DISTANCE SALES

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SCOPE ANDPRINCIPLE

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Definition

A distance sale means an intra-Community supply of goods that are transported from a Member State to another Member State BY or ON BEHALF of the supplier and that satisfies some conditions

Art. 7 VAT ActArt. 7 VAT ActItem 4(1) Third ScheduleItem 4(1) Third Schedule

EU MS 1 EU MS 2

AA BBSale of goods

Transport by A or on his behalf

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CONDITIONS

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Principle

A distance sale takes place in the Member State where transport ends provided the total value of such sales by the supplier exceeds a threshold fixed by the Member State of destination during the year in which the distance sale takes place or during the previous calendar year or the supplier has opted in his Member State for the taxation of all his distance sales in the Member State of destination

Art. 7 VAT ActArt. 7 VAT Act Item 4(2) and (3) Third ScheduleItem 4(2) and (3) Third Schedule

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Operations excluded

o New means of transport (intra-Community acquisition always subject to VAT in the Member State of destination, whatever is the quality of the purchaser)

o Excise goods purchased by a taxable person or a non-taxable legal person (intra-Community acquisition always subject to VAT in the Member State of destination)

o Goods installed or assembled by or on behalf of the supplier (place of the operation always in the Member State where goods are installed or assembled)

o Goods supplied under a transaction subject to the margin scheme on second-hand goods…(supply always subject to VAT in the Member State of origin)

o Goods supplied to a person who is in any case liable to pay VAT on his intra-Community acquisitions in the Member State of destination

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THRESHOLD

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Threshold

A threshold (in Malta the equivalent in Maltese liri of EUR 35,000) is fixed by the Member State of destination:

– Under which or up to which the place of supply remains in the Member State of origin (where transport begins)

– Above which the place of supply is shifted to the Member State of destination (where transport ends)

This threshold is calculated on an annual (calendar year) basis

Art. 4(2) Third ScheduleArt. 4(2) Third Schedule Item 1 Part Three Sixth ScheduleItem 1 Part Three Sixth Schedule

Art.7 VAT ActArt.7 VAT Act

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Threshold

The calculation of the threshold must take into account:

• The value of all distance sales made to a particular Member State. The threshold is then calculated by Member State

• The value of the transaction that leads to exceed the threshold

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Threshold

The calculation of the threshold does not take into account:

     The value of supplies of excise goods made (no threshold for excise goods: always subject to VAT in the MS of destination)

     The value of supplies of new means of transport made (ICA always subject to VAT in the MS of destination)

     The value of supplies with installation made by or on behalf of the supplier (always taking place and subject to VAT in the MS where the installation takes place)

     The value of supplies followed by ICA subject to VAT in the MS of destination

• The value of supplies made under a transaction subject to the profit margin scheme on second-hand goods…(always subject to VAT in the MS of origin)

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Threshold exceeded

Once the threshold is exceeded, the supplier is liable to pay VAT of the MS of destination on all his distance sales made to this MS for the rest of the calendar year during which the threshold has been exceeded and for the following calendar year. If the threshold is also exceeded during this following year, the same rules apply regarding the liability of the VAT of the MS of destination on such supplies

 Example

If a supplier exceeds the threshold fixed by the MS of destination in March 2005, he will be liable to pay VAT of the MS of destination on all his distance sales made in 2005 as from the moment the threshold is exceeded (March 2005) as well as those made in 2006

If the threshold is once again exceeded in 2006, he will be liable to pay VAT of the MS of destination on all his distance sales in 2007

Art. 7 VAT ActArt. 7 VAT Act Item 4(2)(a)(i) and (b)(i)Third ScheduleItem 4(2)(a)(i) and (b)(i)Third Schedule

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OPTION

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Option: Member State by Member State

The supplier may opt to pay VAT of the MS of destination on all his distance sales from the moment of the option and for the rest of the calendar year during which he has opted as well as for the two following calendar years. If the threshold is in any case exceeded during these following years, the rules regarding the threshold also apply regarding the liability of VAT of the MS of destination on such supplies

 Example

If a supplier opts in March 2005 for taxation in the MS of destination of all his distance sales, he will be liable to pay VAT of the MS of destination on all such supplies made in 2005 as from the moment of the option (March 2005) as well as those made in 2006 and 2007

If the threshold is exceeded in 2007, he will be in any case liable to pay VAT of the MS of destination on all such supplies in 2008

Art.7 VAT ActArt.7 VAT Act Item 4(2)(a)(ii) and (b)(ii)Third ScheduleItem 4(2)(a)(ii) and (b)(ii)Third Schedule

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DISTANCE SALES AND ICABY A MEMBER OF THE

“GROUP OF 3 (4)”

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Example: supply from Malta

• Goods are supplied by A (taxable person registered under art.10) in Malta to B in another MS

• Goods are not excise goods nor new means of transport (special regime) and are not exempt from VAT

• Goods are transported from Malta to the other Member State on behalf of A

Malta Other EU MS

A (taxable person, art.10)A (taxable person, art.10)

BBSale of goods

Transport on behalf of A

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First hypothesis

The distance sales threshold fixed by the MS of destination is not exceeded and there is no option by A to pay VAT in this MS. The purchaser is a member of the “Group of 4“ (+ flat-rate farmers in some MS) who does not exceed the acquisition threshold fixed by the MS of destination and has not opted to be liable to VAT in this MS on his intra-Community acquisitions or he is a private individual

1. Is it a supply made by a taxable person?YES

2. Is it a supply in the scope of VAT? YES (supply of goods)

3. Where is this supply taking place? In Malta (where transport begins)

4. Is there any exemption? NO (assumption)

5. Who is liable to pay VAT? A

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Second hypothesis

The distance sales threshold fixed by the MS of destination is not exceeded and there is no option by A to pay VAT of this MS. The purchaser is a member of the “Group of 4“ (+ flat-rate farmers in some MS) who exceeds the acquisition threshold fixed by the MS of destination or has opted to be liable to VAT in this MS on his intra-Community acquisitions

1. Is it a supply made by a taxable person?YES

2. Is it a supply in the scope of VAT? YES

3. Where is this supply taking place? In Malta (where transport begins)

4. Is there any exemption? YES

5. Who is liable to pay VAT? N/A

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Third hypothesis

The distance sales threshold fixed by the MS of destination is exceeded or A has opted to pay VAT in this MS. The purchaser is a member of the “Group of 4“ (+ flat-rate farmers in some MS) who does not exceed the acquisition threshold fixed by the MS of destination and has not opted to be liable to VAT in this MS on his intra-Community acquisitions or he is a private individual

1. Is it a supply made by a taxable person?YES

2. Is it a supply in the scope of VAT? YES

3. Where is this supply taking place? In the other MS (where transport ends)

4. Is there any exemption? N/A

5. Who is liable to pay VAT? N/A

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Fourth hypothesis

The distance sales threshold fixed by the MS of destination is exceeded or A has opted to pay VAT in this MS. The purchaser is a member of the “Group of 4“ (+ flat-rate farmers in some MS) who exceeds the acquisition threshold fixed by the MS of destination or has opted to be liable to VAT in this MS on his intra-Community acquisitions

1. Is it a supply made by a taxable person?YES

2. Is it a supply in the scope of VAT? YES

3. Where is this supply taking place? In Malta (where transport begins)

4. Is there any exemption? YES

5. Who is liable to pay VAT? N/A

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Example: distance sale to Malta

• Goods are supplied by A (regular taxable person) in another MS to B in Malta

• Goods are not excise goods nor new means of transport (special regime) and are not exempt from VAT

• Goods are transported from the other Member State to Malta on behalf of A

Other EU MS Malta

A (regular taxable person)A (regular taxable person)

BBSale of goods

Transport on behalf of A

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First hypothesis

The distance sales threshold fixed by Malta is not exceeded and there is no option by A to pay VAT in Malta. The purchaser is a member of the “Group of 3“ who does not exceed the acquisition threshold fixed by Malta and has not opted to be liable to VAT in Malta on his intra-Community acquisitions or he is a private individual

1. Is it a supply made by a taxable person?YES

2. Is it a supply in the scope of VAT? YES

3. Where is this supply taking place? In the other MS (where transport begins)

4. Is there any exemption? N/A

5. Who is liable to pay VAT? N/A

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Second hypothesis

The distance sales threshold fixed by Malta is not exceeded and there is no option by A to pay VAT in Malta. The purchaser is a member of the “Group of 3“ who exceeds the acquisition threshold fixed by Malta or has opted to be liable to VAT in Malta on his intra-Community acquisitions

1. Is there an ICA ? YES

2. Is this ICA in the scope of VAT? YES

3. Where is this ICA taking place? In Malta (where transport ends)

4. Is there any exemption? NO (assumption)

5. Who is liable to pay VAT? B

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Third hypothesis

The distance sales threshold fixed by Malta is exceeded or A has opted to pay VAT in Malta. The purchaser is a member of the “Group of 3“ who does not exceed the acquisition threshold fixed by Malta and has not opted to be liable to VAT in Malta on his intra-Community acquisitions or he is a private individual

1. Is it a supply made by a taxable person?YES

2. Is it a supply in the scope of VAT? YES

3. Where is this supply taking place? In Malta (where transport ends)

4. Is there any exemption? NO (assumption)

5. Who is liable to pay VAT? A (must register for VAT purposes in Malta under art.10)

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Fourth hypothesis

The distance sales threshold fixed by Malta is exceeded or A has opted to pay VAT in Malta. The purchaser is a member of the “Group of 3“ who exceeds the acquisition threshold fixed by Malta or has opted to be liable to VAT in Malta on his intra-Community acquisitions

1. Is there an ICA ? YES

2. Is this ICA in the scope of VAT? YES

3. Where is this ICA taking place? In Malta (where transport ends)

4. Is there any exemption? NO (assumption)

5. Who is liable to pay VAT? B