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Briefing Document & Podcast: EU VAT Directive 2006/112/EC – Chargeable Event & Chargeability of VAT (Art. 61 – 71)

Briefing Document: VAT Chargeability and Taxable Events in the EU

This briefing document summarises the key concepts, rules, and exceptions surrounding VAT chargeability and taxable events as outlined in Title VI of the EU VAT Directive 2006/112/EC, drawing primarily from the provided excerpts.

1. Core Definitions: Chargeable Event and Chargeability of VAT

Understanding VAT chargeability begins with two fundamental definitions:

  • Chargeable Event: This refers to “the occurrence by virtue of which the legal conditions necessary for VAT to become chargeable are fulfilled.” It is the specific trigger point that legally initiates the VAT process.
  • Chargeable: VAT becomes “chargeable” when “the tax authority becomes entitled under the law, at a given moment, to claim the tax from the person liable to pay, even though the time of payment may be deferred.” This signifies the moment the legal obligation to pay VAT arises for the taxable person.

(Source: Article 62, “VAT Chargeability and Taxable Events”; “VAT Chargeability: An EU Directive Study Guide”, “VAT Chargeability: Principles and Exceptions”)

2. General Rule for Supply of Goods or Services

The overarching principle for the supply of goods or services is that “The chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.” This means that the act of providing the goods or services is typically the moment VAT is legally due.

(Source: Article 63, “VAT Chargeability and Taxable Events”; “VAT Chargeability: An EU Directive Study Guide”, “VAT Chargeability: Principles and Exceptions”)

3. Specific Scenarios and Derogations for Supply of Goods or Services

While the general rule applies, several specific scenarios and exceptions (derogations) exist:

  • Continuous Supplies (Article 64):
  • For supplies generating “successive statements of account or successive payments,” the supply is considered completed “on expiry of the periods to which such statements of account or payments relate.”
  • Cross-border VAT-exempt goods (Article 138): Continuous supplies of goods dispatched to another Member State which are VAT-exempt are “regarded as being completed on expiry of each calendar month until such time as the supply comes to an end.”
  • Continuous services (customer liable, > 1 year): For services where the customer is liable for VAT (Article 196), lasting over a year with no interim statements or payments, the supply is “regarded as being completed on expiry of each calendar year until such time as the supply of services comes to an end.”
  • Member States may also provide for other continuous supplies to be completed at least annually.
  • Pre-payments (Article 65): “Where a payment is to be made on account before the goods or services are supplied, VAT shall become chargeable on receipt of the payment and on the amount received.” This ensures VAT is accounted for on advance payments.
  • Member State Derogations (Article 66): Member States have flexibility to alter the timing of chargeability for “certain transactions or certain categories of taxable person.” VAT can become chargeable no later than:
  • “the time the invoice is issued”
  • “the time the payment is received”
  • A specified time if an invoice is not issued or issued late, linked to Article 222 deadlines.
  • Important Exception: These derogations “shall not, however, apply to supplies of services in respect of which VAT is payable by the customer pursuant to Article 196” (reverse charge services) or to certain VAT-exempt cross-border goods referred to in Article 67.
  • Supplies involving “Deemed Taxable Person” (Article 66a): For supplies of goods by a taxable person “deemed to have received and supplied the goods in accordance with Article 14a,” the chargeable event occurs and VAT becomes chargeable “at the time when the payment has been accepted.”
  • VAT-exempt Cross-border Supplies/Transfers of Goods (Article 67): For VAT-exempt goods dispatched or transported to another Member State (Article 138), VAT “shall become chargeable on issue of the invoice, or on expiry of the time limit referred to in the first paragraph of Article 222 if no invoice has been issued by that time.” Articles 64(1), 64(2) third subparagraph, and 65 do not apply to these specific transactions.

(Source: Articles 64, 65, 66, 66a, 67, “VAT Chargeability and Taxable Events”; “VAT Chargeability: An EU Directive Study Guide”, “VAT Chargeability: Principles and Exceptions”)

4. Intra-Community Acquisition of Goods

  • Chargeable Event (Article 68): The chargeable event occurs “when the intra-Community acquisition of goods is made.” This is further defined as when “the supply of similar goods is regarded as being effected within the territory of the relevant Member State.”
  • Chargeability of VAT (Article 69): VAT “shall become chargeable on issue of the invoice, or on expiry of the time limit referred to in the first paragraph of Article 222 if no invoice has been issued by that time.”

(Source: Articles 68, 69, “VAT Chargeability and Taxable Events”; “VAT Chargeability: An EU Directive Study Guide”, “VAT Chargeability: Principles and Exceptions”)

5. Importation of Goods

  • General Rule (Article 70): “The chargeable event shall occur and VAT shall become chargeable when the goods are imported.”
  • Goods under Special Arrangements (Article 71):
  • If goods are placed under certain customs arrangements upon entry (e.g., customs warehousing, temporary importation with total exemption), “the chargeable event shall occur and VAT shall become chargeable only when the goods cease to be covered by those arrangements or situations.”
  • However, if imported goods are subject to customs duties, agricultural levies, or equivalent charges, the VAT chargeable event and chargeability align with when “those duties become chargeable.”
  • For imported goods not subject to such duties, Member States apply their existing provisions for customs duties regarding chargeability.

(Source: Articles 70, 71, “VAT Chargeability and Taxable Events”; “VAT Chargeability: An EU Directive Study Guide”, “VAT Chargeability: Principles and Exceptions”)

6. Key Themes and Important Considerations

  • Distinction between ‘Chargeable Event’ and ‘Chargeable’: The Directive carefully defines both, highlighting that the chargeable event is the trigger for the legal conditions to be met, while chargeability is the point at which the tax authority gains the right to claim the tax. This two-step process clarifies the legal accrual of VAT.
  • Flexibility and Derogations: The Directive provides Member States with significant flexibility through derogations (e.g., Article 66) to adapt chargeability rules to specific national circumstances or types of transactions. However, this flexibility is not absolute, with explicit limitations for certain reverse-charge services and specific cross-border supplies.
  • Harmonisation vs. National Specificity: While setting general rules, the Directive balances harmonisation across the EU with allowing Member States some discretion to manage VAT collection efficiently, particularly for complex or continuous transactions.
  • Alignment with Invoicing and Payment: For many transactions, the issuance of an invoice or the receipt of payment plays a crucial role in determining the moment of VAT chargeability, especially under derogations or for intra-Community acquisitions.
  • Special Treatment for Cross-Border Transactions: Continuous cross-border supplies of goods (Article 64(2)) and VAT-exempt cross-border supplies/transfers (Article 67) have specific rules, reflecting the complexities of inter-Member State trade and the need for clear tax points in such scenarios.
  • Integration with Customs Procedures for Imports: For imports, VAT chargeability is closely linked to customs procedures and the payment of customs duties, ensuring a coordinated approach to taxation at the point of entry into the EU.

 


See also – in this serie


TITLE VI

CHARGEABLE EVENT AND CHARGEABILITY OF VAT

CHAPTER 1

General provisions

Article 62

For the purposes of this Directive:

(1)

‘chargeable event’ shall mean the occurrence by virtue of which the legal conditions necessary for VAT to become chargeable are fulfilled;

(2)

VAT shall become ‘chargeable’ when the tax authority becomes entitled under the law, at a given moment, to claim the tax from the person liable to pay, even though the time of payment may be deferred.

CHAPTER 2

Supply of goods or services

Article 63

The chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.

Article 64

1.  

Where it gives rise to successive statements of account or successive payments, the supply of goods, other than that consisting in the hire of goods for a certain period or the sale of goods on deferred terms, as referred to in point (b) of Article 14(2), or the supply of services shall be regarded as being completed on expiry of the periods to which such statements of account or payments relate.

▼M9

2.  

Continuous supplies of goods over a period of more than one calendar month which are dispatched or transported to a Member State other than that in which the dispatch or transport of those goods begins and which are supplied VAT-exempt or which are transferred VAT-exempt to another Member State by a taxable person for the purposes of his business, in accordance with the conditions laid down in Article 138, shall be regarded as being completed on expiry of each calendar month until such time as the supply comes to an end.

Supplies of services for which VAT is payable by the customer pursuant to Article 196, which are supplied continuously over a period of more than one year and which do not give rise to statements of account or payments during that period, shall be regarded as being completed on expiry of each calendar year until such time as the supply of services comes to an end.

Member States may provide that, in certain cases other than those referred to in the first and second subparagraphs, the continuous supply of goods or services over a period of time is to be regarded as being completed at least at intervals of one year.

▼B

Article 65

Where a payment is to be made on account before the goods or services are supplied, VAT shall become chargeable on receipt of the payment and on the amount received.

Article 66

By way of derogation from Articles 63, 64 and 65, Member States may provide that VAT is to become chargeable, in respect of certain transactions or certain categories of taxable person at one of the following times:

(a)

no later than the time the invoice is issued;

(b)

no later than the time the payment is received;

▼M9

(c)

where an invoice is not issued, or is issued late, within a specified time no later than on expiry of the time-limit for issue of invoices imposed by Member States pursuant to the second paragraph of Article 222 or where no such time-limit has been imposed by the Member State, within a specified period from the date of the chargeable event.

The derogation provided for in the first paragraph shall not, however, apply to supplies of services in respect of which VAT is payable by the customer pursuant to Article 196 and to supplies or transfers of goods referred to in Article 67.

▼M24

Article 66a

By way of derogation from Articles 63, 64 and 65, the chargeable event of the supply of goods by a taxable person who is deemed to have received and supplied the goods in accordance with Article 14a and of the supply of goods to that taxable person shall occur and VAT shall become chargeable at the time when the payment has been accepted.

▼M9

Article 67

Where, in accordance with the conditions laid down in Article 138, goods dispatched or transported to a Member State other than that in which dispatch or transport of the goods begins are supplied VAT-exempt or where goods are transferred VAT-exempt to another Member State by a taxable person for the purposes of his business, VAT shall become chargeable on issue of the invoice, or on expiry of the time limit referred to in the first paragraph of Article 222 if no invoice has been issued by that time.

Article 64(1), the third subparagraph of Article 64(2) and Article 65 shall not apply with respect to the supplies and transfers of goods referred to in the first paragraph.

▼B

CHAPTER 3

Intra-Community acquisition of goods

Article 68

The chargeable event shall occur when the intra-Community acquisition of goods is made.

The intra-Community acquisition of goods shall be regarded as being made when the supply of similar goods is regarded as being effected within the territory of the relevant Member State.

▼M9

Article 69

In the case of the intra-Community acquisition of goods, VAT shall become chargeable on issue of the invoice, or on expiry of the time limit referred to in the first paragraph of Article 222 if no invoice has been issued by that time.

▼B

CHAPTER 4

Importation of goods

Article 70

The chargeable event shall occur and VAT shall become chargeable when the goods are imported.

Article 71

1.  

Where, on entry into the Community, goods are placed under one of the arrangements or situations referred to in Articles 156, 276 and 277, or under temporary importation arrangements with total exemption from import duty, or under external transit arrangements, the chargeable event shall occur and VAT shall become chargeable only when the goods cease to be covered by those arrangements or situations.

However, where imported goods are subject to customs duties, to agricultural levies or to charges having equivalent effect established under a common policy, the chargeable event shall occur and VAT shall become chargeable when the chargeable event in respect of those duties occurs and those duties become chargeable.

2.  

Where imported goods are not subject to any of the duties referred to in the second subparagraph of paragraph 1, Member States shall, as regards the chargeable event and the moment when VAT becomes chargeable, apply the provisions in force governing customs duties.

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