When and how can the zero VAT rate be applied to an ICS of goods?
When and how can the zero VAT rate be applied to an ICS of goods?
Conditions zero rate to ICS of goods
In order to apply the zero rate to an intra-Comunnity supply of goods in the Netherlands, multiple conditions must be fulfilled. These conditions are as follows.
1. Taxable supply of goods
To apply the zero rate, it is crucial that the supply of goods is subject to taxation in the Netherlands. According to Dutch law and legislation, a supply of goods is taxed in the Netherlands if the transport or dispatch of the goods begins inthe Netherlands.
2. Transport to another EU member state
The goods need to be dispatched or transported to another EUmember state. It is importantthat the goods actually leave theNetherlands. The supplier must be able to prove the cross-bordertransport with documents. This can be done, for example, with a CMR document, a sales invoice or insurance documents.
3. Intra-Community acquisition
The goods are supplied to another taxable person for whom the supply is taxed as an intra-Community acquisition. It does not matter whether the intra-Community acquisition is actually taxed as such in the EU member state of arrival of the goods. In general, there is an intra-Community acquisition if the customer can provide a valid VAT number. In certain circumstances, non-taxable persons must also report intra-Community acquisitions.
4. Foreign VAT number
The customer has a valid, foreign (non-Dutch) VAT number from another EU member state than the Netherlands (if the EU member state of dispatch or where the transport begins is the Netherlands). The VAT number of the customer does not necessarily need to originate from the country where the customer is established or a resident. Along with his own VAT number the supplier must also mention the VAT number of his customer on his invoice. If the customer cannot provide a valid VAT number from another EU member state, the supply will be subject to 21% Dutch VAT (9% if the product is subject to the reduced rate). The customer is still obliged to report an inta-Community acquisition in the EU member state of arrival of the goods.
5. EC Sales Listing
The supplier reports his intra-Community supplies in an EC Sales Listing-report (EC Sales Listing). This concerns a periodic compliance obligation.
Collection transactions (ex works)
Collection transactions (ex works supplies) are transactions whereby the customer takes care of the collection and transportation of the goods to another EU member state. In this case, the zero rate for an intra-Community supply of goods may apply, but the supplies will have to prove documents and records that the goods have actually been dispatched to another EUmember state. If there is a regular customer, a so-called collection declaration can be used.
Consequences for incorrect application of the zero rate
If the zero rate is applied to an intra-Community supply incorrectly, this can have unpleasant consequences. By incorrectly applying the zero rate, the supplier undercharges VAT. Subsequently, too little VAT is paid to the tax authorities. The tax authorities can impose an additional tax assessment and fines. It is important for suppliers to ensure that they don’t get involved in VAT fraud by acting carefully. Acting negligently can result in the refusal to apply the zero rate. This is not possible if the supplier is acting in good faith. This means that the supplier acts with due commercial care and with due diligence in carrying on its activity.
Further actions?
If you supply goods to a VAT registered customer in another EU member state your supplies are possibly subject to the zero rate.
Please be sure to check if you meet all of the conditions. In addition, you can check if the VAT number that your customer has provided to you is valid via VIES VAT number validation ((Vies on-the-Web - European Commission (europa.eu). Should you have any doubt on if you can apply the zero rate on your invoices, we are more than happy to assist you. Please contact one of our VAT advisors.