in the transaction accounts for the VAT in their return on a in/out basis, meaning no cash flow impact on the VAT element of the transaction.
However, the Ministry of Finance is now imposing stricter rules on the qualification for intra-community supplies for fear of wide scale VAT fraud. A key condition now is that the transport of the goods must be organised by the foreign recipient, using their transport vehicles instead of freight hauliers. Additionally, the customer ‘s own tax authorities must agree to the zero rating.
It is anticipated that the change will have a harsh impact on many small Austrian businesses, which buy wholesale from Germany, which have relied on the concession for many years.