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Following tough negotiations between tax authorities and business associations, simplified documentation requirements for tax-exempt shipments to other EU countries have been in effect since October 1, 2013. The Federal Ministry of Finance (BMF) has published a final letter that comprehensively sets out the framework conditions.
Practical Difficulties
In general, intra-Community supplies are tax-exempt if the purchaser is a business and acquires the goods for their company. Another requirement: The supplier must provide evidence to the tax authorities that the goods have actually been shipped from Germany to another EU member state. To this end, the German legislature has introduced the so-called “confirmation of arrival.” The foreign buyer must confirm receipt of the goods to the German seller once the delivery is complete.
In fact, the tax authorities have required such confirmation since January 1, 2012, but due to practical difficulties, the regulation has not yet been applied by all companies. The new regulation, effective October 1, now simplifies the handling of the confirmation of arrival and, in some cases, also allows for alternative forms of proof. “On the one hand, companies benefit from these simplifications,” says tax advisor Gert Klöttschen of the business law firm DHPG in Euskirchen. “On the other hand, however, new problems are also arising.” For example, EU customers from Italy, Spain, or France are not familiar with comparable regulations. They must be urged to verify and confirm receipt of the goods. If this confirmation is not provided, the delivery cannot be made VAT-exempt.
Detailed Analysis
The introduction of the confirmation of receipt is forcing suppliers to make some organizational adjustments. Many scenarios require extra attention, as failure to do so could have far-reaching consequences. First, companies should analyze their supply relationships to determine which form of proof is practical for each one. “Suppliers should engage in dialogue with their customers and the transportation companies involved to avoid implementing a supposedly optimal solution that fails in practice due to resistance from the parties involved,” advises Klöttschen. Suppliers should then inform their EU customers about which new documents they will need in the future and what is expected of them. “For regular business relationships, the confirmation of arrival is likely to become the standard proof,” expects the DHPG consultant. This is because, in such cases, consolidated confirmations are also possible—for example, for all deliveries in a month or quarter. This also works via email. The advantage: In this case, a signature is not required. The business owner simply sends an email to their customer with the necessary details and asks them to confirm these via a reply email. Klöttschen: “However, the complete return of these emails must be strictly monitored and properly archived.”
Certain details are required
The delivery confirmation must contain the following minimum information:
In addition to the name and address of the recipient in another EU country, these include the standard commercial description and quantity of the goods delivered, the location and month of completion of transport, the date of issuance, and the signature of the recipient or their authorized representative, unless transmitted electronically. The Federal Ministry of Finance (BMF) has published a template for the confirmation of arrival. It is not mandatory but merely illustrates the information that must be provided in this or another form. The tax authorities also accept documentation in English and French. An official translation is required for documentation in other languages. In practice, it makes sense for shippers to issue delivery confirmations in two languages from the outset. Companies intending to use the delivery confirmation as proof should first determine the format. In addition to the BMF template, any other format that includes the minimum required information is acceptable. For example, the proof may consist of multiple documents, such as a delivery note and a corresponding confirmation of receipt of the goods. To keep the effort involved to a minimum, existing data from the financial accounting system or the inventory management system should be used whenever possible when preparing the proof.
