Intracommunity supplies in Germany

Tax
Tax

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  1. Introduktion
  2. What is an intracommunity supply?
  3. Why does intracommunity supply exist?
  4. What conditions must be met in order for an intracommunity supply to be tax-free?
  5. What mandatory information must be included on an invoice for an intracommunity supply?
    1. Invoicing indications in the official EU languages
  6. What are the reporting obligations for intracommunity supplies?
  7. What special cases exist for intracommunity supplies?

When it comes to intra-European B2B trade, businesses must comply with the value-added tax (VAT) regulations of the EU internal market. Anyone supplying goods to a business in a country outside of the EU should be aware of the differences with internal trade, otherwise they face the threat of tax-related risks and additional payments.

In our article, we’ll explain what intracommunity supplies are and why they were introduced as a legal instrument. We’ll also outline the conditions that must be met in order for an intracommunity supply to be tax-free. Last, you’ll find an overview of the information that must be included on any invoice and the reporting obligations applicable to businesses.

What’s in this article?

  • What is an intracommunity supply?
  • Why does intracommunity supply exist?
  • What conditions must be met in order for an intracommunity supply to be tax-free?
  • What mandatory information must be included on an invoice for an intracommunity supply?
  • What are the reporting obligations for intracommunity supplies?
  • What special cases exist for intracommunity supplies?

What is an intracommunity supply?

An intracommunity supply involves the cross-border supply of goods and products between businesses in different EU countries. It is often referred to as a “tax-free intracommunity supply,” as the businesses are exempt from value-added tax in certain circumstances. The focus is on the supply of goods, so it is distinct from other intracommunity services in which a business provides services in another EU country.

The legal basis for intracommunity supplies can be found in the following legal texts:

  • German VAT Act (UStG), Section 4 No. 1b
  • UStG, Section 4 No. 6a
  • VAT Implementation Ordinance (UStDV), Section 17

Detailed information on the legal regulations can be found in the VAT Application Decree (UStAE) of the German Federal Ministry of Finance—in particular, sections 6a(1) to 6a(8).

Why does intracommunity supply exist?

The aim of intracommunity supply is to simplify cross-border trade, promoting the movement of goods in Europe. As a legal instrument, the tax-free intracommunity supply replaced the tool known as “tax-free export supplies” when the single European market was introduced at the turn of the year 1992/1993.

Intracommunity supply simplifies cross-border trade by charging VAT in the recipient’s country. It means a massive reduction in red tape for both the supplying and the invoicing business. This is because without the regulation, the supplying business would have to pay the VAT to the tax office in the respective other EU country. As part of the intracommunity supply mechanism, the supply of goods is tax-free for the supplying business.

For the recipient business, the intracommunity supply results in an intracommunity acquisition. As the purchasers, the recipient business must pay the VAT on the purchase in its own country. This can also be deducted as input tax if the business is entitled to do so.

With a few exceptions, trade between EU businesses follows the model below:

  • The supplying business issues an invoice to the receiving business for the net amount (i.e., excluding VAT).
  • The recipient business independently calculates the VAT that is due at the rate applicable in its home country, and it remits this to the tax office there.

What conditions must be met in order for an intracommunity supply to be tax-free?

A number of conditions must be met before a supply of goods can be recognized as a tax-free intracommunity supply:

  • The supply of goods must take place between two businesses. These must be based in different EU Member States.
  • Both businesses must have a VAT identification number (VAT ID number).
  • The recipient business must be acquiring the goods for the business or for a legal entity. Different provisions apply to private purchases.
  • Proof must be provided of the shipment or transportation of the goods, including a receipt document and proof of booking.
  • The goods are subject to VAT on the recipient business’s side.
  • The invoice from the supplying business must be issued correctly and in compliance with certain special features (see below).
  • The supplying business must submit a recapitulative statement to the tax office (see below).

It is important that all the requirements are met, and that the businesses involved are able to provide evidence of this. In the case of shipments, for example, this can be by means of a confirmation of arrival, a carrier’s receipt, a consignment note, or a shipment report. Any ancillary services that the supplying business provides—such as packaging, transportation, or insurance of the goods—are then also exempt from VAT. The principle is that “ancillary services share the same fate as the principal service for VAT purposes” (see VAT Application Decree (UStAE), Section 3(10)(5)).

What mandatory information must be included on an invoice for an intracommunity supply?

Businesses that issue invoices for tax-free intracommunity supplies must include the mandatory information specified in Section 14(4) of the German VAT Implementation Ordinance (UStDV):

  • Name and address of the invoice issuer
  • Tax number of the invoice issuer
  • VAT ID number of the invoice issuer
  • Name and address of the invoice recipient
  • Invoice issue date
  • Time and date service was provided
  • Serial invoice number
  • Name of the service
  • Type and scope of the service
  • Net amount (Note: the tax rate and the gross amount do not apply)

Two special features must also be observed that apply specifically to invoicing for intracommunity supplies:

  • The invoice must also include the recipient business’s VAT ID number in addition to the VAT ID number of the invoice issuer. Without this information, liability for the VAT lies with the invoice issuer, which may be required by their domestic tax office to make subsequent payments.
  • The invoice must also include a written reference to the exemption from tax. On a German invoice, this would be: “steuerfreie innergemeinschaftliche Lieferung” (tax-free intracommunity supply).

Invoicing indications in the official EU languages

Below you will find the indications for the tax exemption of intracommunity supplies for the different countries in the European Union:

  • Austria: steuerfreie innergemeinschaftliche Lieferung
  • Belgium: livraison intracommunautaire exonérée TVA
  • Bulgaria: neoblagaema vatreshnoobshtnostna dostavka
  • Cyprus: tax free intracommunity delivery
  • Czechia: dodání zbozí do jiného clenského státu, osvobozené od DPH
  • Denmark: momsfri EU levering
  • Estonia: käibemaksuvaba ühendusesisene kättetoimetamine
  • Finland: veroton yhteisömyynti
  • France: livraison intracommunautaire exonérée TVA
  • Greece: tax free intracommunity delivery
  • Hungary: forgalmiadó-mentes, Közösségenbelülrol történo áruszállítás
  • Ireland: tax free intracommunity despatch
  • Italy: cessioni intracomunitarie esenti
  • Latvia: ar 0% apliekamas precu piegades ES ietvaros, PVN likuma 28. pants*)
  • Lithuania: pridétinés vertés mokesciu neapmokestinamas tiekimas Europos Sajungos viduje
  • Luxembourg: livraison intracommunautaire exonérée TVA.
  • Malta: tax free intracommunity delivery
  • Netherlands: intracommunautaire levering
  • Poland: wewnatrzwspólnotowa dostawa towarów opodatkowana wg. stawki podatku 0% (Art.42 Ust. 0 pod. od tow.il usl.)
  • Portugal: fornecimento inter-comunitário isento de IVA
  • Romania: livrare intracomunitara scutita de TVA
  • Slovakia: od dane oslobodené intrakomunitárne dodávky
  • Slovenia: oprostitev plačila DDV pri dobavah znotraj EU
  • Spain: entrega intracomunitaria libre de impuesto
  • Sweden: skattefri gemenskapsintern leverans

Businesses can use the services of certified payment service providers for proper invoicing that complies with the law. As well as providing automated processes, payment service providers such as Stripe also use intelligent invoicing programs to reduce error rates to a minimum, including in the case of invoices for tax-free intracommunity supplies.

What are the reporting obligations for intracommunity supplies?

Under Section 18a of the German VAT Act (UStG), one of the most important duties of any business that provides intracommunity supplies is to report the corresponding revenue to the tax office on a regular basis. This is reported using a recapitulative statement. This lists the intracommunity supplies and is submitted electronically, such as via the ELSTER portal in Germany. The statements are reported on a quarterly basis. However, they must be reported monthly if the intracommunity supplies exceed 50,000 euros within those three months. The reporting deadline is the 25th of the following month. The EU tax offices involved in the exchange are able to use the recapitulative statements to review whether the businesses involved have paid the correct tax on the transactions.

If the intracommunity supplies exceed 500,000 euros in the previous year, the supplying business must also report these transactions as part of the intracommunity trade statistics of the German Federal Statistical Office. The same applies to incoming supplies that exceed 800,000 euros per annum.

If the threshold is exceeded in the current calendar year, the mandatory reporting will begin from the month in which the value was exceeded.

What special cases exist for intracommunity supplies?

Supplies of goods between businesses within Europe do not always constitute tax-free intracommunity supplies. For example, gas supplies via the natural gas network and electricity supplies within the meaning of Section 3g of the German VAT Act (UStG) do not constitute intracommunity supplies. Supplies of new vehicles, on the other hand, are always treated as an intracommunity supply, even if the recipients are private individuals.

There is also a special feature for small business owners: these are generally exempt from VAT under Section 19 of the UStG, and they are not required to submit a preliminary VAT return. However, this situation changes with intracommunity supplies. Once small business owners are involved in these types of supplies, they must submit a preliminary return for the corresponding period and keep a record of the supply.

There are several other special cases that affect the invoicing and taxation of businesses for intra-European supplies of goods, and the applicable laws and regulations should therefore be examined precisely. You may consider the option of obtaining professional support. Precise knowledge of the tax regulations is of particular importance with cross-border transactions. To learn more, get in touch with Stripe’s sales team.

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