VAT: Supplies of goods via consignment stocks as of 2019

In October 2017, the German Ministry of Finance implemented into the German VAT Circular the opinion of the German Federal Tax Court with regard to the VAT treatment of supplies of goods via consignment stocks (notification dated 10 October 2017). According to these new rules, under the following circumstances, the foreign supplier no longer needs to be registered for VAT in Germany:

In cases where the customer is already defined prior to the commencement of the transportation of goods, a direct supply of goods is assumed also in cases where the goods are temporarily stored in a consignment stock. According to the German Ministry of Finance, this is the case when the customer has ordered the goods bindingly or paid for them before the commencement of their transportation.

According to recent statements of the German tax authorities, these new rules shall only be relevant for supplies from other EU member states to Germany. In these cases, under the conditions described above, intra-Community supplies and acquisitions have to be assumed instead of local supplies in Germany as in the past. Customers have to be aware that input VAT out of wrongly issued invoices for local supplies (instead of intra-EU supplies of goods) will no longer be deductible.

The German Ministry of Finance granted a transitional period until 01 January 2019 so that amendments can be arranged by the taxpayers concerned until the end of 2018 (notification dated 14 December 2017). Therefore, suppliers as well as customers now have to review whether their supplies via consignment stocks or other warehouses comply with the new rules or whether changes of agreements and procedures are required.