EU VAT Directive: Taxable Transactions Briefing Document
This briefing document provides a detailed overview of “Taxable Transactions” as defined by the EU VAT Directive 2006/112/EC, drawing on insights from the provided sources: “EU VAT Directive: Taxable Persons Unpacked” (Podcast), “EU VAT Directive: Taxable Transactions Study Guide” (Study Guide), “EU VAT: Key Definitions and Concepts” (Key Definitions), and “Taxable Transactions: Goods, Services, and Vouchers” (Directive Excerpts). It highlights key definitions, specific transaction types, and special rules impacting VAT compliance across the European Union.
1. Introduction to Taxable Transactions
The “EU VAT Directive 2006/112/EC” is the cornerstone of the common VAT system within the European Union. As highlighted in the “EU VAT Directive: Taxable Persons Unpacked” podcast, Title 4 of this Directive focuses specifically on “Taxable Transactions,” which are fundamental to understanding VAT obligations for businesses operating within the EU. Understanding these concepts is crucial for tax professionals, business owners, and anyone navigating EU tax law.
2. Supply of Goods
The Directive provides a comprehensive definition of what constitutes a “supply of goods,” extending beyond simple legal ownership transfer.
2.1. Fundamental Definition
The core definition of a ‘supply of goods’ is “the transfer of the right to dispose of tangible property as owner” (Directive Excerpts, Article 14(1)). This emphasises the economic control and benefit derived from the property, rather than merely the legal title (“Key Definitions”).
2.2. Specific Transactions Regarded as Supply of Goods
Beyond the fundamental definition, several specific transactions are also treated as a ‘supply of goods’ (Directive Excerpts, Article 14(2); “Key Definitions”):
- Compulsory Transfers: “the transfer of ownership of property against payment of compensation, by order of a public authority or in pursuance of the law.”
- Hire or Deferred Sale: “the actual handing over of goods under a contract for hire or deferred sale where ownership passes upon final payment.” This refers to agreements where ownership transfers upon the final instalment.
- Commission Contracts: “the transfer of goods pursuant to a contract under which commission is payable on their purchase or sale.”
- Construction Works: Member States may also “regard the handing over of certain construction works as a supply of goods” (Directive Excerpts, Article 14(3); “Key Definitions”).
2.3. What is Tangible Property?
For VAT purposes, “tangible property” explicitly includes “electricity, gas, heat or cooling energy and the like” (Directive Excerpts, Article 15(1); “Key Definitions”). Member States can also extend this to include “certain interests in immovable property,” “rights in rem giving the holder thereof a right of use over immovable property,” and “shares or interests equivalent to shares giving the holder thereof de jure or de facto rights of ownership or possession over immovable property or part thereof” (Directive Excerpts, Article 15(2)).
2.4. Private/Non-Business Use of Business Assets
If a taxable person applies goods forming part of their business assets for “private use or for that of his staff, or their disposal free of charge or, more generally, their application for purposes other than those of his business,” it is “treated as a supply of goods for consideration” (Directive Excerpts, Article 16). This applies where VAT on those goods was wholly or partly deductible. Exception: “the application of goods for business use as samples or as gifts of small value shall not be treated as a supply of goods for consideration” (Directive Excerpts, Article 16; “Key Definitions”).
3. Intra-Community Transactions and Special Rules
The Directive contains specific provisions for cross-border movements of goods within the EU.
3.1. Intra-Community Acquisition of Goods
An ‘intra-Community acquisition of goods’ is defined as “the acquisition of the right to dispose as owner of movable tangible property that is dispatched or transported to the acquirer in a Member State different from where the dispatch or transport began, by or on behalf of the vendor or acquirer” (Directive Excerpts, Article 20; “Study Guide,” Q5). This ensures VAT is accounted for in the Member State of destination for goods moving within the single market (“Key Definitions”). This also covers situations where a taxable person moves their own goods for business purposes from one Member State to another (“Key Definitions,” Article 21).
3.2. Intra-Community Distance Sales of Goods
These refer to “supplies of goods dispatched or transported by or on behalf of the supplier from one Member State to a customer in another Member State” (“Study Guide,” Q3). A key condition is that the supply is “carried out for a taxable person, or a non-taxable legal person, whose intra-Community acquisitions of goods are not subject to VAT… or for any other non-taxable person” (Directive Excerpts, Article 14(4)(1)(a)). This rule is crucial for B2C cross-border sales within the EU (“Key Definitions”).
3.3. Electronic Interfaces and Deemed Suppliers (Article 14a)
A significant rule, particularly for e-commerce, concerns electronic interfaces (e.g., online marketplaces). “Where a taxable person facilitates, through the use of an electronic interface such as a marketplace, platform, portal or similar means, distance sales of goods imported from third territories or third countries in consignments of an intrinsic value not exceeding EUR 150,” or facilitates intra-Community sales by non-EU established suppliers to non-taxable persons, “that taxable person shall be deemed to have received and supplied those goods himself” (Directive Excerpts, Article 14a; “Key Definitions,” Q5). This simplifies VAT collection by making the marketplace the ‘deemed supplier’. An example given is “an online marketplace facilitating a sale from a Chinese vendor to a consumer in France” (“Study Guide,” Q6).
3.4. Transfer to another Member State (Article 17)
The “transfer by a taxable person of goods forming part of his business assets to another Member State shall be treated as a supply of goods for consideration” (Directive Excerpts, Article 17(1)). This is referred to as an ‘Article 17 transfer’ and implies a deemed intra-Community supply and acquisition. However, Article 17(2) lists several exceptions where such a dispatch or transport is not considered a transfer, including:
- Supply of goods with installation/assembly (Art. 36).
- Supply of goods on board ships, aircraft, trains (Art. 37).
- Temporary use for service supply where the goods are returned.
- Temporary use for up to 24 months, comparable to temporary import with full exemption.
3.5. Call-Off Stock Arrangements (Article 17a)
‘Call-off stock arrangements’ are a VAT simplification measure where goods are sent to a warehouse in another Member State for a known customer, with ownership transferring later (within 12 months). Under these conditions, “The transfer by a taxable person of goods forming part of his business assets to another Member State under call-off stock arrangements shall not be treated as a supply of goods for consideration” (Directive Excerpts, Article 17a(1)). This avoids the supplier needing to VAT register in the destination Member State at the time of initial stock transfer (“Key Definitions,” Q6). Key conditions for call-off stock to apply include:
- Goods dispatched to another Member State for later supply to a known taxable person (customer).
- Supplier has no establishment in the destination Member State.
- Recipient is VAT-identified and known to the supplier at the time of dispatch.
- Proper recording of the transfer (Directive Excerpts, Article 17a(2)). If these conditions are met, the supply and intra-Community acquisition are deemed to occur when the right to dispose of the goods as owner is transferred to the customer within the 12-month period (Directive Excerpts, Article 17a(3)). If conditions cease to be met or the 12-month period expires, an Article 17 transfer is deemed to have occurred (Directive Excerpts, Article 17a(4), (7)).
4. Supply of Services
The definition of ‘supply of services’ serves as a catch-all category.
4.1. Overarching Definition
“‘Supply of services’ shall mean any transaction which does not constitute a supply of goods” (Directive Excerpts, Article 24(1); “Study Guide,” Q7). This is a “residual category, encompassing a wide range of transactions that are not tangible property transfers” (“Key Definitions”). Examples include “the assignment of intangible property,” “the obligation to refrain from an act, or to tolerate an act or situation,” and “the performance of services in pursuance of an order made by or in the name of a public authority or in pursuance of the law” (Directive Excerpts, Article 25; “Key Definitions”).
4.2. Telecommunications Services
Specifically defined as “services relating to the transmission, emission or reception of signals, words, images and sounds or information of any nature by wire, radio, optical or other electromagnetic systems” (Directive Excerpts, Article 24(2)). This includes “the related transfer or assignment of the right to use capacity for such transmission, emission or reception, with the inclusion of the provision of access to global information networks” (Directive Excerpts, Article 24(2); “Key Definitions”).
4.3. Private/Non-Business Use of Services (Article 26)
Similar to goods, the “use of goods forming part of the assets of a business for the private use of a taxable person or of his staff or, more generally, for purposes other than those of his business” where VAT was deductible, “shall be treated as a supply of services for consideration” (Directive Excerpts, Article 26(1)(a)). Also, “the supply of services carried out free of charge by a taxable person for his private use or for that of his staff or, more generally, for purposes other than those of his business” is treated similarly (Directive Excerpts, Article 26(1)(b)).
4.4. Taxable Person Acting in Own Name on Behalf of Another (Article 28)
“Where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself” (Directive Excerpts, Article 28).
5. Importation of Goods
‘Importation of goods’ is defined as “the entry into the Community of goods which are not in free circulation within the meaning of Article 24 of the Treaty” (Directive Excerpts, Article 30; “Key Definitions,” Q8). It also includes goods in free circulation coming from a ‘third territory’ that forms part of the customs territory of the Community (Directive Excerpts, Article 30). This definition is critical for determining when goods entering the EU from outside its customs territory are subject to import VAT.
6. Vouchers (Common Provisions for Goods and Services)
The Directive distinguishes between two types of vouchers, with differing VAT treatments. A ‘voucher’ is broadly defined as an instrument where “there is an obligation to accept it as consideration or part consideration for a supply of goods or services” and the goods/services or potential suppliers are indicated (Directive Excerpts, Article 30a(1)).
6.1. Single-Purpose Voucher (SPV)
An SPV is a voucher where “the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services, are known at the time of issue of the voucher” (Directive Excerpts, Article 30a(2)). For SPVs, “Each transfer… by a taxable person acting in his own name shall be regarded as a supply of the goods or services to which the voucher relates” (Directive Excerpts, Article 30b(1)). This means VAT is applied when the voucher is sold, not when the underlying goods/services are redeemed (“Key Definitions,” Q7). The actual handing over of the goods or services is not regarded as an independent transaction (Directive Excerpts, Article 30b(1)).
6.2. Multi-Purpose Voucher (MPV)
An MPV is defined as “a voucher, other than a single-purpose voucher” (Directive Excerpts, Article 30a(3)). For MPVs, “the place of supply of the goods or services to which it relates, or the VAT due… is not known at the time of its issue” (“Study Guide,” Q10). Consequently, “each preceding transfer of that multi-purpose voucher shall not be subject to VAT” (Directive Excerpts, Article 30b(2)). VAT is only charged “when the underlying goods or services are actually handed over or provided in return for the MPV upon redemption” (“Key Definitions,” Q7). However, any identifiable services related to the MPV’s transfer (e.g., distribution or promotion) can be subject to VAT (Directive Excerpts, Article 30b(2)).
See also – in this serie
TITLE IV
TAXABLE TRANSACTIONS
CHAPTER 1
Supply of goods
Article 14
1.
2.
In addition to the transaction referred to in paragraph 1, each of the following shall be regarded as a supply of goods:
the transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation;
the actual handing over of goods pursuant to a contract for the hire of goods for a certain period, or for the sale of goods on deferred terms, which provides that in the normal course of events ownership is to pass at the latest upon payment of the final instalment;
the transfer of goods pursuant to a contract under which commission is payable on purchase or sale.
3.
4.
For the purposes of this Directive, the following definitions shall apply:
‘intra-Community distance sales of goods’ means supplies of goods dispatched or transported by or on behalf of the supplier, including where the supplier intervenes indirectly in the transport or dispatch of the goods, from a Member State other than that in which dispatch or transport of the goods to the customer ends, where the following conditions are met:
the supply of goods is carried out for a taxable person, or a non-taxable legal person, whose intra-Community acquisitions of goods are not subject to VAT pursuant to Article 3(1) or for any other non-taxable person;
the goods supplied are neither new means of transport nor goods supplied after assembly or installation, with or without a trial run, by or on behalf of the supplier;
‘distance sales of goods imported from third territories or third countries’ means supplies of goods dispatched or transported by or on behalf of the supplier, including where the supplier intervenes indirectly in the transport or dispatch of the goods, from a third territory or third country, to a customer in a Member State, where the following conditions are met:
the supply of goods is carried out for a taxable person, or a non-taxable legal person, whose intra-Community acquisitions of goods are not subject to VAT pursuant to Article 3(1) or for any other non-taxable person;
the goods supplied are neither new means of transport nor goods supplied after assembly or installation, with or without a trial run, by or on behalf of the supplier.
Article 14a
1.
2.
Article 15
1.
2.
Member States may regard the following as tangible property:
certain interests in immovable property;
rights in rem giving the holder thereof a right of use over immovable property;
shares or interests equivalent to shares giving the holder thereof de jure or de facto rights of ownership or possession over immovable property or part thereof.
Article 16
The application by a taxable person of goods forming part of his business assets for his private use or for that of his staff, or their disposal free of charge or, more generally, their application for purposes other than those of his business, shall be treated as a supply of goods for consideration, where the VAT on those goods or the component parts thereof was wholly or partly deductible.
However, the application of goods for business use as samples or as gifts of small value shall not be treated as a supply of goods for consideration.
Article 17
1.
‘Transfer to another Member State’ shall mean the dispatch or transport of movable tangible property by or on behalf of the taxable person, for the purposes of his business, to a destination outside the territory of the Member State in which the property is located, but within the Community.
2.
The dispatch or transport of goods for the purposes of any of the following transactions shall not be regarded as a transfer to another Member State:
the supply of the goods by the taxable person within the territory of the Member State in which the dispatch or transport ends, in accordance with the conditions laid down in Article 33;
the supply of the goods, for installation or assembly by or on behalf of the supplier, by the taxable person within the territory of the Member State in which dispatch or transport of the goods ends, in accordance with the conditions laid down in Article 36;
the supply of the goods by the taxable person on board a ship, an aircraft or a train in the course of a passenger transport operation, in accordance with the conditions laid down in Article 37;
the supply of gas through a natural gas system situated within the territory of the Community or any network connected to such a system, the supply of electricity or the supply of heat or cooling energy through heating or cooling networks, in accordance with the conditions laid down in Articles 38 and 39;
the supply of the goods by the taxable person within the territory of the Member State, in accordance with the conditions laid down in Articles 138, 146, 147, 148, 151 or 152;
the supply of a service performed for the taxable person and consisting in valuations of, or work on, the goods in question physically carried out within the territory of the Member State in which dispatch or transport of the goods ends, provided that the goods, after being valued or worked upon, are returned to that taxable person in the Member State from which they were initially dispatched or transported;
the temporary use of the goods within the territory of the Member State in which dispatch or transport of the goods ends, for the purposes of the supply of services by the taxable person established within the Member State in which dispatch or transport of the goods began;
the temporary use of the goods, for a period not exceeding twenty-four months, within the territory of another Member State, in which the importation of the same goods from a third country with a view to their temporary use would be covered by the arrangements for temporary importation with full exemption from import duties.
3.
Article 17a
1.
2.
For the purposes of this Article, call-off stock arrangements shall be deemed to exist where the following conditions are met:
goods are dispatched or transported by a taxable person, or by a third party on his behalf, to another Member State with a view to those goods being supplied there, at a later stage and after arrival, to another taxable person who is entitled to take ownership of those goods in accordance with an existing agreement between both taxable persons;
the taxable person dispatching or transporting the goods has not established his business nor has a fixed establishment in the Member State to which the goods are dispatched or transported;
the taxable person to whom the goods are intended to be supplied is identified for VAT purposes in the Member State to which the goods are dispatched or transported and both his identity and the VAT identification number assigned to him by that Member State are known to the taxable person referred to in point (b) at the time when the dispatch or transport begins;
the taxable person dispatching or transporting the goods records the transfer of the goods in the register provided for in Article 243(3) and includes the identity of the taxable person acquiring the goods and the VAT identification number assigned to him by the Member State to which the goods are dispatched or transported in the recapitulative statement provided for in Article 262(2).
3.
Where the conditions laid down in paragraph 2 are met, the following rules shall apply at the time of the transfer of the right to dispose of the goods as owner to the taxable person referred to in point (c) of paragraph 2, provided that the transfer occurs within the deadline referred to in paragraph 4:
a supply of goods in accordance with Article 138(1) shall be deemed to be made by the taxable person that dispatched or transported the goods either by himself or by a third party on his behalf in the Member State from which the goods were dispatched or transported;
an intra-Community acquisition of goods shall be deemed to be made by the taxable person to whom those goods are supplied in the Member State to which the goods were dispatched or transported.
4.
5.
No transfer within the meaning of Article 17 shall be deemed to take place where the following conditions are met:
the right to dispose of the goods has not been transferred, and those goods are returned to the Member State from which they were dispatched or transported within the time limit referred to in paragraph 4; and
the taxable person who dispatched or transported the goods records their return in the register provided for in Article 243(3).
6.
Where, within the period referred to in paragraph 4, the taxable person referred to in point (c) of paragraph 2 is substituted by another taxable person, no transfer within the meaning of Article 17 shall be deemed to take place at the time of the substitution, provided that:
all other applicable conditions in paragraph 2 are met; and
the substitution is recorded by the taxable person referred to in point (b) of paragraph 2 in the register provided for in Article 243(3).
7.
If the goods are supplied to a person other than the taxable person referred to in point (c) of paragraph 2 or in paragraph 6, it shall be deemed that the conditions set out in paragraphs 2 and 6 cease to be fulfilled immediately before such supply.
If the goods are dispatched or transported to a country other than the Member State from which they were initially moved, it shall be deemed that the conditions set out in paragraphs 2 and 6 cease to be fulfilled immediately before such dispatch or transport starts.
In the event of the destruction, loss or theft of the goods, it shall be deemed that the conditions set out in paragraphs 2 and 6 cease to be fulfilled on the date that the goods were actually removed or destroyed, or, if it is impossible to determine that date, the date on which the goods were found to be destroyed or missing.
Article 18
Member States may treat each of the following transactions as a supply of goods for consideration:
the application by a taxable person for the purposes of his business of goods produced, constructed, extracted, processed, purchased or imported in the course of such business, where the VAT on such goods, had they been acquired from another taxable person, would not be wholly deductible;
the application of goods by a taxable person for the purposes of a non-taxable area of activity, where the VAT on such goods became wholly or partly deductible upon their acquisition or upon their application in accordance with point (a);
with the exception of the cases referred to in Article 19, the retention of goods by a taxable person, or by his successors, when he ceases to carry out a taxable economic activity, where the VAT on such goods became wholly or partly deductible upon their acquisition or upon their application in accordance with point (a).
Article 19
In the event of a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof, Member States may consider that no supply of goods has taken place and that the person to whom the goods are transferred is to be treated as the successor to the transferor.
Member States may, in cases where the recipient is not wholly liable to tax, take the measures necessary to prevent distortion of competition. They may also adopt any measures needed to prevent tax evasion or avoidance through the use of this Article.
CHAPTER 2
Intra-Community acquisition of goods
Article 20
‘Intra-Community acquisition of goods’ shall mean the acquisition of the right to dispose as owner of movable tangible property dispatched or transported to the person acquiring the goods, by or on behalf of the vendor or the person acquiring the goods, in a Member State other than that in which dispatch or transport of the goods began.
Where goods acquired by a non-taxable legal person are dispatched or transported from a third territory or a third country and imported by that non-taxable legal person into a Member State other than the Member State in which dispatch or transport of the goods ends, the goods shall be regarded as having been dispatched or transported from the Member State of importation. That Member State shall grant the importer designated or recognised under Article 201 as liable for payment of VAT a refund of the VAT paid in respect of the importation of the goods, provided that the importer establishes that VAT has been applied to his acquisition in the Member State in which dispatch or transport of the goods ends.
Article 21
The application by a taxable person, for the purposes of his business, of goods dispatched or transported by or on behalf of that taxable person from another Member State, within which the goods were produced, extracted, processed, purchased or acquired within the meaning of Article 2(1)(b), or into which they were imported by that taxable person for the purposes of his business, shall be treated as an intra-Community acquisition of goods for consideration.
Article 22
The application by the armed forces of a Member State taking part in a defence effort carried out for the implementation of a Union activity under the common security and defence policy, for their use or for the use of the civilian staff accompanying them, of goods which they have not purchased subject to the general rules governing taxation on the domestic market of a Member State shall be treated as an intra-Community acquisition of goods for consideration, where the importation of those goods would not be eligible for the exemption provided for in point (ga) of Article 143(1).
The application by the armed forces of a State party to the North Atlantic Treaty, for their use or for the use of the civilian staff accompanying them, of goods which they have not purchased subject to the general rules governing taxation on the domestic market of a Member State shall be treated as an intra-Community acquisition of goods for consideration, where the importation of those goods would not be eligible for the exemption provided for in Article 143(1)(h).
Article 23
Member States shall take the measures necessary to ensure that a transaction which would have been classed as a supply of goods if it had been carried out within their territory by a taxable person acting as such is classed as an intra-Community acquisition of goods.
CHAPTER 3
Supply of services
Article 24
1.
2.
Article 25
A supply of services may consist, inter alia, in one of the following transactions:
the assignment of intangible property, whether or not the subject of a document establishing title;
the obligation to refrain from an act, or to tolerate an act or situation;
the performance of services in pursuance of an order made by or in the name of a public authority or in pursuance of the law.
Article 26
1.
Each of the following transactions shall be treated as a supply of services for consideration:
the use of goods forming part of the assets of a business for the private use of a taxable person or of his staff or, more generally, for purposes other than those of his business, where the VAT on such goods was wholly or partly deductible;
the supply of services carried out free of charge by a taxable person for his private use or for that of his staff or, more generally, for purposes other than those of his business.
2.
Article 27
In order to prevent distortion of competition and after consulting the VAT Committee, Member States may treat as a supply of services for consideration the supply by a taxable person of a service for the purposes of his business, where the VAT on such a service, were it supplied by another taxable person, would not be wholly deductible.
Article 28
Where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself.
Article 29
Article 19 shall apply in like manner to the supply of services.
CHAPTER 4
Importation of goods
Article 30
‘Importation of goods’ shall mean the entry into the Community of goods which are not in free circulation within the meaning of Article 24 of the Treaty.
In addition to the transaction referred to in the first paragraph, the entry into the Community of goods which are in free circulation, coming from a third territory forming part of the customs territory of the Community, shall be regarded as importation of goods.
CHAPTER 5
Provisions common to Chapters 1 and 3
Article 30a
For the purposes of this Directive, the following definitions shall apply:
‘voucher’ means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services and where the goods or services to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument;
‘single-purpose voucher’ means a voucher where the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services, are known at the time of issue of the voucher;
‘multi-purpose voucher’ means a voucher, other than a single-purpose voucher.
Article 30b
1.
Where a transfer of a single-purpose voucher is made by a taxable person acting in the name of another taxable person, that transfer shall be regarded as a supply of the goods or services to which the voucher relates made by the other taxable person in whose name the taxable person is acting.
Where the supplier of goods or services is not the taxable person who, acting in his own name, issued the single-purpose voucher, that supplier shall however be deemed to have made the supply of the goods or services related to that voucher to that taxable person.
2.
Where a transfer of a multi-purpose voucher is made by a taxable person other than the taxable person carrying out the transaction subject to VAT pursuant to the first subparagraph, any supply of services that can be identified, such as distribution or promotion services, shall be subject to VAT.
