Intracommunity delivery accounts for a large share of commercial transactions among seller companies within the European Union. It enables the waiver of value-added tax (VAT) for goods shipped or transported from one member state to another. In France, where intra-EU deliveries accounted for €331.5 billion in 2023, this can be a significant relief to companies.

In this article, you’ll learn all there is to know about how intracommunity supply of goods work and about your tax obligations required to benefit from the VAT exemption.

What’s in this article?

• Intracommunity delivery defined
  
• Conditions of VAT exemption on intracommunity deliveries
  
• Information required on an intracommunity delivery invoice
  
• How to file an intracommunity delivery
  
• Can VAT exemption on intracommunity deliveries be rejected?
  
• Example of a VAT-exempted intracommunity delivery
  
• What happens when goods are sold to a private individual or an entity not liable for VAT?
  
• How Stripe Tax can help
  

Intracommunity delivery defined

An intracommunity delivery occurs when a seller ships or transports items between two EU member states. The seller applies a VAT exemption to the sale, while the acquiring entity reports and pays VAT in its own country of origin.

Under Article 262 ter of the General Tax Code (CGI), the transfer of items shipped or transported from France to another EU member state is exempt from VAT. The purpose of this relief for the supplier is to promote exchange among member countries and avoid double taxation.

For example, a French office supply company sells furniture to a Spain-based company and ships it to the buyer’s facilities in Madrid. This intra-EU sale exempts the French company from filing VAT and places the responsibility to do so on the Spanish firm.

What is the difference between intracommunity delivery and intracommunity acquisition?

An intracommunity acquisition occurs when an entity in one EU member state purchases goods from a company established in another member state. The transaction mirrors an intracommunity delivery but reflects the buyer’s perspective. In such cases, the acquiring entity files and pays VAT to the tax authority.

For instance, a French company buys machines from a German seller and has them dispatched to Lyon. Under the acquisition rules, it is the buyer who is responsible for the reverse charge (declare and pay the VAT).

What is the difference between intracommunity delivery and export?

Within the EU, intracommunity delivery refers to the sale of items and their transport or shipping from one member state to another. In contrast, export refers to the transfer of goods to a country outside the EU. Although intra-EU delivery is a type of export, the geographic difference creates two distinct situations for fiscal purposes.

Conditions of VAT exemption on intracommunity deliveries

To qualify in France, several conditions apply simultaneously:

• The intracommunity sale must involve payment.
  
• The French seller must be subject to VAT and operate as part of its commercial activity, except when benefiting from the basic VAT exemption regime under Article 293 B of the CGI.
  
• The French seller must have an intracommunity VAT number issued by the SIE (corporate tax office).
  
• The foreign acquirer must be liable to VAT in its jurisdiction or must be a legal entity that is not subject to VAT and which does not benefit from the derogatory regime (PBRD).
  
• The foreign acquirer must provide its intracommunity VAT number to the French seller.
  
• The merchandise must be shipped or transported outside of France to another EU member state, whether this is done by the supplier, the buyer, or on their behalf.
  
• Delivery outside of this territory must be demonstrable with proof.
  
• The foreign acquirer must pay the VAT in its country.
  

All these conditions are required to be met for a VAT exemption to apply to an intracommunity sale.

What is the derogatory regime?

The derogatory regime (PBRD) allows certain entities to exempt their intracommunity acquisitions from VAT. This scheme applies explicitly to:

• Legal entities not liable to VAT for the acquisition related to the operation carried out
  
• Those liable to VAT who only execute transactions that do not entitle them to tax deductions (e.g., beneficiaries of the basic exemption regime or microbusinesses)
  

This PBRD only applies if the amount of intracommunity purchases did not exceed €10,000 in the previous or current year.

What qualifies as valid proof of transport or shipment?

The seller or acquirer can substantiate an intracommunity sale by providing two consistent pieces of transport evidence issued by separate and independent parties. Generally, two of the following items are acceptable:

• An agreement related to the international merchandise contract for transport by road
  
• A maritime bill of lading
  
• An air freight invoice
  
• An invoice from a shipping carrier
  

To prove its intracommunity acquisition, the acquirer can also provide a written statement from the supplier that certifies that the items were shipped or transported by the buyer, or by a third party on the acquirer’s behalf. The statement has to specify the member state of destination.

Information required on an intracommunity delivery invoice

To be valid, an intracommunity delivery invoice must contain certain mandatory information:

• Contact information for the French seller and the foreign buyer
  
• Invoice number and date of issuance
  
• Both parties’ intracommunity VAT IDs, and the supplier has to verify the buyer’s number through the VIES (VAT Information Exchange System) database
  
• A description of the goods delivered (quantity, detailed description, price per unit before tax, legally applicable VAT rate)
  
• Transaction total (before tax)
  
• The statement “Exonération TVA selon l’article 262 ter I du Code général des impôts” (VAT exemption per Article 262 ter I of the General Tax Code), which justifies the relief
  

If the supplier has not received an intracommunity VAT number for the sale, they must issue an invoice that includes VAT. However, if the supplier can obtain this ID after the transaction, the tax authority allows issuing a corrected invoice.

How to file an intracommunity delivery

The French seller must note all instances of intracommunity sales on the VAT filing CA3 or CA12 (annual VAT form), on the line “Livraisons intracommunautaires" (“Intracommunity deliveries” in the “Opérations non imposables” section, meaning “Nontaxable transactions”). The seller states the total amount before tax of all exempted intra-EU supply of goods.

They must also complete the VAT summary as well as the monthly statistical survey on intra-EU trade of goods (EMEBI), but only upon request by the government. These returns have to be submitted within 10 business days after the end of the month in which the VAT became due, regardless of the value of the intracommunity deliveries.

If the seller does not complete the summary and the EMEBI promptly, they could face a penalty of €750 per filing, and up to €1,500 per filing if a formal notice is not complied within 30 days.

Can VAT exemption on intracommunity deliveries be rejected?

Yes, the authorities can deny a VAT exemption on intracommunity deliveries if they prove that the supplier knew or ought to have known the buyer was not conducting genuine economic activity.

Lack of a business function can be determined by:

• The existence of legal, economic, or personal links between the seller and the acquirer
  
• The lack of premises, equipment, and staff
  
• The lack of an economic activity related to the merchandise acquired
  
• A payment method that is uncommon for that industry
  

Officials can refuse the exemption if the foreign acquirer fails to provide a valid VAT number or submits a false one. In this case, it is the French seller’s own responsibility to pay the VAT.

Example of a VAT-exempted intracommunity delivery

To better understand how intracommunity delivery and VAT exemption work, here’s a concrete example:

1. A French company supplies computer equipment to an Italian company, and both are subject to VAT in their respective jurisdictions.
   
2. The seller ships the merchandise from its warehouse in France and delivers it to the buyer in Italy.
   
3. To meet the relief conditions, the French company issues an invoice that does not include tax.
   
4. On the intracommunity invoice, the French company lists its VAT ID as well as the Italian buyer’s ID, after ensuring the number is valid.
   
5. The French company also includes the statement “Exonération TVA selon l’article 262 ter I du Code général des impôts” (VAT exemption per Article 262 ter I of the General Tax Code) on the invoice.
   
6. Within 10 business days after the end of the month in which the VAT is due, the French company files the summary and, if requested by the government, the EMEBI.
   
7. The French company files its intracommunity sales before tax in its monthly or annual return.
   
8. It also preserves all documents that can prove that the sale was indeed an intra-EU supply of goods.
   

What happens when goods are sold to a private individual or an entity not liable to VAT?

If a company supplies a good to a private party or an entity not liable to VAT located in a different EU member state, it is treated as a remote distance sale. In this case, there are several possibilities:

• The seller is subject to VAT and the annual remote sale amount is less than €10,000: This is subject to VAT in the seller’s country.
  
• The seller is subject to VAT and the annual remote sale amount is greater than €10,000: This is subject to VAT in the acquirer’s country.
  
• The seller is not subject to VAT and the annual remote sale amount is less than €10,000: This is not subject to VAT.
  
• The seller is not subject to VAT and the annual remote sale amount is greater than €10,000: This is subject to VAT in the acquirer’s country.
  

To illustrate, a French company supplies clothing to private parties in Belgium. If the company is subject to VAT and sells €6,000 worth of products in France, it applies VAT accordingly. If it is outside the TVA scope and turnover reaches €15,000 for the year, it applies the Belgian rate at a government office (guichet unique).

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