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Dear Clients and Readers,

The essence of call-off stocks is that vendors do not need to register in the country of destination and include local VAT in the price of their goods when delivering to a warehouse in another Member State. Instead, the person acquiring the goods may fulfil their tax payment liability through a reverse charge procedure under the rules applying to intra-Community acquisition of goods.

Differences between Member State regulations caused several problems concerning call-off stocks in the past, but starting from 2020, call-off stocks have been subject to uniform rules within the EU. Compared to former Hungarian regulations, this simplifies some rules but also imposes some more stringent ones.

Rules simplified

• According to former Hungarian rules, call-off stocks always implied that the goods concerned were stored in a warehouse, whether owned or rented by the person acquiring them. The new rules no longer stipulate this. The warehouse may belong to a third-party logistics service provider acting on behalf of or at the expense of the vendor. (Please note that any warehouses rented directly or owned in the country of destination may result a fixed establishment, leading to non-compliance with the conditions of call-off stocks.)
• The old rules assumed that the sale of goods (i.e. the transfer of ownership) occurs at the time when the stocks are called from the warehouse upon the initiative of the person acquiring the goods. Starting from 2020, the parties may specify the time when the goods are sold in a fairly flexible manner: the new rules only stipulate that, under an agreement, the person acquiring the goods may acquire ownership at a later time.
• The new rules allow a change in the person acquiring the goods after dispatch to the call-off stocks (within a 12 month period mentioned subsequently) provided that a new agreement meeting the conditions applicable to call-off stocks already exists between the vendor and the new buyer at the time when the agreement with the initial buyer is terminated.^[1]

^[1] If the goods intended for the first buyer are sold to a new one based on a ‘sudden decision’. e.g. because the latter offers a higher price, the transaction will not comply with this condition. In this case the only option is to register and sell the goods with local VAT.

Rules becoming more stringent

• The vendor must not be established in the country of destination for business purposes. This is categorically prohibited by the new rules, even though formerly – according to certain interpretations – local sites were permitted for other transactions non-related to the call-off stock.
• The buyer’s tax number registered in the country of destination must be known and valid at the time of dispatching the goods. The former regulation was more flexible concerning tax numbers with registration in progress or those not properly documented.
• Dispatching goods must also be reported in the ECSL with reference to the buyer’s tax number (it must be included in Form 20A60 without value of the goods, as a so-called ‘call-off stock movement’). No such requirement existed before, although goods transported by road had to be included in the EKAER report also under the old rules above a certain limit.
• If the goods are not sold within 12 months from their arrival in the country of destination, the vendor must register a tax number in that country and report the transfer of their own goods to another member state.
• According to the Directive, the goods must be transported by the vendor or a third party acting on its behalf. Due to differences in wording, this limitation is not apparent in the text of the Hungarian law, but the Hungarian Tax Authority has confirmed in a written statement that the simplification of call-off stock arrangements is not applicable if the customer or a transport company acting on behalf of the customer collects the goods in the vendor’s Member State.

Unchanged rules

• Keeping appropriate records remains an important condition for the application of call-off stocks simplifications. The records may be kept by a third-party logistics service provider.
• The call-off stocks rules apply even if certain goods are returned to the vendor before transfer of ownership provided that such movement is appropriately entered into the records.

Transitional rules

Under the transitional rules, goods transported to a different Member State as call-off stocks before 1 January 2020 according to the then effective rules must be reported as an intra-Community transfer of own goods between the tax numbers registered in Hungary and in the other Member State if this transaction is taxable as intra-Community acquisition of goods under the regulations of the country of destination.

If, under the regulations of the country of destination, the transported goods meet all conditions for call-off stocks according to the single treatment of 2020, they do not need to be reported in the country of destination even if the transaction did not fully comply with the Hungarian call-off stocks rules effective before 1 January 2020. (A case in point is when the goods were stored in a warehouse not owned or rented by the person acquiring the goods because this is no longer relevant under the rules of 2020.)

At the end of 2019 the European Committee released ‘Explanatory Notes’ in this regard, which may provide further guidance for the interpretation of the new rules.

If you have any questions about call-off stocks, please do not hesitate to contact our staff.

With regards,

ABT Treuhand Group[/vc_column_text][/vc_column][/vc_row]