5.6.4.1 Cross-border chain of transactions under the proposed (temporary) rules for intra-EU cross-border trade

In 2017, the European Commission presented its plans to modernise the current EU VAT system for the intra-EU cross-border trade of goods.1 The proposed detailed technical measures for the operation of the definitive VAT system for the taxation of trade between Member States were presented by the Commission in 2018.2 Under these proposed rules, the intra-EU cross border supply of goods shall be deemed to take place in the Member State where the transportation of the goods ends (proposed Articles 33 and 35). For business-to-business transactions, there is an option to apply the reverse charge mechanism to the VAT due on those supplies, effectively shifting the VAT liability for the supply from the supplier to the customer, if the customer is a so-called ‘Certified Taxable Person’ (CTP).3 CTP is a status that can be obtained by EU established businesses if they meet certain requirements that, basically, demonstrate that they are considered ‘trustworthy taxpayers’.4 Since it is not relevant for this research, I will not further elaborate on the proposed CTP concept.

For intra-Union supplies5 to CTPs, the VAT treatment of leap-frog rebates in cross-border situations as described above in Section 5.6.4 does not change. For the intra-Union supply of goods to non-CTPs, the supplier will have to charge VAT in the country where the transportation of the goods ends. If the supplier would grant a rebate under those rules, it would be even more relevant for him to be allowed to reduce the taxable amount for his original supply, as this taxable amount is the basis for him charging the local VAT of the country of destination, which should be partially refunded under the Elida Gibbs-rules, instead of ‘only’ adjusting a zero-rated supply.