In this new post we will focus on trying to explain a concept that is often complex and without proper understanding can make our customers lose possibilities of saving VAT on goods transport.
We are talking about the special rules applied to the Value Added Tax (VAT) in the activities of transport of goods and merchandise, both in intercommunity transport and in transport outside the European Union.
Before we start, it is important to be clear about two basic concepts in freight forwarding:
- The carrier is the person who provides the service while being a taxable person for VAT purposes. He/she is obliged to pass on the tax to the recipient of the service (or to the taxpayer’s investment) and to pay it into the treasury.
- The recipient of the service is the sender or shipper. For VAT, you are obliged to bear the impact of the tax, being able to deduct it.
We will now go on to define the characteristics of inter-community transport and external transport, and then summarize all the information concerning VAT in a summary table to make it easier to understand.
VAT on intra-Community trade in goods
It occurs when the place of commencement and arrival of the property is situated in two different territories of the Member States.
The intra-community transport of goods is always subject to and not exempt from tax.
The intra-Community acquisitions of goods are taxed at the destination, so that the supply of goods in the country of origin is therefore exempt from tax, being in the country of destination where the taxable event takes place. Intra-Community acquisitions are subject to the self-assessment regime, which requires compliance with a number of formal and reporting obligations.
VAT on foreign goods traffic
They occur between a place located in the territory of application of the tax (Peninsula and Balearic Islands) and another place located outside the common system (third countries) of the EU VAT, or vice versa.
it is important that we are clear about what is considered to be external in relation to VAT, because in addition to third countries, also the Canary Islands, Ceuta and Melilla are considered to be outside the scope of VAT.
They are exempt from VAT, provided that they are directly related to exports or imports.
Unlike in the case of intra-Community acquisitions of goods, the importer is not required to be a businessperson or a professional and a private individual may carry out this taxable transaction.
Summary table on the application of VAT in the transport service |
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| ORIGIN OF GOODS | DESTINATION OF GOODS | BUSINESS CLIENT* | INDIVIDUAL CLIENT |
| SPAIN | SPAIN | The transaction is subject to Spanish VAT in the territory of application. The invoice issued carries VAT. | The transaction is subject to Spanish VAT in the territory of application. The invoice issued carries VAT. |
| SPAIN | EUROPEAN UNION COUNTRIES OTHER THAN SPAIN | Recipient’s location. The transaction is not subject in the territory of application of Spanish VAT, it is subject in the Member State where the customer is established, entering the taxable amount in field 59 of form 303, field 71 of form 322 | Start of transport. The transaction is subject to Spanish VAT in the territory where the transport starts. |
| SPAIN | CEUTA AND MELILLA CANARY ISLANDS | Recipient’s location. The operation is not subject in the territory of application of Spanish VAT, without prejudice to its subjection to IGIC in the Canary Islands, by entering the tax base in field 61 of form 303, field 73 of form 322 | Recipient’s location. The operation is not subject to Spanish VAT in the territory of application of the Spanish VAT, without prejudice to its subjection to the IGIC in the Canary Islands, by entering the taxable amount in field 61 of form 303, field 73 of form 322 |
| SPAIN | OUTSIDE THE EUROPEAN UNION | Recipient’s location. The transaction is not subject to Spanish VAT in the territory of application. The supplier of the service must declare the transaction as not subject to VAT by virtue of location rules, entering the taxable amount in field 61 of form 303, field 73 of form 322. | In each Member State for the part of the journey that takes place in it. The transaction is subject in the territory of application of Spanish VAT for the part of the journey that runs through it, without prejudice to the taxation that corresponds to the part of the journey that runs through another Member State, in accordance with the rules of location for this type of transaction that will be determined according to the criteria set out in Directive 2006/112/EC and the national legislation resulting from the transposition of that Directive. The transport of goods shall be exempt from VAT where it is directly linked to exports of goods outside the European Union under the terms of Article 21. 5 of Law 37/1992, or whose consideration is included in the taxable base of the imports of goods according to articles 64 and 83 of the same law. The taxable amount of these operations shall be entered in box 60 of form 303, 72 of form 322. |
Deductions and returns
The right to deduct input tax on the acquisition of goods and services in the course of performance is generated:
If they are subject and not exempt transports, because the general rule of the operations that generate the right to deduct is fulfilled.
If they are transports that are exempt because they are related to transactions that give rise to the right to deduct.
Taxes paid or paid on purchases of goods or services made in the territory where Spanish VAT is applicable are deductible:
- Supported by purchases of goods and services made by the carrier.
- Self-reported for transport services where the taxable person has invested.
- Satisfied by intra-community acquisitions of goods or imports of goods made by the carrier
If you still have doubts to resolve regarding taxation in your freight transport activities, from CST we help you by means of a personal study of your required services and we help you to carry out an optimum tax planning in order to reduce your tax costs as much as possible.
Fonts: Iberley, Aselec Consultores