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The Belgian VAT authorities have updated their administrative guidance on B2B intra-Community trade in goods, in particular regarding the temporary cross-border movement of own goods, between Belgium and another EU Member State, for the purpose of using these goods to supply services.
Background: ‘transfers of own goods’ versus ‘non-transfers of own goods’
For VAT purposes, the movement of a taxable person’s own goods from one EU Member State to another EU Member State may, in certain circumstances, be treated in the same way as a B2B cross-border supply of goods. In practical terms, such a ‘transfer of own goods’ may give rise to a ‘deemed intra-Community supply of goods’ in the Member State of dispatch and a corresponding ‘deemed intra-Community acquisition of goods’ in the Member State of arrival (both in the hands of the owner of the goods). The latter typically entails VAT registration & reporting obligations for the owner of the goods in both Member States.
However, the VAT legislation also provides for a number of situations where the cross-border movement of own goods is not treated as such a VAT taxable transfer of own goods (subject to several conditions). These situations are commonly referred to as so-called ‘non-transfers of own goods’. Where a movement qualifies as a ‘non-transfer’, the mere cross-border intra-Community movement of the goods does not trigger a deemed intra-Community supply and acquisition of goods. The latter non-transfer qualification is for many companies a key simplification, by means of which they can avoid triggering a VAT registration & reporting obligation in the Member State of dispatch and/or the Member State of arrival (otherwise triggered purely due to moving their own goods cross-border within the EU).
One of these non-transfer scenarios concerns the temporary movement of own goods to another Member State for use by the taxable person (who remains owner) in the context of services performed by that taxable person, whereby the goods are returned to the Member State of dispatch after the temporary use in the Member State of arrival.
What has changed from a Belgian VAT perspective?
The key change is that the Belgian VAT authorities have abandoned their previous broader administrative practice for this particular non-transfer scenario (laid down in article 12bis, second paragraph, 5° of the Belgian VAT Code) related to the temporary use of goods for service activities.
Historically, the Belgian VAT authorities applied a broader interpretation, allowing taxable persons not established in the Member State of dispatch, but merely VAT registered there, to also rely on this non-transfer provision.
Under the revised guidance, the respective simplification is only available where the taxable person is established in the Member State of dispatch. A mere VAT registration in the Member State of dispatch is no longer sufficient.
Impact on outbound and inbound movements
The revised interpretation impacts both outbound and inbound cross-border movements of goods falling within this particular non-transfer scenario:
- outbound movements (from Belgium): can only qualify as a non-transfer if the taxable person is established in Belgium;
- inbound movements (into Belgium): can only qualify as a non-transfer if the taxable person is established in the Member State of dispatch.
Practical example
A French construction company transporting its own equipment (e.g. a crane) from France to Belgium to carry out a construction project in Belgium, may apply this non-transfer simplification for its temporary cross-border movement of equipment (subject to the other conditions being met). However, a foreign company with a French VAT number but without establishment in France, will no longer meet the conditions for the respective non-transfer simplification. In the latter scenario, the cross-border movement of equipment from France to Belgium will qualify as a transfer of own goods.
Practical implications for businesses
The revised position may have a significant impact for businesses that temporarily move their own goods cross-border within the EU for use in service activities.
The qualification as a transfer of own goods (instead of non-transfer) typically triggers for the owner:
- VAT registration & compliance obligations in the Member State of dispatch;
- VAT registration & compliance obligations in the Member State of arrival.
An incorrect qualification as a non-transfer of own goods also creates risks in both jurisdictions, such as:
- in the Member State of dispatch: potential rejection of the VAT exemption for the intra-Community supply, increased with penalties and/or late payment interest;
- in the Member State of arrival: potential assessment of the VAT due on the intra-Community acquisition, increased with penalties and/or late payment interest.
Recommended action
Businesses should review their intra-Community movements of own goods, particularly where goods are temporarily moved for use in service activities. Specific attention should be paid to cases where the business is merely VAT registered, but not established, in the Member State from which the goods are dispatched.
In addition, businesses are also recommended to map other recurring cross-border movements of own goods to determine whether they could meet the conditions to qualify as non-transfers for VAT purposes (e.g. in the framework of tolling manufacturing, supplies of goods with installation etc.).
Our experts remain available to assist with reviewing cross-border flows of own goods and assessing the related VAT consequences, potential risks and actions to be taken.