My client sells gym-wear and has been approached by a German VAT registered Amazon trader to supply them with 1000 t-shirts which are to be shipped to a warehouse in Germany – this will be the equivalent of six months’ worth of stock. The customer will take the stock whenever it is required, therefore, the client will still retain title and ownership of the goods prior to that. We have read conflicting information on whether the client needs to register for VAT in Germany. Are these call-off or consignment stocks? Does the client need to VAT register in Germany?
The definition for call-off stocks can be found in VAT Notice 725 sec 15.2:
“Call-off stocks are goods transferred by the supplier between member states, to be held for an individual customer in the member state of arrival pending ‘call-off’ for use by the customer as they need them. In the meantime title and ownership of the goods remain with the supplier.
This only applies in cases where the goods are destined for a single identified customer either:
for consumption within their business (for example, as part of a manufacturing process)
to make onward supplies to their own customers”
The main features of call-off stock are that you have identified the customer and that the specific stock is theirs to purchase as required.
VAT Notice 725 section 15.3 describes consignment stock as “goods you transfer between member states to meet future supplies to be made by you, or on your behalf, in the member state of arrival. The important feature is that the movement of the goods occurs before a customer has been found for them.” This would mean taking local advice and potentially having to VAT register in that member state.
In your scenario, your client has call-off stock. They have identified the German VAT registered entity as their customer and there is an intra-EU movement of goods. This type of supply can be treated as a zero-rated despatch, thus, avoiding the issue of having to register for VAT in Germany. See section 4.3 for conditions for zero-rating, https://www.gov.uk/guidance/vat-and-the-single-market-notice-725#section4.
For the reporting requirements for the VAT return, boxes 6 and 8 will need to be completed – this will be a value based on the cost of the goods. An EC sales list will also need completing, albeit with no value stated until the goods are called off by the customer.
Recent EU wide changes to call-off stocks from 1st January 2020 also require suppliers to enter into a call-off stock agreement and maintain a register of when goods are ‘called-off’. The prescribed record-keeping obligations can be found here: https://www.gov.uk/government/publications/changes-to-the-rules-for-call-off-stock-arrangements-between-member-states/changes-to-the-rules-for-call-off-stock-arrangements-between-member-states.
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