New documentation requirements for intra-community supplies from Germany to other EU member states.

March 7, 2012

On March 7, 2012, Tax Executives Institute submitted the following comments to the European Commission discussing concerns with recent German VAT legislation changing the substantiation requirements for zero-rating of intra-community supplies of goods originating in Germany. The comments were prepared under the aegis of TEI's European Indirect Tax Committee, whose chair is Siegert Slagman of Phillip Morris International. Contributing substantially to the development of TEI's comments was Karl-Heinz Haydl of General Electric Company. Daniel B. De Jong, TEI Tax Counsel, serves as legal staff liaison to the European Indirect Tax Committee and coordinated the preparation of TEI's letter.

On behalf of Tax Executives Institute, thank you for the opportunity to meet in Madrid on 25 January 2012 to discuss the European Commission's White Paper on the future of VAT and other European Union VAT issues of general importance to business. TEI very much appreciated the candid conversation and looks forward to working with you and your colleagues in the future. In that respect, we draw your attention to a recent law change in Germany that introduces new documentation requirements to substantiate zero-rating of intra-community supplies. These rules create new risks for legitimate business and undermine the application of the zero-rating provisions for intra-community supplies by making trade within the EU more burdensome for international business. (1)

TEI urges the Commission to communicate the concerns of international businesses, as documented in this letter, to the German government and to engage appropriately with it to ensure that Germany applies its new law in line with the EU VAT regulations.

Background

Under German law, supplies of goods made by a VAT-registered business in Germany to a VAT-registered business in another Member State may be zero-rated. Businesses must maintain documentation proving that the goods were shipped to another Member State to substantiate the utilization of this zero-rating. German tax authorities have historically interpreted the law flexibly to allow businesses to rely on documentation received and maintained in good faith that clearly shows a supply was made within the EU. Examples of acceptable documentation include transport documents, delivery notes, and receipts of payment. This flexibility allows legitimate businesses to qualify for zero-rating while protecting the government against VAT fraud.

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