In VAT we often confuse the term Export with the term Intra-Community supply. Is there a difference? Can you explain?
The broad distinction between the two is that an export is essentially covering the movement of goods from the EU to outside the EU while an Intra-Community supply is covering supplies of goods moving from one European Member State to another.
So in a situation where a Malta business sells goods to an Italian business, vat registered in italy but the goods remain in a warehouse in Malta, would the fact that both supplier and customer are registered in two different Member States have the necessary criteria for the supply to qualify as an Intra-Community Supply?
No. an intra-Community supply presupposes the movement of goods from one Member State to another and therefore the transaction cannot be classified as an ICS. The transaction would be treated as a domestic supply of goods which would be taxable in Malta.
Is an export taxed? What about an Intra-Community supply?
The export of goods to a destination outside the community is treated as exempt with credit irrespective of the acquirer i.e. irrespective of whether the customer is a business or a private customer. It is also exempt where the goods are not subject to a supply but are moved to a country outside of the European Union example – when a person is relocating to a country outside of the EU and moves his personal belongings outside of the EU.
An Intra-Community supply may be taxable or exempt depending on the status of the acquirer. Where the acquirer is a business identified for VAT purposes in another Member State and the goods move from one MS to another, then the transaction is exempt in the country of dispatch to the extent that the supplier reports the details of the customer and the value of the transaction in a recapitulative declaration. Where the customer is a private person, and the goods are transported to that person by the supplier then, the transaction would be subject to VAT – this is what we refer to as a distance sale.
Where do exports and Intra-Community supplies take place for VAT purposes?
Both ICS and exports are classified as supplies of goods with transport and in line with the VAT rule regulating supplies of goods with transport are treated as taking place in the country where the transport begins.
You mention distance sales as being an Intra-Community Supply. Is this also taxed in the country where the transport begins?
No. the rule is that all distance sales are taxed in the country where the transport ends. However, where the distance sales threshold is not exceeded the supplier may opt to have his supplies taxed in the country where the transport begins.
So, if it is taxed in the country where the transport ends, the supplier needs to charge VAT at the rate of the Member State where the transport ends. Does this mean that the supplier needs to be registered for VAT in the country where the transport ends?
Not necessarily. With effect from 1 July 2021, Businesses may avoid registration in the Member state where the transport ends by using the One-Stop-Shop through which the VAT collected in the MS where the transport ends may be passed on to the respective authority.
Where are exports and Intra-Community supplies reported in the VAT return?
Exports are treated as exempt with credit supplies and are therefore reported in box 20 of the VAT return. As regards to Intra-Community supplies we have to determine whether they are treats as exempt or taxable. If they are exempt they should be reported in Box 1 of the return. If the are taxable we need to determine whether they are taxable in Malta or another Member State. If taxable in Malta they should be reported in box 18 with the VAT element in Box 23 while If they are taxable in another Member State they should be reported in Box 2 of the Malta VAT return.
Matthew Zampa
Partner
