Austria: Customs law thwarts VAT law

For distance sales of imported goods under § 3 (8a) VAT Law, the supply is deemed to have been carried out where the transport or dispatch ends, if either the goods are imported in a Member State other than the one where the transport or dispatch ends, or the trader makes use of the special regulation under Article 25b VAT Law (=IOSS). According to the customs provisions of Article 221 (4) UCC-IA, the release of goods for free circulation for low-value consignments (up to EUR 150) and for deliveries between private individuals (up to EUR 45), which are exempt from import duties under the Customs Exemption Regulation and for which the IOSS does not apply, must be carried out in the Member State of the goods’ destination. As a consequence of this customs provision, the place of supply rule for VAT purposes under § 3 (8a) no. a VAT Law no longer applies.

The Austrian VAT regulations (§ 3 (8a) VAT Law) give an example of how to correctly handle such distance sales of imported goods, which has been adapted to the customs provisions of Article 221 (4) UCC-IA. In the example’s solution, it is concluded correctly that the place of supply must be determined according to the place of supply rules under § 3 (8) VAT Law (the place of supply is where the transport begins) or § 3 (9) VAT Law (the place of supply is where the goods are imported if the supplier is liable to pay the import VAT) as the new place of supply rule for distance sales of imported goods does not apply.

Although this conclusion conforms with the law, it does not fully reflect the new provision’s desired effect for distance sales of imported goods, which is to make third-country traders liable for tax and the handling of such deliveries in practice. From the point of view that a delivery of goods with a consignment value of more than EUR 150 leads to the supplier in the Member State of destination having a mandatory VAT registration obligation and that deliveries below this value also trigger a registration obligation in the EU area under the IOSS’s application, it is actually not consistent that there appears to be a ‘grey’ area for low-value consignments that does not entail a mandatory VAT registration obligation. This would be the case if § 3 (8) VAT Law must be applied as the place of supply rule for deliveries covered by Article 221 (4) UCC-IA. However, if the actual customs handling in practice is considered, then the possibility of applying § 3 (8) VAT Law is only of a theoretical nature.

Distance sales of imported goods presuppose that the supplier must take care of the tax/ customs duties on the customer’s behalf. In compliance with customs law non-Union goods must be brought from the port of entry to the Member State of destination by means of a customs transit procedure by the supplier. In practice, there will probably be no case in which the private customer will or can handle the import (the release of the goods into free circulation) itself following the customs transit procedure, so that de facto these delivery constellations will inevitably lead to the application of § 3 (9) VAT Law and thus also trigger a mandatory VAT registration obligation for the supplier. Should the customer actually handle the import customs clearance, this can only mean that the characteristics for distance sales of imported goods are not given anyway.

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