Supplies outside the territory of the country

Place of supply of goods which are dispatched or transported either by the supplier or by the recipient or by a third person shall be the place where the goods are at the time when dispatch or transport to the recipient begins.

I have the following question: We are a Bulgarian company which is registered under VAT. We acquire goods from the Czech Republic, but we do not make import to Bulgaria and we export the goods directly to Russia. I think that this is not a case of Intra-European Union supply of goods, but I would like to as what kind of supply this is and how it should be documented and reported in the journals.

Indeed, this is not a case of Intra-European Union acquisition of goods within the meaning of Article 13 of the Act – there is no movement of goods between European Union member states. Therefore, the provision of Article 62, paragraph 2, of the Act is inapplicable.

The place of transaction of the supply made by you to the Russian company is determined in compliance with the provisions of Article 17, paragraph 2, of the Act, namely – supplies outside the territory of the country (in this case the Czech Republic, and the provisions of the Czech legislation which are analogous to Article 28 of our act would be applicable to the supplies. In this reference, it is advisable to check if any liabilities arise for you in the Czech Republic in relation to the Czech VAT Act). As the supplies are outside the territorial scope of the Act, the invoice issued by you shall not include tax on the grounds of Article 86, paragraph 3, of the Act.

In the sales journal, the invoice issued by you is reflected in column 23 – turnover tax of supplies, pursuant to the provisions of Article 69, paragraph 2, of VATA, including turnover tax of supplies in conditions of distance sales with a place of transaction on the territory of another member state. You are not obligated to reflect in the acquisitions journal the invoice received from the Czech company.

VAT:

Article 13. (1) Intra-European Union acquisition shall mean acquisition of the right of ownership of goods, as well as the actual receipt of goods in the cases under Article 6 (2) herein, which are dispatched or transported to the territory of the country from the territory of another Member State, where the supplier is a taxable person registered for VAT purposes in another Member State.

Article 17. (2) Place of supply of goods which are dispatched or transported either by the supplier or by the recipient or by a third person shall be the place where the goods are at the time when dispatch or transport to the recipient begins.

Article 69.(2) For the purposes of Paragraph 1, the following shall furthermore be considered taxable supplies:

1. The supplies within the framework of the economic activity of the registered person, whereof the place of transaction is outside the territory of the country but which would have been taxable if effected within the territory of the country;

Article 86. (3) No tax shall be charged in the cases of effecting an exempt supply, an exempt intra-European Union acquisition, as well as in respect of any supply whereof the place of transaction is outside the territory of the country.

I purchase goods from the Netherlands and sell them in Italy. The seller is registered in the Netherlands, the buyer of the goods is registered in Italy, and we are registered in this country. The transportation from the Netherlands to Italy is performed by an Italian forwarder, which is different from the recipient company. We have received an invoice for the transportation, we have applied self-taxation and we have issued an invoice for this transportation service to the recipient company. What follows in these cases?

This is a case of a triangular operation within the meaning of Article 15 of the Act. The tax to this supply shall be paid by the end recipient – the Italian company. You do not charge tax in the invoice issued by you, and the reason for not charging tax pursuant to the provisions of Article 114, paragraphs 3 and 4 of the Act, which you need to specify is “Article 141 2006/112/EC” and the text that the tax to the supply is payable by the recipient. The supply performed by you in your capacity of an intermediary in a triangular operation should be reported in the VIES return. To verify the performance of the supplies, you need to have the documents listed in Article 9, paragraph 2, of the Rules on the application of the Act.

Regarding the transportation service re-invoicing by you – you do not charge tax again, this time on the grounds of Article 86, paragraph 3, in connection with Article 21, paragraph 2, of the Act. The tax to this transaction is payable by the recipient, and the supply itself needs to be reflected by you in the VIES return:

VATA:

Article 15. Triangular operation shall be the supply of goods between three persons registered for VAT purposes in three different Member States A, B and C, where the following conditions are simultaneously fulfilled:

1. A registered person in Member State A (transferor) effects a supply of goods to a person registered for the purposes of VAT in Member State B (intermediary) who then effects a supply of the said goods to a person registered for the purposes of VAT in Member State C (acquirer);

2. The goods are transported directly from A to B;

3. The intermediary is not registered for VAT purposes in Member States A and B;

4. The acquirer charges VAT as a recipient of the supply.

Article 21. (Amended, State Gazette No 95/2009, effective 1 January 2010) (2) The place of supply of services, in the case of a taxable person being the recipient, shall be the place where the recipient has established his economic activity conducted independently. Where these services are provided to a fixed establishment different from the place in which the recipient has established his economic activity conducted independently, the place of supply shall be the location of the fixed establishment. In the absence of a place of establishment of economic activity conducted independently or a fixed establishment, the place of supply shall be the place where the recipient has his permanent address or usually resides.

Article 62. (5) Notwithstanding Paragraph (2), the place of supply of the intra-European Union acquisition shall be the Member State where the goods arrive or where the transport thereof ends, where the following conditions are simultaneously fulfilled:

1. The intermediary in a triangular operation acquires goods under the identification number thereof referred to in Article 94 (2) herein;

2. The person referred to in Item 1 effects a subsequent supply of the goods to the acquirer in the triangular operation;

3. The person referred to in Item 1 issues an invoice on the supply referred to in Item 2, satisfying the requirements of Article 114 herein, stating therein that the said person is an intermediary in a triangular operation and that the acquirer in the triangular operation is the person liable for the tax due on the supply;

4. The person referred to in Item 1 declares the supply referred to in Item 2 in the VIES return for the relevant tax period.

Article 86. (3) No tax shall be charged in the cases of effecting an exempt supply, an exempt intra-European Union acquisition, as well as in respect of any supply whereof the place of transaction is outside the territory of the country.

Article 114. (3) (Amended, State Gazette No 94/2010, effective 1 January 2011) When the registered person who is an intermediary in a triangular operation documents a supply of goods effected to the acquirer in the triangular operation, the invoice shall state “Article 141 2006/112/EC” as grounds for not charging tax.

(4) Where the tax is chargeable from the recipient, the invoice shall not state the amount of tax and the rate of tax. In such case, it shall be specifically recorded in the invoice that the tax is payable by the recipient, as well as the grounds for this.

Rules on the Application of the Value Added Tax:

Article 9. (2) To prove the circumstances under Article 62 (5) of the Act the intermediary in a triangular operation shall have the following documents:

1. An invoice issued by the transferor in the triangular operation, stating the VAT identification number of the intermediary under Article 94 (2) of the Act;

2. (Supplemented, State Gazette No 101/2006) an invoice under Item 1 of Article 79 (2) issued by the intermediary in the triangular operation, specifying the VAT number of the acquirer in the triangular operation, issued by the Member State wherein the goods arrive;

3. A VIES return for the relevant tax period in which the supply is declared in respect of which the invoice under Item 2 has been issued;

4. (Supplemented, State Gazette No 10/2011, effective 1 February 2011, a written confirmation by the acquirer in the triangular operation, certifying the receipt of the goods, indicating the date and place of receipt, the type and quantity of the goods, and alternatively the type, make and registration number of the vehicle with which the transport is effected, the name of the person who handed over the goods.