Intra-Community supplies: the 7 requirements for VAT non-taxability

intra community supplies

An intra-Community supply must meet certain basic requirements, which are present at the same time, in order to benefit from non-taxable VAT.

The Community institutions have laid down the conditions necessary to exempt from VAT the supply of goods in the context of certain intra-Community transactions.
Non-taxable supplies of VAT are those transactions involving the transfer of goods to the purchaser, or by a third party on their behalf, belonging to an EU Member State other than that of the supplier.

In order to make an intra-EU supply and to be able to issue a non-taxable VAT invoice, the following requirements must be met jointly:

  1. Right of ownership
    There must be an actual acquisition or transfer of the right of ownership of the goods from the supplier to the transferee.
  2. Actual movement of the goods
    Dispatch or transfer of the goods from one Member State to another is indispensable, regardless of whether this is done by the supplier, the transferee or by a third party on their behalf.
  3. Supply for consideration
    The supply for consideration is essential; supplies free of charge (e.g. gifts) do not meet the necessary conditions and are therefore subject to domestic law.
  4. The status of economic operator
    The national supplier and the Community transferee must have the status of economic operator, to which must be added the obligation of registration with the VIES (VAT Information Exchange System), considered by administrative practice as a substantial requirement for the taxation of the transaction in the Member State of destination of the goods not only for the supplier, but also for the non-resident transferee.
  5. Transferor as taxable person
    The supplier must be a taxable person in Italy, i.e. a foreign person who has appointed a tax representative in Italy or has identified himself directly.
  6. Transferee as taxable person
    The transferee must also be a taxable person in a Member State other than that of the supplier, or in any case not a person for whom the conditions of the derogating scheme in his Member State apply.
  7. Possession of Evidence
    The supplier must be in possession of adequate documentary evidence to show that the previous six requirements are met.

In the absence of even one of these requirements the supply is taxable for VAT.