What is an intra-community supply for EU VAT purposes?
An intra-community supply is the sale of goods from one EU member state to a VAT-registered buyer in another EU member state. The supply is zero-rated in the origin country on the condition that the buyer is VAT-registered and the goods actually move to the other member state. The buyer accounts for acquisition tax in their country at their local VAT rate, offsetting it against their input tax deduction in the same return.
What conditions must be met for a supply to qualify as an intra-community supply?
The intra-community supply zero-rate requires: (1) the supplier is VAT-registered in the member state of dispatch; (2) the buyer is VAT-registered in another member state and provides their VAT number; (3) goods physically move from one member state to another (dispatched or transported out of origin state); (4) the supplier has proof of transport (CMR, carrier documentation). Without all conditions being met, the supplier may be liable for domestic VAT rather than zero-rating.
Frequently Asked Questions
- What is acquisition tax and how does it work?
- Acquisition tax is the VAT mechanism by which the buyer of intra-community goods self-accounts for VAT in their own country at their local rate. The buyer declares acquisition tax as output VAT on their VAT return and simultaneously deducts it as input VAT, resulting in net zero cash impact for fully taxable businesses. For businesses with restricted input tax recovery (partial exemption), acquisition tax may create a net cost.
- What proof of transport is required for zero-rating an intra-community supply?
- Proof that goods actually left the origin member state is required to support the zero-rate. Acceptable evidence includes: carrier consignment notes (CMR), air waybills, courier tracking records, or freight forwarder confirmation. The Quick Fixes EU Directive 2018/1912 introduced harmonized requirements: two non-contradictory pieces of evidence from a list approved by the regulation. Missing or inadequate proof can result in the origin state tax authority assessing domestic VAT on the supply.