Call-off stocks: BMF circular letter dated 10 December 2021

Interrelation to BFH case law from 2016

If a trader supplied a warehouse in another EU Member State from which the customer could take the goods as required, German VAT law used to always require an intra-Community transfer of own goods in the country of departure, an intra-Community acquisition in the country of destination upon arrival of the goods, and a local supply when the goods were taken out. Simplification regulations for call-off stocks, as provided for by some EU Member States, did not exist in Germany.

On November 16, 2016 (V R 1/16), the BFH had ruled that an intra-Community supply by the seller in the country of departure and an intra-Community acquisition by the customer could be assumed if the recipient (customer) had already bindingly ordered or paid for the goods at the start of the transport or dispatch. Thus, in these cases, the supplier did not have to register for VAT in the country of destination.

As part of the so-called quick fixes, a uniform call-off stock regulation was introduced throughout the EU on January 1, 2020 (Article 17a VAT Directive), which the German legislator implemented, inter alia, with Section 6b German VAT Code. This raised the question of whether the BFH ruling from 2016 would be superseded by this. The BMF letter states that the BFH case law and Section 6b UStG remain applicable alongside each other and do not compete with each other because they relate to different circumstances. The BMF emphasizes in many places of the amended VAT Application Decree that Section 6b UStG is not applicable if the customer has already bindingly ordered or paid for the goods at the beginning of the movement of goods. In principle, this case is still to be solved via BFH case law. Section 6b UStG, on the other hand, refers to situations in which there is no binding order or payment. In this context, the BMF clarifies that a merely probable justification of the buyer's position is not sufficient.

The result of both regulations is only the same at first glance: It is true that in both cases an intra-Community supply by the supplier and an intra-Community acquisition by the customer can be assumed, which saves the supplier having to register in the country of destination. However, there are considerable differences with regard to the time of the respective reportings and the formalities to be complied with.

"Waiver" and optional application of Section 6b German VAT Code

If the requirements of Section 6b German VAT Code are fulfilled, the call-off stock regulation must be applied. However, the BMF emphasizes that it is up to the entrepreneur to control the fulfilment of the requirements. If, for example, he does not keep the special register according to Section 22 para. 4f German VAT Code, the call-off stock regulation is not applicable.

Surprisingly, the BMF allows Section 6b German VAT Code to be applied even if the goods have already been bindingly ordered or paid for at the beginning of the movement of goods, if the other requirements are met. This is an optional application of Section 6b German VAT Code, which requires a corresponding agreement between the supplier and the customer.

Together, these two measures give companies a wider scope for application and also more legal certainty: it is thus hardly possible to accidentally slip into the call-off stock regulation. If the application of the call-off stock regulation is desired, however, the prerequisites must still be carefully examined. Voluntary application is also only possible if all conditions are met except for the fact that a binding order/payment has not yet been made.

No residence in the country of destination: problem warehouse/Titanium jurisdiction

The supplier must not be established in the country of destination for the application of Section 6b German VAT Code. The BMF clarifies that a part of the business located in the country of destination, which is not involved in the delivery process, is also detrimental in this respect. According to the BMF, an own or rented warehouse that is operated with own means ("e.g. personnel") should already lead to a permanent establishment. This seems to be a reaction to the considerations of the EU VAT Committee, which dealt with this question in detail in a working paper of May 15, 2019. Against this background, the BMF's statement appears to be rather sweeping – in particular, the question arises as to whether, against the background of the VAT Directive's concept of permanent establishments, further requirements are to be placed on the powers of the staff. Furthermore, the BMF does not deal here with the possible effects of the latest ECJ case law, on which it has not yet taken a position in general: In its ruling of June 3, 2021 (C-931/19) in the "Titanium" case, the ECJ elaborated that a permanent establishment necessarily also requires personnel resources. An own or rented warehouse without personnel should therefore not lead to residency in the sense of the consignment warehouse regulation. In our view, however, the Titanium ruling allows the conclusion that third parties who manage the property (the warehouse) could also be considered "personnel resources" under certain circumstances if they have extensive powers. This should be carefully examined in each individual case.

Other selected regulations

• The call-off stock regulation does not apply to chain transactions.
• The call-off stock regulation requires a withdrawal within a period of twelve months. The Federal Ministry of Finance points out that the time limit is not to be calculated according to the provisions of the German General Tax Code, but according to Articles 2 and 3 of Regulation (EEC, Euratom) No. 1183/71 of June 3, 1971.
• For certain goods, it shall not be objected if the FIFO method (first in, first out) is applied for the purpose of calculating the time limit.
• "Small losses" in the warehouse of less than 5 % should not lead to the omission of the requirements of Section 6b German VAT Code, i.e. the supplier does not have to register in the country of destination because of this.

The BMF circular letter is to be applied (retroactively) to all transactions involving the supply of goods to a warehouse within the meaning of Section 6b German VAT Code for which the transport commenced on or after January 1, 2020.

The amendments to the BMF letter cover further areas that cannot be presented exhaustively here. If you have any questions, the VAT team and, of course, your usual contact person will be happy to help you at any time.

(Dated: 22 December 2021)