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Value Added Tax: Treatment of cross-border chain-transactions

Friday, 17 January 2020

The Treasury advises that the Value Added Tax (Place of Supply of Goods)(Amendment) Order 2020 and Value Added Tax (Amendment) Regulations 2020 have been made and came into operation on 16 January 2020, making changes to the VAT treatment of cross border chain-transactions.

The Order inserts a new Part 4 (Chain Transactions) into the Value Added Tax (Place of Supply of Goods) Order 2004. A chain transaction is the supply of goods between three or more parties, in which the goods are delivered directly from the first party to the final customer. This Order establishes which supply within the chain should be treated as the intra-Community supply and therefore treated as zero rated for VAT purposes.

These Regulations amend Part 16 (importations, exportations and removals) of the Value Added Tax Regulations 1996. It is now a requirement for zero-rating in relation to intra-community supplies that the recipient of the supply is registered for VAT in a member State and has provided the supplier with its VAT number.

The amendments make changes that correspond to those made to the equivalent United Kingdom legislation and are required under the terms of the Customs and Excise Agreement.

A revised edition of Notice 725 will be issued in due course.

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