Supply chain visibility is becoming increasingly important, not only for businesses involved but also for the government. This is why the EU is implementing four so-called ‘quick fixes’ from January 1, 2020, regarding the zero tax rate on intra-community transfers.
The standardisation of the existing VAT-regulation will lead to a higher visibility throughout the process for all parties involved – a development in which the digital consignment note can play a crucial role.
The EU is working on standardising the laws regarding the VAT-regulation on intra-community transactions, which is currently being dealt with by each state individually. As agreeing on one standardised law takes quite a few discussions and a long time, the EU starts by implementing four so-called quick fixes by January 1, 2020, to adapt the existing rules and improve transparency throughout the process. To me, this does not come as a surprise at all, after careful estimations in 2017 showed that the EU is currently missing out on over €137 billion (Source: European Commission) per year on the VAT, partly due to not paid taxes on intra-community transactions. With the quick fixes, the EU ensures that the standardised process is known to and understandable for everyone and can minimise (un)deliberate VAT fraud.
At the same time, the DTLF (Digital Transport & Logistics Forum) in Brussels is working on creating a digital connection between companies and the government (B2A) regarding logistic processes. Again, the aim is to increase supply chain visibility for all parties and create transparency on those processes within the EU.
I definitely see a connection here: One of the quick fixes will standardise the evidence to be handed in when wanting to apply the zero tax rate on intra-community transactions. Currently, it is regulated on state-level, which documents can be used as evidence to prove that the goods have been transported from one EU-member state to another. With the quick fix in place, this is about to change. Starting in January, companies who want to apply the zero tax rate on a transaction need to hand in two independent and non-contradictory pieces of evidence, if possible from a party not directly involved or profiting from the zero tax rate (as the consignor and consignee). I expect this to be the (e-)CMR and a bank statement in most cases.
Obviously, this will cause a change in administrative processes of importing and exporting companies. I am convinced that the digital consignment note can play a crucial role in this development – e.g. when it comes to simplifying administrative processes and granting all parties involved transparency throughout the import-/export process. When using digital consignment notes, all data needed is saved in one database, e.g. TransFollow, and can be reviewed by the consignor, the carrier and the consignee. Comments and photos can be added easily, and in case there are misunderstandings or damages, the digital consignment note can be adapted easily. The changes are tracked and visible to everyone – and as soon as it has been signed by the consignee, the document is final with no possibility for further changes. This makes the eCMR more objective and reliable than a paper CMR and therefore a perfect evidence for applying the zero tax rate according to the new quick fix. Another advantage of going digital regarding consignment notes is that administrative processes within companies can be accelerated as all parties have direct insight in every version of the eCMR, including the final signed one.
When looking at the development of the digital connection that DTLF is currently working on, I consider the process of digitalization in all areas, but especially of the consignment note, as crucial. It does not only increase supply chain visibility significantly, but also simplifies administrative processes in line with the quick fixes of the EU VAT-regulation. This is the vision we follow at TransFollow and the way I see it, investing in new systems is investing in the future. Which leaves me hoping that, when discussing an entirely new VAT-regulation for the EU, the parties responsible get in touch with DTLF to find future-minded solutions for everyone.
The standardised evidence to apply the zero tax rate on intra-community transactions is just one out of four quick fixes that will be implemented in the EU by January 1, 2020. The other quick fixes standardise the VAT-regulations regarding call-off stocks, chain transactions and the obligation of indicating a VAT-ID on invoices for intra-community transactions. Read more about all quick fixes and their consequences for importing and exporting businesses here.
About the author
René Bruijne has been working in the field of logistics, IT and compliancy for all of his professional life and was one of the key players when it came to digitizing customs forms in the Netherlands. As one of the co-writers of the UN eCMR protocol he became managing director at TransFollow in 2013.
* First published 16-10-2019 on transfollow.org