EUROPEAN COMMISSION
DIRECTORATE-GENERAL
TAXATION AND CUSTOMS UNION
Indirect Taxation and Tax administration
Value Added Tax
7th
VAT Expert Group
meeting – 6 February 2014
taxud.c.1(2014)57825 – EN
Brussels, 13 January 2014
VAT EXPERT GROUP
VEG NO 027
Option 1B - Sub-Groups report – Proof of intra-EU supplies
Commission européenne, 1049 Bruxelles / Europese Commissie, 1049 Brussel – Belgium – Tel.: +32 2 299 11 11.
taxud.c.1(2014)57825 – VAT Expert Group
VEG No 027
EUROPEAN COMMISSION
DIRECTORATE-GENERAL
TAXATION AND CUSTOMS UNION
Indirect Taxation and Tax administration
Tax administration and fight against tax fraud
Brussels, 10 January 2014
[Annex to D-47090]
EU VAT FORUM N° 3/9 (final)
WORKING DOCUMENT
FOR OFFICAL USE ONLY
EU VAT FORUM
Report to the Group on the future of VAT and the VAT expert group
1.
INTRODUCTION AND MANDATE
In discussions within the Group on the future of VAT and the VAT expert group,1 Member
States wanted to ascertain whether it is possible to improve the functioning of the current
VAT “transitional” system with regard to intra-EU supplies.
As a consequence, the EU VAT Forum set up a specific working group to consider the
proof of despatch or transport to another EU Member State (‘proof’) required to VAT
exempt intra-EU supplies of goods.2 The aim of this sub-group was to analyse best
practices and the possibilities for cooperation in order to improve the functioning of the
current VAT system. 13 Member States3 and representatives from 9 business
organisations4 participated in the working group.
Based on an understanding of business models and different intra-EU scenarios, which
correspond to the current practices of Member States regarding the proof required for
intra-EU supplies, the sub-group sought to identify possible ways to be more efficient on
both sides.
It was agreed that the sub-group should report back its findings to the EU VAT Forum to
enable the EU VAT Forum to issue recommendations in this field in time for the next
meetings of the Group on the Future of VAT and the VAT Expert group.
1
2
3
4
Discussions based on working document GFV 22 - Group on the future of VAT + VAT expert
Group.
As set down in article 138 of Directive 2006/112/EC.
BE, BG, DK,DE,IE,ES,EE,IT, LT,AT,HU,PL,PT,NL,SK.
Business Europe, CBE, CFE, EEA, EPMF, FEE, IVA, Siemens, TEI.
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2.
WORKING METHOD
Three meetings of the sub-group took place5. In addition, two questionnaires6 were sent to
all participants, to enable members of the sub-group to gain an understanding of current
practices in Member States. Business members also shared information on the commercial
documentation which could be provided in different scenarios as proof of the despatch or
transport of goods in case of an intra-EU supply.
2.1.
Information sharing
Business and Member States participants agreed to base their discussions on a set of
business models corresponding to different scenarios for B2B intra-EU supplies of goods,
which varied from the simplest (two party transactions) to the more complex supply
chains. The aim was to identify those situations where properly documenting intra-EU
supplies were likely to be more difficult. Business also provided the group with a detailed
end to end process map of internal controls applied to manage risk, and the related
documents produced, when carrying out an intra-EU supply of goods.
2.2.
Identification of the most difficult situations to be documented
Among the different scenarios, it was considered that the supplier’s obligation to provide
evidence of an intra-EU supply of goods was straightforward in transactions involving two
parties where transportation of the goods is handled by a third party.
However, two other scenarios of intra-EU supplies were considered to be problematic, as
follows:
-
when the supplier, or the customer, transports the goods using his own means of
transport; and
-
when goods are sold “ex works”.
In both cases, tax authorities require proof that the goods have physically left the territory
of the Member State of the supplier7 to be despatched or transported to another EU
Member State.
The group did not discuss in depth the other condition necessary for the VAT exemption
of intra-Community supplies (i.e. the customer’s status as a taxable person). However, the
sub-group acknowledged that this issue was relevant to the wider issue of the prevention
of fraud.
In relation to the controls undertaken and documents generally available, the participants
of the sub-group acknowledged that there were no substantial differences between SMEs’
and larger companies involved in intra-EU trade. The requirements of Tax authorities for
businesses to provide proof are almost identical for both categories of enterprises.
5
31 July 2013, 4 October 2013 and 20 November 2013 .
Note dated 19 June 2013 with reference taxud.c.4/HM/LV/tm (2013)2394405 and e-mail of 14/10/2013.
7
Article 138(1) of Directive 2006/112/EC.
6
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However, it was acknowledged that SME’s often find it more challenging to gain access to
appropriate information and, in consequence, have less of an understanding of their legal
obligations.
2.3.
Appointment of rapporteurs
Two rapporteurs (one from the tax administrations and one from the Business members)
were designated to summarize the discussions and report to the EU VAT Forum.
It was agreed that the report should be circulated among the members of the sub-group by
the secretariat for comments and suggestions, so that it can be adopted by consensus by
the sub-group. If it is not possible to finalise the report, the remaining issues could be
discussed at the EU VAT Forum plenary meeting.
3.
STATE OF PLAY
3.1.
General remarks
The efficient operation of the internal market is essential for business in order to create
growth and employment. The tax environment in which businesses operate, provided by
tax authorities, can have a direct impact on competition between companies, as well as
between Member States. Therefore, the principles of fairness, tax neutrality, legal
certainty, legitimate confidence and proportionality must be applied and respected by tax
authorities (as well as judges). At the same time tax authorities are under considerable
pressure to recover VAT more efficiently and to ensure that all taxpayers are treated fairly
and equally, which implies that fraud has to be combated even more effectively.
In recent years, many Court cases at the EU level in the field of VAT have concerned the
issue of fraud. Carousel fraud and substantial disruption to certain markets by fraudulent
operators have been reported. Consequently, the fight against tax fraud is currently a
major issue at both national and EU level.
However, combating fraud should not lead us to overlook the fact that the vast majority of
businesses comply with the rules.
In considering whether the VAT exemption should be applied to the intra-EU supply of
goods, the business representatives view this as comprising three elements as follows:
i.
whether, in principle, the transaction falls within the scope of the
legislation;
ii.
whether the supplier has carried out all reasonable steps to verify the good
faith/ standing of his customer (the ‘knowledge test’); and
iii.
whether the supplier holds the required proof that the goods have left the
Member State of dispatch, to be delivered/transported to another EU
Member state.
Business representatives believe that the use of documentation (either in terms of a
different format, or additional information) is not an effective means to combat fraud as,
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in practice, the fraudsters will hold, or provide, perfect documentation (which does not
affect the possibility for the Member States to ask for documentary evidence). Preferably,
the detection and prevention of fraud, which is an issue for both legitimate business and
tax authorities, needs to be dealt with at an earlier stage in the process (i.e. the point at
which goods are being dispatched and invoiced is too late). For example, although this is
an issue which the business participants believe should be considered by the proposed subgroup on fraud, effective controls by a business as part of the knowledge test could
prevent fraud. Consequently, in considering the issue of proof, the sub-group has focussed
on situations where fraud is not present. In any event, it is observed in practice that
holding the required proof (in whatever format) did not enable the supplier to VAT
exempt its supply if the business failed the “knowledge test”. Consequently, the
distinction to be made between legitimate business and fraudsters is a major issue for both
parties and should be further explored.
3.2.
Means of proof, documentation, setting the scene
3.2.1. Diversity of documentation
The answers to the questionnaire reflected different approaches in Member States. Some
Member States are less demanding than others regarding the means of proof of an intraEU supply and the documentation that has to be provided in this respect, accepting various
forms of alternative evidence.
However, in most cases there is no single document which would be sufficient but a
number of different types and formats, which may or may not be listed in national
legislation, or alternatively used in practice. For instance8: commercial documents
relating to contractual commitments, an invoice mentioning the fact that it relates to an
exempt intra-EU supply; a document signed by the purchaser (or authorized person)
acknowledging the receipt of the goods in the other Member State; a payment document
proving that the purchaser has paid for the goods received, proof that the transaction has
been correctly reported in the VAT returns and in the intra-EU sales listing of the supplier;
proof of the VAT registration of the purchaser in another Member State at the time of the
supply; the Intrastat listing; bank documents proving payment by the customer; etc…
3.2.2. Documentation concerning the transport of the goods outside the territory of the
Member State of the supply into another Member State
Several documents may be requested by tax authorities, depending on national legislation
and practice. For instance9: bills of lading; airway bills; a signed CMR; consignment note;
the invoice from the carrier, as well as the evidence of payment of the carrier invoice; a
receipt issued by the customer; order document; delivery docket; supplier’s invoice;
evidence of transfer of foreign currency for payment; drivers logs (tachograph); diesel
records; an insurance policy with regard to the international transport of the goods; also
reliable third party documents; verification (by an authority, or a notary) of the delivery to,
or the arrival in, another Member State; a storage receipt issued in the Member State of
destination (or the storage contract) mentioning the goods specified according to types,
quantity, value and quantities; a certificate issued by a professional body of the Member
8
9
This list corresponds to the answers given by the Member States to the two questionnaires. It is
not exhaustive and contains no ranking.
See foot note 8 above.
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State of destination (for example: chamber of commerce or industry); a minute, or other
certification, of the escrow account of a solicitor; etc…
3.2.3. Media and format of the documents
In most cases, Member States will accept the documents provided as proof in any
available format. Only a few Member States require the document to be provided through
an electronic portal. However, in the event of an audit, Member States require “readable”
documents be made available to the tax authorities. Therefore, it is for taxpayers to ensure
that documentation is accessible either electronically, or physically, to the tax authorities
until the end of the limitation period laid down in the national legislation.
In the context of intra-EU trade, some Member States have now issued national forms
which may be used by the supplier in certain circumstances (e.g. ex-works, and goods
transported by the supplier or the purchaser without a third party). In one case, the tax
authority concerned underlined that these forms are optional and that they constitute nonexclusive means of proof. They are meant to help the supplier to provide evidence. Some
tax authorities expressed an interest in this initiative. From a business perspective, it was
acknowledged that such forms were helpful in providing certainty to the supplier in certain
scenarios, but that care needed to be taken to avoid such documents becoming mandatory
in practice (e.g. in the event of an audit). Accordingly, the ability to provide alternative
proof should be available to suppliers.
3.2.4. Time to provide the documentation to the tax authorities
There are also differences between the Member states as to when the documentation
should be provided. For some Member States, in principle, all evidence must be provided
at the time the supply is carried out. In other Member States, part of the proof can be
provided later (e.g. the VAT number which was not known at the time of carrying out the
supply).
In their reply to the first questionnaire, some Member States took the view that complete
proof should exist at the moment of an audit. One Member State observed that, as tax
authorities must have full evidence that the conditions were fulfilled at the time of
delivery, the original signature of the entrepreneur, or a person acting on his behalf, who
receives goods must be given at the time of delivery of the goods. A later confirmation, or
a qualified statement, would not be possible in that case. On this point, the Commission
drew the sub-group members’ attention to the well-established case law of the ECJ (in
particular the Collée judgment).
From the perspective of business representatives any requirement that full information
must be available at the time of delivery is simply not practical. A supplier has a
legitimate expectation that he should have certainty as to the VAT treatment of a supply at
the time an invoice is issued (which will often occur before the delivery is physically
made, or completed) and be able to VAT exempt a supply, even if documentary proof that
goods have left the Member State of dispatch is received later.
3.2.5. Authentication of the documents
Some Member States have additional requirements regarding the necessity to have
documents signed. Specifically, these include a requirement for an original signature from
the entrepreneur, or a person acting on his behalf, who receives goods. In the case of
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signatures, providing them subsequently is not accepted. On this point, the Commission
informed sub-group members of a preliminary request currently pending before the ECJ
(C-492/13, Traum).
Some Member States have now issued a new national form which can (or should) be used
by the supplier, which can assist suppliers in providing proof (e.g. where the supplier, or
customer uses their own means of transport). Tax authorities concerned see these as a
useful additional source of information (e.g. because they contain a delivery address,
vehicle type and registration number) and tax auditors could expect that these forms are
part of the body of documents that taxpayers should be able to provide in the course of an
audit. From their point of view, these forms may help the taxpayers who don’t have any
other available means, to establish the despatch or transport of the goods from the Member
State of supply to another Member State.
However, from a business perspective, any requirement to provide additional information
in respect of a supply (e.g. place of delivery, vehicle registration number, identity of the
driver) could only ever identify a potential fraud after the event and does not assist in the
prevention of fraud, or prevent a loss of tax if the supplier has taken all reasonable steps
such that it passes the ‘knowledge test’.
3.2.6. Proof value of the documents
The answers from business to the questionnaire have highlighted an important difference,
compared to tax authorities, in the status and the commercial weight placed on the receipt
of payment for a supply from a customer. Business would stress that this fact is a key
element in their business process giving a tangible indication that the intra-EU supply of
goods has taken place according to the contract agreed between the supplier and his
customer.
Of course, as part of the normal commercial process, full or part payments can and are
sometimes requested from new or existing customers in advance of the delivery of goods.
In such cases, business accepted that receipt of a payment could not be used as part of the
proof that goods have been dispatched from a Member State.
However, Member States pointed out that in the current state of the legislation, payment
as such is not on its own adequate to document the physical movement of the goods
properly as required by Article 138(1) of directive 2006/112. Some Member States take
the view that no single document is sufficient to prove an intra-EU movement of goods
and that it is essential to consider all the commercial documentation available. In such
cases, documentation from a third party (e.g. transport documents, such as a CMR) are
viewed as having more weight.
4.
LEGAL ISSUES
4.1.
General remarks
Given the absence of any specific provision in the VAT Directive, Member States are free
to ask for documents to support the right to exempt intra-EU supplies, in accordance with
Art. 131 of that directive, but bearing in mind the tax neutrality and proportionality
principles.
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Business representatives insisted that the level of demands from tax authorities to
document intra-EU trade should not systematically be upgraded because of recent fraud
cases. One reason for not escalating this is that very few fraud cases were discovered on
the basis of missing documents. It was generally acknowledged that fraudsters usually
provide almost impeccable documentation and are able to provide all sorts of
documentation at short notice.
Nevertheless, in recent years, it seems that the line of reasoning developed by the Court of
Justice of the European Union in situations of fraudulent chain transactions, is also now
being used in a broader context where errors, or failure to comply with formal obligations,
have been identified (see case C- 284/11, 12 July 2012, para. 74). A number of requests
for proof by tax authorities seem to be driven more by fears of a worst case scenario rather
than by a risk analysis strategy.
Precisely with the aim of fighting fraud, one Member State has made recent legislative
changes whereby the supplier is now required to document not only the transport of goods
outside the territory but also the fact that the goods have reached their destination10.
Another Member State is currently considering whether to introduce a requirement that,
where the buyer pays in cash, or with debit or credit card, the person collecting the goods
will be required to present proof of identity to the seller. If the person collecting the goods
is not the owner of the business buying the goods then the person will have to demonstrate
that they have the legal power to represent the buyer, to the seller.
Accordingly, it is clear that paper documents are still important to many Member States.
Furthermore, some Member States impose conditions as to the authenticity of the
signature of the person acquiring the goods. Setting aside the question of the
proportionality of such demands (see preliminary ruling request in case C-492/13), the EU
digital agenda should be considered. However, aspects relating to the EU digital agenda
were not evoked by the sub-group participants.
4.2.
Guiding principles, Internal market context – Free movement of goods - ECJ
Case law
“The position of economic operators should not be less favourable than it was prior to the
abolition of frontier checks between the members states, because such a result would run
counter to the purpose of the internal market which is intended to facilitate trade between
them.
In the absence of intra-Community frontiers, the transitional intra-Community supplies
schemes should not be more cumbersome for economic operators than before. Whilst it is
true that the regime governing intra-Community trade has become more open to fraud, the
fact remains that the requirement for proof established by the Member States must comply
with the fundamental freedoms established by the EC treaty, such as, in particular, the
free movement of goods.
10
See C-430/09, Euro Tyre, para. 38 quoting C-409/04, Teleos, para. 67 “… once the supplier has
fulfilled his obligations relating to the evidence of an intra-Community supply, where the
contractual obligation to dispatch or transport the goods out of the Member State of supply has
not been satisfied by the purchaser, it is the latter who should be held liable for the VAT in that
Member State.”
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Under Article 28(8) of the sixth Directive, the Member States may impose the obligations
which they deem necessary for the correct collection of the tax and for the prevention of
evasion, provided that such obligations do not, in trade between Member States, give rise
to formalities connected with the crossing of frontiers.” (C-409/04 Teleos, paras. 62-64).
4.2.1. What should be documented with regard to intra-EU trade?
“Apart from the requirements relating to the capacities of the taxable persons, to the
transfer of the right to dispose of goods as owner and to the physical movement of the goods
from one Member State to another no other conditions can be placed on the classification of
a transaction as an intra-Community supply or acquisition of goods” (C-409/04 Teleos,
para. 70).
4.2.2. Who should provide the evidence of the intra-EU supply?
It is for the supplier of the goods to provide the proof that the conditions are met.
“Once the supplier has fulfilled his obligations relating to the evidence of an intraCommunity supply, where the contractual obligation to dispatch or transport the goods
out of the Member State of supply has not been satisfied by the purchaser, it is the latter
who should be held liable for the VAT in that Member State. See Teleos case C-409/04
para. 67.”(C-184/05 Twoh para. 26).
4.2.3. How is this proof to be provided and the documents been assessed?

In the Meilike judgment (C-262/09, 30 June 2011), the Court stresses that the
assessment of the means of proof must not be conducted too formalistically (para 46)
(direct taxation).

“Transactions should be taxed taking into account their objective characteristics
(see, in particular, Optigen and Others, paragraph 44, and Kittel and Recolta Recycling,
paragraph 41). (…) since it is apparent from the order for reference that there is no
dispute about the fact that an intra-Community supply was made, the principle of fiscal
neutrality requires – as the Commission of the European Communities also correctly
submits – that an exemption from VAT be allowed if the substantive requirements are
satisfied, even if the taxable person has failed to comply with some of the formal
requirements. The only exception is if non-compliance with such formal requirements
would effectively prevent the production of conclusive evidence that the substantive
requirements have been satisfied. However, that does not appear to be so in the main
case”. (Case C-146/05 Collée, paras 30,31).

“The first subparagraph of Article 28c(A)(a) of the Sixth Council Directive
77/388/EEC of 17 May 1977 ... must be interpreted as precluding the refusal by the tax
authority of a Member State to allow an intra-Community supply – which actually took
place – to be exempt from value added tax solely on the ground that the evidence of such a
supply was not produced in good time” (C-146/05 Collée, first para of the operative part).
4.2.4. Good faith, proportionality
“However, any sharing of the risk between the supplier and the tax authorities, following
fraud committed by a third party, must be compatible with the principle of proportionality
(Teleos and Others, paragraph 58).
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“That will not be the case if a tax regime imposes the entire responsibility for the payment
of VAT on suppliers, regardless of whether or not they were involved in the fraud
committed by the purchaser (see, to that effect, Teleos and Others, paragraph 58). As the
Advocate General has pointed out in point 45 of his Opinion, it would clearly be
disproportionate to hold a taxable person liable for the shortfall in tax caused by
fraudulent acts of third parties over which he has no influence whatsoever.
Accordingly, the fact that the supplier acted in good faith, that he took every reasonable
measure in his power and that his participation in fraud is excluded are important points
in deciding whether that supplier can be obliged to account for the VAT after the event
(see Teleos and Others, paragraph 66).” (Case C-271/06, Netto, judgment of 21.02.2008,
paras. 23 to 25).
It is for national authorities and national courts to decide whether the supplier has taken
every reasonable measure in his power, or has exercised all due commercial care, when
applying the principle of proportionality. The objective elements are to be weighted
according to the merits of each case. But also when it comes to deciding whether an
operator has acted in good faith, a subjective aspect comes into play. In cases such as ‘ex
works’ sales, or 3-party transactions, this notion could be interpreted in a different way by
tax authorities and national courts. Therefore, suppliers are put in a risky situation against
which the sole real remedy for a supplier (within the current legal framework) is either not
agreeing to the transaction, or trying to charge VAT of the Member state of the supply to
the purchaser and for the latter to ask for a reimbursement of the VAT initially charged
once adequate evidence is provided to the supplier.
However, business representatives emphasised that the commercial reality is that a
supplier is rarely, if ever, able to charge VAT on an intra-EU supply pending the receipt of
acceptable proof from his customer that the goods have been despatched or transported out
of the Member state of the supplier. The reality is that the customer will invariably refuse
to pay the VAT element shown on an invoice with the result that the supplier is left with
the VAT liability irrespective of whether he has passed the ‘knowledge test’ and despite a
legitimate expectation that he should be able to VAT exempt the supply. At best this
dilemma leaves the supplier with a cashflow cost and, at worst, means he bears the full
risk of the VAT. In such cases, a business (especially an SME) might feel that their only
option is to decline the transaction.
4.2.5. Legal certainty: when is a business on the safe side?
The EUCJ stressed that: “...it would be contrary to the principle of legal certainty if a
Member State which has laid down the conditions for the application of the exemption of
supplies of goods for export to a destination outside the Community by prescribing,
among other things, a list of the documents to be presented to the competent authorities,
and which has accepted, initially, the documents presented by the supplier as evidence
establishing entitlement to the exemption, could subsequently require that supplier to
account for the VAT on that supply, where it transpires that, because of the purchaser’s
fraud, of which the supplier had and could have had no knowledge, the conditions for the
exemption were in fact not met (see, to that effect, Teleos and Others, paragraph 50).”
(Netto C-271/06, paras 26, 27).
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In several EUCJ cases (e.g. C-409/04, Teleos, para. 48; C-273/11, Mecsek Gabona, para.
39) it has been stressed, that the principle of legal certainty requires that taxable persons
are informed about their tax obligations before concluding a transaction.
5.
ROLE OF THE TAX AUTHORITIES, ADMINISTRATIVE COOPERATION
If the supplier is not able to establish the existence of an intra-EU supply, there is no
obligation for the tax authorities of the Member State of dispatch or transport to request
information from the authorities of the destination Member State in order to assist the
supplier (C-185/04 Twoh, paras. 28-38). However, neither this case law, nor the
administrative cooperation channels and rules, prevent tax authorities from making use of
data available to them in cases where a supplier was not able to document an intra-EU
supply. Some Member States of the group acknowledged that a better use of
administrative cooperation tools could be beneficial.11 Nevertheless, it should be borne in
mind that most tax authorities do not have the necessary (human) resources to undertake
such a process.
5.1.
Role of third parties such as Transporters, shipping agents
The sub-group did not deal with this item in depth given the short time frame available
and the fact that, in the context of proof, ex-works supplies and arrangements involving
‘own transport’ were perceived to be more problematic. However, it might be important
to assess if third parties such as transporters and shipping agents can play a larger role in
giving trust and assurance and how this can influence the compliance costs compared to
the benefits for business and for the tax authorities.
5.2.
Special regime for ‘group’ companies
None of the 11 Member States that have answered the questionnaire allow specific and/ or
less-burdensome requirements for proof on intra-EU movement of goods between
members of the same corporate group. Some members of the sub-group invoked the
principle of equal treatment. However, where a risk analysis was being undertaken by a
tax authority (or horizontal monitoring is applied ), the risk of fraud may be different
between members of the same corporate group, or between parties with a long established
trading relationship, and that the tax administrations’ limited resources should be targeted
accordingly.
6.
CONCLUSIONS
6.1.
General conclusion
Currently, there is a failure to properly implement the (transitional) intra-EU VAT system
which, taking into account the purpose of the internal market that is intended to facilitate
intra-EU trade, often cannot be fully complied with, even by legitimate businesses.
11
Question n° 8 of the first questionnaire: “Do you think that administrative cooperation
arrangements can be useful to check information provided by suppliers? Do you use
administrative cooperation arrangements at the request of suppliers?”
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Moreover, all the above-mentioned suggestions do not change anything in regard to the
vulnerability of the present intra-EU trade VAT system to fraud.
Therefore, it is considered that the work of the Group on the Future of VAT and the VAT
Expert group should now concentrate on more promising scenarios, which necessarily
imply legislative changes to the existing rules for intra-EU trade in goods.
6.2.
Issues for further discussion in the EU VAT Forum (or a sub-group)
The discussions of the sub-group identified a number of areas, in relation to the intra-EU
trade in goods, that would be suitable for discussion either within the main EU VAT
Forum, or as part of a sub-group (e.g. in relation to the fight against fraud), as follows:
6.2.1. Optimizing existing documentation and controls in place in business, changing
the approach.

The diversity of approaches across EU Member States generates costs and
increases risks for business operating in different Member States. Ideally, further
harmonisation /consistency should be achieved.

The diversity in the approach to intra-EU trade can be a particular challenging for
SMEs, who generally have less access to information outside their own Member State and,
therefore, may not be aware of all their legal obligations. Further work in making
information publically available needs to be considered (e.g. discussions relating to the
VAT Portal).

The exchanges in the group showed that lots of the documents and information
requested by tax authorities are already part of business controls. However, the answers to
the questionnaire show one important difference between businesses and tax
administrations in relation to the status and the commercial weight placed on the receipt of
payment from a customer. Business stresses that this fact is a key element in their
business process giving a tangible indication that the intra-EU transaction took place in
accordance with the contract agreed between the supplier and acquirer. Member States
pointed out that in the current state of the legislation, payment as such is not adequate to
document the physical movement of the goods properly as required by Article 138 of
Directive 2006/112.

The requirement to provide proof in relation to an intra-EU supply of goods made
under Ex-Works delivery terms, or where there is no third-party transport carrier involved,
can be particularly problematic. The use of agreed documents in such cases to ‘certify’
that goods have left the Member State of dispatch can assist in providing a supplier with
some certainty as to the VAT treatment, so long as these are optional and alternative
evidence is still acceptable. The use of such documents could be considered in
conjunction with an appropriate application of the ‘knowledge test’.
6.2.2. Increase the efficiency of tax administrations: Promote a risk based strategy in
tax administrations?
From the discussion, it emerged that a minority of Member States have introduced their
own end-to-end risk analysis system.
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The advantage of such tools was stressed on numerous occasions by business. Some of the
advantages of a robust IT risk based analysis, put forward include:
- monitoring of registration conditions, reliable VIES numbers, efficient deregistration
measures;
- enabling some transactions to be cleared in advance, or in real-time, which brings legal
certainty for both parties;
- enabling tax authorities to concentrate their resources on targeted audit when needed;
- improving the conditions for fair competition and the competitiveness of legitimate
business;
- it is a cost effective investment: the costs of the system, resources and IT is
compensated for by an increase in tax yield/collected (in the experience of one Member
State in four months);
- enabling authorities to know more about the taxpayer and to assess the risks across a
broad range of fiscal obligations and relationships. For example, the existence of a long
lasting confidence based relationship between businesses partners (or transactions
within corporate groups) could be taken into consideration by tax authorities.
6.2.3. Exercise of Controls by Businesses and Tax Authorities: Preventing and
Tackling Fraud
Although the focus of the sub-group was the proof requirements for intra-EU supplies of
goods, assuming trade between legitimate businesses, it was recognised that the promotion
of an effective single market requires that both businesses and Member States work
together to tackle and prevent fraud.
Although there has been an increasing focus on proof and additional information
requirements to tackle fraud, such an approach can only detect fraud after the event.
Accordingly, any expert group on the fight against fraud should consider what measures
could be taken to prevent fraud, which may include the following:

what controls do businesses currently undertake as part of their internal risk
management process that demonstrate that they have taken every reasonable step
to verify the good standing of their customer and what would be considered best
practice?;

how would, or should, those controls be different in the case of a new customer, or
where there is a long standing commercial relationship between the parties?;

are there practices, or internal controls, applied by businesses that would be of
assistance in tackling fraud if adopted by Tax Authorities?;

what best practices could tax authorities adopt to check the status of a taxable
person before it assigns that person a VAT identification number, or in the case of
a change of ownership?;
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
how can communications between businesses and tax authorities be improved to
aid the effective fight against fraud, taking into account that the fact of it’s often
changing nature?
6.3. CLOSING CONSIDERATIONS FROM A BUSINESS PERSPECTIVE
-
Business representatives believe that the level of demands from tax authorities to
document intra-EU trade should not be upgraded systematically because of recent
fraud cases. One reason for not escalating this is that very few fraud cases are
discovered on the basis of missing documents and that additional information can only
detect fraud after the event, rather than prevent it, as the fraudster is able to provide
impeccable documents. Intelligence about the companies seems to be more effective in
identifying clients at risks.
-
There is also a need for further guidance to improve clarity and legal certainty in the
interpretation and practice of certain tax authorities following recent CJEU case law.
The concept of good faith is fairly subjective; the other conditions (for instance “all
due commercial care”) are also very general and leave a wide margin of interpretation
to national tax authorities as well as to national judges.
-
Business representatives believe that proof of an intra-EU supply of goods should,
where possible, be based on documents that are produced in the context of a legitimate
commercial arrangement. Documents that are not part of the normal commercial
environment are easier for the fraudster to replicate and place additional cost burdens
on legitimate businesses.
-
Some participants raised questions about recent changes in national legislation leading
to new documents, or certificates, being used in certain circumstances. Provided that
those measures are in line with EU law, the trend towards more complex and
demanding procedures in the Member States as proof of intra-EU supplies is not a
good signal as compliance costs are involved. It could be a deterrent for SME’s in
particular to develop their activities within the EU.
-
Business representatives believe that a supplier should have certainty as to whether he
can VAT exempt a supply at the time at which an invoice is raised. Although the
option of charging VAT and then crediting such VAT when additional proof of an
intra-EU supply has been provided by a customer is often suggested, the commercial
reality is that this puts the supplier in the worst of both worlds in that the customer will
invariably refuse to pay that VAT and the supplier is left with the risk of being liable
for VAT if the proof is not provided (notwithstanding having taken reasonable steps to
verify the good standing of his customer).
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