Call-off stock situations occur when:
- A supplier transports goods from one Member State (place of origin) to another Member State (place of destination);
- The supplier holds goods at a location in the place of destination; in addition to
- At the time of the transport of goods, the supplier already knows the identity of the customer receiving the goods once they arrive in the Member State of destination.
That customer will then “call-off” the stock as and when required. Only at this point will ownership of the goods pass from the supplier to the customer.
Whilst this position creates useful efficiencies from a business and commercial perspective, in some Member States it increased VAT compliance obligations. This happened via the need for the supplier to sometimes register in the place of destination so as to account for acquisition tax when the goods arrived. Once registered, the supplied needed to consider how to account for VAT on the supply to the customer.
New Rules implemented under the EU ‘Quick Fixes’
The EU’s ‘Quick Fixes’ introduced new rules for call-off stock to be implemented uniformly across the EU. Primarily the quick fix allows for a simplification to be applied which means the supplier no longer has to register in the place of destination. Until 31 December 2019 some Member States had such a simplification, but the conditions to apply it differed. These inconsistencies created difficulties for businesses.
Under the new rules the movement of the goods by the supplier from the Member State of origin to the Member State of destination does not get treated in the first instance as an intra-community supply. This is advantageous for the supplier as it does not need to register for VAT in the place of destination (as described above). It is only at the point the customer calls-off the stock that the intra-community supply take place and when it does, the customer is liable to account for the acquisition tax, not the supplier.
For these new rules to apply, certain conditions need to be met which are as follows:
- The supplier is removing the goods to the Member State of destination with the intention of supplying those goods to the customer there, after the goods arrival in the Member State of destination;
- The supplier does not have a business establishment or other fixed established in the destination Member State;
- The customer is VAT registered in the Member State of destination and its identity and VAT number is known by the supplier at the time the goods are delivered;
- The supplier records the transfer of the goods in a register; and
- The supplier also reports on its EC Sales List the customer’s VAT number and identity
The simplification cannot apply if:
- Businesses do not meet any of the conditions
- Not calling off goods within 12 months; or
- Destroying/losing goods before the sale
The result of this is the supplier needs to become registered for VAT in the place of destination and this will have to be effective from the date when the goods were first moved. In short, requring a retrospective VAT registration alongside a need to submit associated declarations and make amendments to some others.
Managing the changes
Most of these conditions are straightforward to be met and managed. However to manage the administration associated with them, this requires some new processes and procedures.
Reporting call-stock on EC Sales Lists
When call-off stocks are first sent from a Member State of origin to a warehouse in the Member State of destination, this must be recorded in the supplier’s EC Sales List.
The information that must be supplied on the EC Sales List is:
- The customer’s country code;
- The customer’s VAT Registration Number in the place of destination; and
- The call-off stock indicator
This EC Sales list does not have entry values. However, when calling-off the goods and a title changes, another entry must be put in the EC Sales List. This time the value of the supply added to that detailed above.
It is also necessary to make entries to the EC Sales Lists when:
- Substituting the customer;
- Changing the customer (and the call off stock arrangement expires);
- Returning the goods are before 12 months or destroying/losing them
Each change will have a different indicator which the supplier will have to know and include on the listing
Call-off stock register
To apply the simplification a new condition to meet is that the supplier must record in a register (the Call-off Stock Register) the transfer of stock to the Member State of destination under the call-off stock arrangements.
When physically removing the goods to the Member State of destination, a record must be made of the transfer. In addition to updating the Call-off Stock Register, which must record when goods are called off.
There is a requirement for the customer to keep a register of goods under call-off stock. Requiring an update when transferring goods into its warehouse and calling-off goods. Also, in a similar way as EC Sales Lists, the customer records changes in these records.
For many businesses this change will be welcome. Primarily, it streamlines compliance obligations related to VAT registrations. However, to enjoy that benefit it will be necessary to ensure the conditions can be met. In addition to complying with the new associated reporting obligations.
Before making the change, and potentially deregistering from VAT in some Member States, businesses should ensure they can achieve the above. They also should discuss the position with customers; this ensures they are aware of the changes and what it means for them. This is essential to continue good relationships and avoid any unnecessary miscommunication or VAT reporting that could occur.