Timely submission of the EC sales list - BMF circular letter dated 20 May 2022

Background: Tightening due to the Quick Fixes

The so-called Quick Fixes stipulate that, among other things, from 1 January 2020, the correct reporting of the intra-Community supply of goods in the EC sales list is no longer only a formal, but rather a material prerequisite for the tax exemption. What this difference means: If formal requirements are not met, the supply of goods is still VAT-exempt according to ECJ case law if it can be proven that goods were supplied to a VAT taxable person in another Member State. If the material requirements are not met, however, the tax exemption will be denied.

In Germany, the preliminary VAT returns must generally be submitted by the 10th day of the following month, while the EC sales list is not due until the 25th day of the following month. It is obvious that when the preliminary VAT return is submitted, it is often not yet clear whether the requirement for correct reporting in the EC sales list will be met. Suppliers who have delivered goods to a taxable person in another Member State may nevertheless already treat this turnover as VAT-exempt in the preliminary VAT return.

Problem: EC sales list is incorrect or submitted too late

In a letter dated 9 October 2020, the German Federal Ministry of Finance (BMF) took a position on the question of what happens if the EC sales list is not submitted, not submitted correctly, or not submitted on time. It stated that if the EC sales list is submitted is incorrect, incomplete, or late, the requirements for VAT exemption are not considered to have been met. This reads as if the VAT exemption can no longer be obtained if no EC sales list was submitted at all in the corresponding reporting period. In the case of an incorrect or incomplete EC sales list, the BMF previously provided that a correction must be made within one month so that the supply of goods can be VAT-exempt. The BMF drew this conclusion from the fact that § 4 No. 1b of the German VAT Code, which regulates the EC sales list as a material legal prerequisite for VAT exemption, refers to § 18a (10) of the German VAT Code, which requires the correction of an EC sales list within one month. Whether this restrictive interpretation of the BMF was compatible with the VAT Directive was disputed from the beginning.

Mitigation: corrections are possible and have a retroactive effect

In its circular letter dated 20 May 2022, the BMF has now rectified the situation and clarified that if the supplier does not submit an EC sales list for the corresponding reporting period, the supply of goods is not VAT-exempt. However, if the supplier later submits the EC sales list and reports the intra-Community supply of goods correctly, the VAT exemption is to be granted retroactively if the other requirements are met. The same applies if an incorrect EC sales list is corrected, even beyond the one-month period of § 18a (10) of the German VAT Code.

In one example, the BMF points out an obstacle when correcting the EC sales list: If an intra-Community supply of goods was reported with an incorrect taxable amount within a reporting period, the correction must then be also made in the original reporting period. Including the excess or shortfall in a later EC sales list would be an error that would lead to the denial of VAT exemption.

It should also be noted that, although the one-month deadline of Section 18a (10) of the German VAT Code is no longer relevant for the retroactive correction of the EC sales list, the individual assessment deadline of the General Fiscal Code must be observed in any case. If the relevant taxation period is time-barred, subsequent treatment of a supply of goods as tax-exempt is no longer possible.

The original circular letter of the Federal Ministry of Finance (BMF) contained a minor inaccuracy concerning the reporting period. It was ruled that the intra-Community supply of goods had to be included in the EC sales list within the reporting period in which it was carried out. This was incorrect, because according to § 18a (8) of the German VAT Code, intra-Community supplies of goods must be declared in the EC sales list in the reporting period in which the invoice is issued, but no later than one month after the supply. The new circular letter from the Federal Ministry of Finance corrects this.

Retroactive application

The provisions of the new circular letter will apply to all intra-Community supplies effected after 31 December 2019, i.e., retroactively to all supplies for which the EC sales list is a material requirement for VAT exemption.

(Dated: 25 May 2022)