Value Added Tax (VAT) in intra-community trade
January 16, 2018 | 40,00 EUR | answered by Steuerberater Peter Jansen
Is this correct? Is a VAT-exempt invoice (not a small business) mandatory in intra-community trade or just an option?
If you as a business sell something to another BUSINESS (with a valid VAT number) in the EU-FOREIGN COUNTRY (EXPORT), then the "destination principle" applies throughout the EU, i.e. the goods are taxed in the DESTINATION COUNTRY. This is not an alternative, but a mandatory legal regulation (regulated in Germany in UStG §4 No.1b).
- In other words, the seller is not allowed to charge VAT (and cannot remit it) and the buyer MUST pay the VAT in the destination country. An invoice that includes VAT is therefore unfortunately INVALID and cannot be used for accounting purposes.
Dear questioner,
If it is an intra-community supply, it is taxable in the country of origin under the conditions of § 4 No. 1b in conjunction with § 6 UStG, but tax exempt. The supplying entrepreneur must indicate the tax exemption on the invoice (stating his own as well as the VAT ID number of the recipient).
The taxation is ensured by the country of the recipient, therefore a separate report of the intra-community supply is required.
This means that the supplying entrepreneur is not allowed to show VAT for this tax-exempt service. If he does so, he incorrectly shows this VAT (the correct way would be no VAT) and he owes it according to § 14c (1) UStG. The issued invoice does not become invalid as a result, and this also has no impact on the taxation in the recipient country. However, the entrepreneur has the option of correcting the invoice.
So if the entrepreneur incorrectly invoices VAT in such a case, he must also remit it to the tax office.
I hope I could help.
Peter Jansen
Tax consultant
