VAT consultancy – The VAT treatment of International transactions

In the life of most businesses involved in international transactions, VAT constitutes the biggest tax risk, since the Hungarian VAT rate is very high, and the applicable rules are rather complicated.

Factors such as who is the buyer of the goods sold, for what VAT number that buyer requests the invoicing, to what address is the delivery ordered, whether the goods are invoiced in a simple supply, or it is a part of a chain transaction or a triangular deal, who ordered the transportation, etc. all make a difference. Furthermore, documentation also has a special significance, and can make or break the tax-free treatment of the transaction. In other words, no matter how well we know the rules and how correctly we treat the supply of goods from a VAT point of you, if we fail in the course of the certification of delivery.

Changes in the conditions of tax-free supplies of goods within the EU

On 1 January 2020, the so-called “Quick fixes” entered into force within the European Union, the primary aim of which is the unification and refining of the treatment of intra-Community transactions. A part of the quick fixes concerns the conditions of the tax-free treatment of the intra-Community supply of goods. There was no change in the sense that the taxpayer must certify if the delivery of the goods to another member state has taken place. The new legislative environment, however, also answers the question “How?”, in terms of specifying exactly what documents can be used as evidence in a procedure conducted by the tax authority. The expectations have become stricter inasmuch that a signed delivery note is no longer sufficient proof in itself to presume delivery. As a further requirement, the buyer of the goods must have a valid EU VAT number at the time of the performance date, which places a continuous burden of checking on the supplier. In addition, the requirements concerning the recapitulative statement have also become stricter. If the taxpayer does not include the transaction in its recapitulative statement, or includes it incorrectly or incompletely, this can result in the loss of the tax-exempt status of the transaction.

The change in legislation is also a good occasion for reviewing and – if necessary – also changing the processes used for the treatment of VAT in international transactions.

How can Forvis Mazars support you?

• We map your international supplies of goods, the process of deliveries, and determine the proper treatment of VAT in these transactions.
• We identify any VAT risks inherent in your processes and make recommendations for avoiding risks and establishing proper procedures.
• We offer you personalized consultancy with respect to proper documentation, in the interest of ensuring that the transactions are tax-free.
• We provide your company assistance in the consultations with your partners, since informing customers and ensuring their cooperation is indispensable in the proper documentation of the deliveries.
• We make recommendations for solutions that are sustainable in the long run, and by incorporating these into your business processes, you can avoid sanctions imposed by the Tax Authority in the course of intra-Community supplies.

To whom do we recommend our services?

• Those who supply in a significant volume to other member State of the EU
• Those who are uncertain if their treatment of VAT in various transaction arrangements is correct
• Those who have faced problems when recollecting the signed delivery notes
• Those who have experienced headaches over the need to present the suitable accounting documentation during a tax audit
• Those on whom the Tax Authority has already imposed sanctions as a result of missing the proper documentation
• Those who ever left out a transaction or two from A60 recapitulative statement

If you have any questions in connection with our services, please contact our advisor colleagues.