Food businesses urged to be aware of VAT obligations as sales rocket during COVID outbreak
VAT consultant, highlights the requirements for paying VAT on business to consumer sales (B2C) and business to business sales (B2B) and looks at the EU’s Four Quick Fixes that were implemented in January this year.
The UK food industry is currently thriving in an economy which has seen one of the biggest drops in consumer spending in over a century. It has been reported that Britons spent nearly £2billion on shopping in March this year, following the bulk buying spree that preceded the government lockdown to tackle the COVID-19 pandemic.
Businesses in the food and beverage industry are likely to be overwhelmed by the current demand that is being placed upon them. Therefore, whilst being pre-occupied with meeting their customers’ needs during the pandemic, it is also important that they don’t lose sight of their VAT obligations and ensure they remain compliant.
Business to consumer (B2C) sales
Companies that are in the business of selling shelf-stable products or in areas such as food supplements and vitamins are probably experiencing high demand from individual consumers across the EU.
For intra-EU B2C sales, each Member State has a threshold which once exceeded, means businesses must become VAT registered in the Member State where the goods are delivered.
Once VAT registered, they will be required to charge local VAT on the sale of their products and then file the relevant VAT declarations.
Therefore, it is important that businesses keep a close eye on thresholds and ensure that they are compliant with local VAT obligations.
Business must also navigate their way through the complexities of having to apply the different VAT rates that are used across Member States.
Whilst the majority of food products in the UK are zero-rated for VAT purposes, each Member State is different, so various reduced and super-reduced VAT rates can be applied to food.
Source Credit – Russle Hughes – (Accordancevat)
EUROPEAN UNION – Update 12th May
Commission proposes postponement of taxation rules due to Coronavirus crisis
The European Commission has decided today to postpone the entry into force of two EU taxation measures to take account of the difficulties that businesses and Member States are facing at the moment with the Coronavirus crisis. First, the Commission has proposed to postpone the entry into application of the VAT e-commerce package by 6 months. These rules will apply as of 1 July 2021 instead of 1 January 2021, giving Member States and businesses more time to prepare for the new VAT e-commerce rules.
Second, the Commission has decided to propose deferring certain deadlines for filing and exchanging information under the Directive on Administrative Cooperation (DAC). Based on the proposed changes, Member States will have three additional months to exchange information on financial accounts of which the beneficiaries are tax residents in another Member State. Similarly, Member States will have three additional months to exchange information on certain cross-border tax planning arrangements.
Depending on the evolution of the Coronavirus pandemic, the Commission proposes the possibility to extend the deferral period once, for a maximum of three further months. The proposed tax measures only affect the deadlines for reporting obligations.
The beginning of application of DAC 6 will remain 01 July 2020 and the reportable arrangements made during the postponement period will have to be reported once the deferral has terminated. Equally, the information on financial accounts to be exchanged under DAC 2 during that period will have to be reported after the deferral has ended.
The choice of different deferral periods responds to the fact that while the exchange of information under the DACs relies on an existing IT system, the e-Commerce package requires both adaptation of existing IT systems and the setting-up of new ones by Member States. The Commission remains committed to fighting against tax evasion and avoidance. Both the European Parliament and the Council have been informed about these proposals. The Commission counts on both institutions to adopt these proposals as soon as possible in order to provide legal certainty to all stakeholders.
Source Credit – European Union
EUROPEAN UNION – Update 5th May
COVID-19 response: import duties relief and VAT exemption
Member State approved organisations that import products intended for the free of charge distribution to persons affected by, at risk in or combatting the COVID-19 outbreak, are granted with an import duty relief and VAT exemption for the period running from 30 January until 31 July 2020.
On 3 April 2020, the European Commission adopted Commission Decision (EU) 2020/491 on the relief of duties and VAT exemption on imports, which are granted for goods needed to combat the impact brought by COVID-19 outbreak. This comes as a response to multiple Member State requests over the past weeks.
After the COVID-19 outbreak was officially recognised as a pandemic by the World Health Organisation, the European Commission found that the extreme challenges brought by COVID-19 constitute a ‘disaster’ as defined by Section C of Chapter XVII of Regulation (EC) No 1186/2009 and Chapter 4 of Title VIII of Directive 2009/132/EC. In such a situation, the EU’s Customs legislation provides for the possibility to grant duty relief for imports by State organisations or approved (charitable) organisations.
The Commission Decision therefore enables an import duties relief and VAT exemption if the goods are imported by State organisations, public bodies or Member State approved organisations, and thereafter delivered (free of charge) to persons affected, at risk or involved in combatting the COVID19 outbreak.
All Member States have to inform the European Commission of the nature and quantities of goods imported free of duties and VAT as per this Decision. They should also provide a list of organisations approved by the competent authorities within their territories.
The import duties relief and VAT suspension are applicable upon the import of goods, made from 30 January 2020 until 31 July 2020 and meeting the above criteria. Consequently, a refund of duties and VAT can be claimed retroactively. Furthermore, the situation will be reviewed before 31 July 2020 and may be extended as required.
Source Credit – Deloitte
EUROPEAN UNION – Update 30th April
Guidance on Customs issues related to the COVID-19 emergency
Possibility to use designated places for temporary storage of goods was updated on 27 April 2020.
As an interim solution, economic operators may ask the competent customs authorities whether they can designate additional temporary storage facilities as places where goods in temporary storage may be stored. If so, the designated places could be used until the authorisations for temporary storage have been granted or amended.
Source Credit – European Union
EUROPEAN UNION – Update 15th April
New retroactive custom duties relief and VAT exemptions in the fight against COVID-19
The European Commission adopted a new decision on 3rd April 2020 to grant relief from import duties and import VAT for those goods that are needed to combat the effects of COVID-19 in 2020. Council Regulation 1118/2009 on Customs Duties Relief and VAT Directive 2019/132/EC both allow for relief, respectively from customs duties and import VAT on goods, in the event of special circumstances.
Because of the COVID-19 crisis, the Commission decided to grant relief to certain goods that are imported into the EU. In order to qualify, the goods must be imported by state organizations or approved charitable or philanthropic organizations. In addition, they must be distributed or made available free of charge to persons affected by or involved in fighting COVID-19.
The Decision does not define which goods qualify. Keeping in mind that each Member State may exercise discretion, the Commission published a list of goods as guidance. This non-exhaustive, indicative list covers a variety of goods, ranging from basic hospital equipment to personal protective equipment (PPE), medical devices, medicines, primary alcohols and acids, such as:
- single use drapes;
- single use drapes;
- masks, gloves and coveralls;
- respirators, ventilators and monitors;
- pumps and tubes;
- soaps, hydroalcoholic solutions and hydrogen peroxide;
- medical consumables (e.g., syringes and needles);
- test kits (instruments and apparatus used in diagnostic tests);
- medical sterilizers;
- certain medicines (e.g., paracetamol and hydrochloroquine);
- formic acid.
The relief is only temporary: from 30th January 2020 until 31st July 2020. As COVID-19 was declared a Public Health Emergency of International Concern on 30th January 2020, the Commission gave retroactive effect as of that date.
With regard to VAT, it is important to note that intra-community acquisitions of similar goods do not benefit from a similar exemption. The current legal framework does not provide for the possibility to apply reduced or zero rates to this type of products.
Finally, also within Belgium, certain goods can be donated VAT-free because of the adoption of Belgian Circular No 2020/C/46 of 24th March 2020. This temporary VAT measure applies until 30th June 2020, benefitting the following categories of goods:
- medical devices as described by Belgian Royal Decree of 18th March 1999 regarding Medical Devices; and
- personal protective equipment (PPE), such as masks, protective clothing, gloves and hand sanitizers.
Medicines are not included. Unlike the decision taken by the Commission, only donations to hospitals and approved healthcare institutions are covered by the Circular.
Source Credit – PWC