VAT: Implementing the ‘destination principle | KPMG | UK

VAT: Implementing the ‘destination principle’ to intra-EU B2B supplies of goods

VAT: Implementing the ‘destination principle

A web briefing on the EC’s website provides information on the implementation of the ‘destination principle’ to intra-EU B2B supplies of goods.


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Back in May 2014 the European Commission (EC) began work on implementing the ‘destination principle’ to intra-EU Business to Business (B2B) supplies of goods. The current system has been in place since the Single Market in 1992 and was always considered a transitional regime. However, the EC noted that such a system has proven to be prone to fraud and new definitive rules have become a high priority.

The current system effectively taxes the supplies in the Member State of destination but is not a destination system. Such intra-EU supplies are exempted with credit in the Member State of origin and therefore the place of supply of the goods is in that Member State. There is a separate requirement for acquisition tax to be declared by the customer in the Member State of destination. 

It was agreed that such supplies would be taxed under the destination principle. Over the last year or so a number of papers and reports have been released exploring the various options, including a reverse charge and adjustments to the existing rules.

However, a video on the EC’s website shows European Commissioner Valdis Dombrovskis giving an update following a College meeting where an orientation debate took place on the way forward. The Commissioner emphasises that taxation will be on a destination principle, but that the supplier in the Member State of origin will charge VAT (presumably at the rate of the Member State of destination), collect this VAT and pass it on to the Member State of destination - effectively a Mini One Stop Shop (MOSS) for B2B sales of goods. 

No further details are currently available. The Commissioner noted the requirement for unanimity i.e. the proposal would have to be agreed by all Member States and that it would require trust and cooperation between Member States.

For further information plaease contact:

Karen Killington 

Steve Powell

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