Introduction
Real-time reporting solutions are spreading all over the European Union (EU). With more and more countries planning to introduce this technology, we wish to focus today on how real-time reporting affects call-off stock arrangements, predetermined movements of goods between EU Member States.
In order to quantify the advantage of real-time reporting in the context of call-off stock arrangements, we will first focus on the definition of such movements of goods, taking into account the latest developments on a EU level. In a second part, we will analyse the advantage of digitalisation through real-time reporting which helps to speed up the reporting process for businesses and taxpayers.
Call-off stock arrangements
By call-off stock arrangements we refer to situations in which a supplier transports goods to another Member State but the ownership of the goods does not transfer until a later date after the arrival of the goods in the second Member State. At the moment the transport takes place, the supplier must already know the identity of the person that will be acquiring the goods. Transfer of title, however, does not take place at that moment of the transport but at a later stage, normally when the customer needs the goods for its production processes.[1]
For EU VAT purposes, as of January 1st 2020 any eventual call-off stock arrangement sale is treated as an intra-Community transaction. This means that the sale is recorded under the seller’s domestic VAT number and return. Being an intra-Community transaction, VAT does not apply anymore on call-off stock arrangements.[2]
More specifically, EU reporting requirements for call-off stock arrangements according to Council Directive 2018/1910 require the shipping company to indicate the transport of the goods in its call-off stock register, also mentioning the VAT number of the beneficiary company. The intended acquirer has to indicate the arrival of the goods to the stock also in its call-off stock register. Furthermore, the shipping company will have to declare the intra-Community supply in its local VAT return in the VIES system (VAT information exchange system).
Real-time reporting design considerations: unifying reporting obligations
Real-time reporting solutions are implemented by EU Member States in order to digitalise VAT, increase VAT revenues and reduce the VAT gap. Their advantages for businesses include the automation of VAT compliance, with a reduction in its costs, and the increase in the internal accounting processes.
It is important to mention that real-time reporting does not affect the VAT system, meaning that the same VAT requirements for call-off stock arrangements will still be applicable after the introduction of a real-time reporting system. On the other hand, it can also offer benefits to companies in terms of call-off stock arrangements. For example, real-time reporting can help in digitalising VAT reporting requirements by unifying reporting obligations. This will be a simplification compared to having both transaction-based and periodic reporting obligations. This is what already happens in Spain, where a real-time reporting system has been in place since 2017. In Spain, reporting obligations for call-off stock arrangements were unified under the real-time reporting obligations, allowing businesses to notify their call-off stocks in their books through the Spanish SII. This allows for a reduction in compliance time and costs for businesses and an increase in their efficiency. Furthermore, real-time reporting would allow for a more granular audit trail of call-off stock arrangements across the EU.
Conclusion
Call-off stock arrangements are a method for companies to simplify their intra-Community exchanges. Nevertheless, they also come with additional reporting requirements which may slow down business efficiency and their willingness to make use of this process. However, real-time reporting can help to digitise reporting obligations through one requirement for all business activities, including call-off stock arrangements. This way, businesses will more easily have access to call-off stocks while reducing their compliance costs.
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[2] https://www.taxand.com/wp-content/uploads/2019/09/Call-of-stock.pdf