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The German Federal Court recently issued a decision on the VAT treatment of call of stock supplies. In practice, this decision would allow call of stock simplification to be applied in Germany, hence allowing the foreign supplier to avoid a VAT registration where all conditions are met. The decision confirms an earlier ruling by a local tax court, however, it has not been reflected yet in the German VAT law, nor in the tax authorities’ notices.
Under the general rule, a German VAT registration is required when a supplier outside Germany ships goods to a German warehouse to store these goods locally and supply them to a German customer as and when required by the client. This foreign business will make an intra-Community acquisition followed by a domestic sale in Germany in which VAT is accounted for. Where consignment stock simplification applies, the German VAT registration of the foreign business is not required.
The conditions for the German simplification on consignment stock have not been clearly listed by the Federal Tax Court, however, the German customer must be identified prior to the transport of goods into Germany and a binder order must exist between customer and foreign supplier. The German tax authorities are expected to issue guidance on the conditions of the contract between the parties and the logistic requirements in order to apply this simplification. Please contact us if you need help assessing the impact of this decision.