The “destination document”: an alternative form of proof for the transport of intra-Community supplies of goods

The requirement to provide proof of VAT exemption for intra-Community supplies is a thorny issue in many VAT audits. If the VAT authorities are not satisfied that the goods were genuinely supplied to another Member State, they will overturn the VAT exemption, with all that that entails. However, for the purposes of simplification, the VAT authorities have now published a decision outlining an alternative form of proof.

1. Background: Proof of exemption for intra-Community supplies

Intra-Community supplies of goods, which are shipments of goods dispatched or transported from Belgium to another Member State, may under certain conditions be exempt from VAT. This means they must involve:

  • The delivery of goods by a taxable person acting as such[1];
  • To a taxable person or non-taxable legal person acting as such in another Member State which is liable to pay tax in that Member State on its intra-Community acquisitions of goods;
  • whereby the goods are dispatched or transported from Belgium to another Member State by or on behalf of the buyer or the seller.

In practice, this boils down to a requirement for two different types of proof which the seller must be able to produce in a subsequent VAT audit.

a) Proof of the status of the buyer

First and foremost, the seller must be able to show that the buyer is liable to pay VAT on the intra-Community acquisition of the goods. The authorities consider this condition to be met if the seller has a valid VAT identification number for the buyer, lawfully issued by a Member State other than Belgium. So an extract from the VIES website showing that the buyer’s VAT identification number was valid at the time of supply is enough to meet this requirement[2].

        b) Proof of dispatch/transport of the goods

The seller also has to be able to show that the goods were dispatched or transported out of Belgium, but within the European Union. It can prove this using a set of ordinary and corresponding commercial documents, such as contracts, order forms, transport documents and payment documents. The authorities consider each individual supporting document to be permitted, but no single special document by itself is sufficient or essential.

In principle, the seller must be in possession of all of these documents at all times, and be able to produce them at any time at the request of the audit officials. However, the Court of Justice has held in the past that when these documents are not provided during the audit itself, but are instead provided afterwards, this cannot preclude the application of the VAT exemption.

Published case law shows that both the VAT authorities and the Belgian courts and tribunals take a fairly strict position on this requirement for the seller to produce two types of proof. Timely gathering of adequate, correct, clear and corresponding supporting documents is thus essential when applying a VAT exemption to the intra-Community supply of goods. After all, if the exemption is disallowed, it’s the supplier who has to pay the VAT – VAT which should actually be paid by its customer, but it’s not clear whether that VAT can then be claimed from the customer. VAT audits often take place quite a while after the transaction. And it’s obviously also important not to overlook the fines (10% – or 200% in case of fraud) and interest (0.8% per month on the payable VAT amount) which the VAT authorities impose in such cases.

2. Administrative simplification of proof of transport – the “destination document”

For a long time, people working in this area have been asking whether it would be possible to create a specific “proof document” to give sellers greater legal certainty with regard to the correct application of the VAT exemption on their intra-Community supplies. In decision No. E.T. 129.460 dated 1 July 2016, the authorities provided a response of sorts to this plea, by establishing an alternative document to be used as proof[3].

From 1 July 2016, the authorities accept that the transport of goods from Belgium to another Member State can be proven by a so-called “destination document”, instead of through a transport document.

The destination document must certify that the goods which were the subject of intra-Community supply are now in the possession of the buyer in an EU Member State other than Belgium. In principle, the document is prepared by the supplier, although the authorities will also accept a destination document drawn up by the customer. Obviously, the parties have to act in good faith. In the case of chain transactions, including triangular trade, the destination document must be prepared by the supplier making the exempt intra-Community supply or by its co-contractor.

For every separate supply, the seller can choose whether it wants to prove intra-Community transport using a destination document. It is also possible for a destination document to contain all intra-Community supplies to a single customer for a period of up to three consecutive calendar months in which goods were received by or on behalf of the buyer.

The destination document must contain at least the following information:

  • The name, address and VAT identification number (starting with “BE”) of the supplier;
  • The name, address and VAT identification number of the buyer (issued by a Member State other than Belgium);
  • Confirmation that it concerns the arrival of an intra-Community supply of goods as defined by Article 138(1) of Directive 2006/112/EC;The period to which the document relates;
  • A description of the supplied goods (their usual name and quantity);
  • An unambiguous reference to the sales invoice or invoices; the invoice number and date of each invoice. If no invoice has yet been issued, the reference may be to a document exchanged by the parties, which can be unambiguously linked to the invoice (e.g. an order number, delivery slip number, pro forma invoice number, etc.). Both the seller and the buyer must possess a copy of the document;
  • The month and year of receipt of the supplied goods;
  • The place where the supplied goods arrived (Member State, city/municipality);
  • The price in euros (excl. VAT) of the supplied goods.

The correctness of this information must be certified by the buyer within three months from the expiry of the period to which the document relates. The buyer may designate a person (who by virtue of their administrative role within the company may be deemed to have knowledge of purchases made by the company [4]) who in addition to his/her name, signature and the date, will write the words “Received on behalf of (name of the buyer)” on the destination document. The buyer must supply the identity and capacity of this person to the supplier in advance (by email or letter, or in some other written form).

Destination documents may be sent and confirmed by email or some other electronic method, provided the identity of the signatory can be guaranteed. The exchanged documents should then be stored together.

Obviously the supplier is still the one who needs to ensure it obtains the signed destination document from the buyer, but this recent VAT decision does give suppliers a more concrete form of proof. A form of proof that, moreover, gives rise to a rebuttable presumption of accuracy if the seller:

  • Can present the sales invoice, proof of payment and transport invoices, where the seller was responsible for transport;
  • Has submitted the intra-Community listing with regard to the goods specified on the destination document;
  • Has taken every reasonable measure in its power to ensure that it has not become involved in tax fraud in relation to the intra-Community supplies specified on the destination document.

Be aware that this destination document is an alternative form of proof for the transport document only. This is confirmed in the VAT decision, in which the authorities emphasise that they can still request documents other than transport documents to check the genuineness of the transaction and whether the details match the declarations on the destination document. So simply having a signed destination document does not give you a free pass. The seller still needs to gather other commercial documents to prove the exempt status of the intra-Community supply.

In this new VAT decision, the authorities expressly refer to case law from the European Court of Justice, in which the Court emphasised that non-compliance with a procedural requirement cannot prevent a VAT exemption from being applied, provided the fundamental conditions of the exemption scheme are met. It remains to be seen whether these European principles will be applied in practice during audits.

VAT decision E.T. 129.460 dated 1 July 2016 contains a number of templates of destination documents. Naturally, the VAT team here at Moore Stephens would be happy to help you draw up your own destination document template.

 

[1] Taxable persons covered by the special exemption scheme for small businesses are excluded.
[2] In the case of an ongoing trading relationship, periodic checks of the VAT identification number on the VIES website are sufficient.
[3] If the authorities observe non-compliance with the conditions of application of this decision, or more generally, misuse or attempted misuse, they reserve the right, in the future, to revoke the decision in its entirety, or deny a particular supplier the right to rely on this decision.
[4] Such as the Manager of the Accounting Department.

Author: Evy Maurits

The requirement to register gets a broader scope
More entrepreneurs must register with the Crossroads Bank for Enterprises (CBE)
Under the aim of creating a more attractive business climate, changes were made to the existing company law. In that context, the legislator has done away with the ‘trader’ concept, replacing it with the umbrella term ‘enterprise. Besides forming the basis for the rules of the Code of Economic Law, the Judicial Code and the Civil Code, the new enterprise concept also has consequences for reg
More specific: matrimonial property law
A new compensation obligation in the legal system
What if a spouse practices his profession in a company whose shares all form part of his separate property? The Act of 22 July 2018 has introduced considerable changes to matrimonial property law. This article addresses a specific addition to that law, namely the possible disadvantage incurred by the matrimonial property when a spouse practices their profession through their own company1. 
Changes in the cary proxy and usufruct
Estate planning: recent developments
Over the last few months, we have regularly reported on the important changes in estate planning and inheritance planning. Below is an update of some of those changes.   The care proxy: secure your estate for later The classic example is a person who, due to a physical or mental limitation (e.g. coma, dementia), is – temporarily or permanently – unable to manage their assets properly.
Happy Brexmas?
How to prepare your company for Brexit?
On 10 December 2018, the British Prime Minister decided to postpone the vote on the Brexit deal in the House of Commons. The risk of a ‘no deal’ disaster scenario is increasing. What are the important dates? On 29 March 2017, the United Kingdom formally informed the European Council of its intention to leave the EU (according to the procedure provided in Article 50 of the Lisbon Treaty). C
A popular control structure
The all-powerful manager of a civil-law partnership: was it always a fiction?
The civil-law partnership has long been a popular control structure among wealth planners. In many cases, donors do not want to give up their assets entirely, and still want to retain some control over what they donate. Definitely in cases of transfers of family companies, the donors (often parents or family members) still want to retain control over the course of the business.  The advant
The tax framework
Company subsidies: exempted or not?
Various subsidies were briefly described in the article by our colleagues from Strategy and Operations. They explained that they can assist you and your company with guidance on subsidies, from A to Z.1 In this context, we would like to discuss the tax framework for subsidies: how are awarded subsidies treated tax-wise within companies? Are these subsidies exempt from corporation tax and, if
Right to deduct VAT possible for costs incurred during the purchase of shares
The Ryanair ruling
Right to deduct VAT also possible for costs incurred during the purchase of shares, if the purchase ultimately does not (fully) go ahead The European Court of Justice recently confirmed that VAT on costs incurred during the purchase of shares may be deductible even if the purchase ultimately does not (fully) go ahead. As such, the Court of Justice has upheld the principle that the preparatory t
What are the options?
The deduction for investment: an illustration of the options
The deduction for investment allows companies and natural persons who earn profits or benefits to reduce their taxable profits by placing part of the acquisition or investment value of investments in new tangible and intangible fixed assets. Depending on the size of your business and the nature of your activities, you can generally apply the regular, one-off deduction for investment of 20% (tem
Valuation of usufruct
Now also a witch hunt when usufruct is sold?
In previous editions, we have already written about the valuation of usufruct when purchasing property, but recently there have also been regular reports of checks on the valuation of usufruct when reselling. However, up until now, the case law has followed the viewpoint of the taxpayer. Brief description For several years, there has been a lot of controversy regarding the valuation of usufruc
Vlabel is using conciliatory language
Has the decrease in Flemish sales duty led to an increase in the costs for purchases of usufruct?
The decrease in sales duty: also for split purchase usufruct-bare ownership The recent drop in the rate (to 7.00%) for purchases of family homes comes with a number of conditions. For example, the purchaser must be a natural person. Following some uncertainty, it was subsequently confirmed that, in the event of a split purchase of such a property by a company for the usufruct and the bare owner f

Subscribe to our newsletter