ViDA, Consignment Stock and SAP: Preparing Your Systems for Change
For many businesses, particularly in the automotive sector, speed of supply is critical. Production lines cannot afford to stop because a component is sitting in a warehouse hundreds of kilometres away. To support just-in-time manufacturing, suppliers frequently hold stock close to their customers, often in warehouses located on or near the customer’s premises.
Under these arrangements, goods are physically available for immediate use, while legal ownership remains with the supplier until the customer withdraws the goods from stock. This enables rapid fulfilment, reduces transport lead times, and helps manufacturers maintain lean inventory levels.
While commercially attractive, holding stock in another EU Member State has historically created VAT challenges. Without simplification measures, suppliers often face local VAT registration obligations simply because they hold inventory in another country. The introduction of the EU “call-off stock quick fix” in 2020 provided significant relief.
VAT Treatment Without the Call-Off Stock Quick Fix
In the absence of the call-off stock simplification, the movement of goods to a warehouse in another Member State is generally treated as a transfer of own goods.
From a VAT perspective, this creates two separate transactions:
- An intra-Community transfer of the supplier’s own goods from the Member State of dispatch.
- A deemed intra-Community acquisition by the supplier in the Member State where the stock is located.
As a result, the supplier is normally required to obtain a VAT registration in the country where the stock is held.
When the customer subsequently takes ownership of the goods, a domestic sale takes place in the Member State of storage. The supplier must charge local VAT unless the extended reverse charge mechanism applies.
For multinational businesses holding stock across multiple Member States, these requirements can create substantial administrative burdens, both in terms of VAT, and in getting these transactions determined correctly in SAP.
The Benefit of the Call-Off Stock Quick Fix
The call-off stock quick fix was introduced in January 2020 to remove the need for suppliers to obtain a local VAT registration merely because they hold stock for a known customer in another Member State.
Certain conditions must be fulfilled in order for the simplification to apply, such as the goods are moved to another Member State for a known VAT registered customer identified in advance, ownership transfers within twelve months, the supplier is not established in the destination Member State, and detailed call-off stock records and reporting requirements are maintained.
Where the conditions are met, the movement of goods is not treated as a transfer of own goods. Instead, the entire transaction is treated as a single intra-Community supply occurring only when the customer withdraws the goods.
The supplier reports an intra-Community supply in the Member State of dispatch, and the customer reports an intra-Community acquisition in the Member State where the goods are withdrawn.
As a result, the customer effectively self-accounts for the VAT due on the acquisition, while the supplier avoids the need for a VAT registration in the country where the stock is held.
In practice, this has significantly simplified VAT compliance for many automotive, industrial manufacturing and spare parts businesses.
Introducing ViDA
VAT in the Digital Age (ViDA) is the European Union’s largest VAT reform programme in decades. Its objectives are to modernise VAT reporting, reduce fraud and simplify cross-border VAT compliance.
ViDA is built around three pillars:
- Digital Reporting Requirements (DRR) and eInvoicing.
- New VAT rules for platform businesses.
- Single VAT Registration through expansion of the OSS regime.
The third pillar is particularly relevant for businesses operating call-off stock arrangements because it introduces a new mechanism for reporting transfers of own goods across Member States.
The End of the Call-Off Stock Quick Fix
As part of the ViDA reforms, the call-off stock simplification will be withdrawn. From 1st July 2028, businesses will no longer be able to enter into new call-off stock arrangements under the current quick fix rules, while existing arrangements may continue under transitional provisions until 30th June 2029.
The rationale is that ViDA introduces a broader Single VAT Registration (SVR) framework and expands the use of the One Stop Shop (OSS), reducing the need for a separate simplification designed to avoid multiple VAT registrations.
This means:
- Cross-border transfers of own goods are expected to be reportable through the expanded OSS framework in a monthly declaration (separate to the current B2C OSS).
- The subsequent domestic sale is also intended to fall under the new SVR rules, whereby the extended reverse charge would apply mandatorily (where the customer is VAT registered in the Member State of sale of the goods).
- Overall VAT compliance is expected to become more centralised, with reporting largely managed through a single VAT registration in the Member State of identification of the supplier.
Tax Codes and VAT Return Reporting
However, during the transition period, businesses may need to consider both sales made under the quick fix, as well as new consignment stock sales agreements which would be reportable under the OSS (if used) for the movement of own goods, which will present challenges both from a VAT but also an SAP perspective. Business will need to ensure that correct (potentially new) tax codes are used, and a good tax determination solution will be essential, in order to ensure that transactions are reported in the correct compliance process, and in the correct VAT declarations.
For example, if sales made under the mandatory reverse charge are invoiced under the suppliers VAT ID in his country of establishment, these would need to be correctly reported in the VAT return of the country of establishment, and not in the country of sale of the goods (on the basis that the supplier is not VAT registered in that Member State, and that country does not request such sales to also be reported locally). Many Member States already require sales made outside of the scope of VAT to be reported in their own jurisdiction, or may implement new fields for same in their VAT return form, which would need to be mapped correctly to tax codes used for same.
Many existing VAT configurations were designed around local VAT registrations rather than OSS reporting, and as such, will cause reporting errors and complications if not handled correctly.
eInvoicing and eReporting
Digital Reporting Requirements (DRR) which will replace the EC Sales List, and eInvoicing for inner EU B2B sales, are expected to come into effect as of 1st July 2030 (notwithstanding any delays). Companies will also need to correctly identify which intra-Community dispatches of goods will be subject to DRR or eInvoicing as of July 2030, and which dispatches relate to movements of own goods, and are out of scope of this new obligation.
Again, from a system perspective, it will be essential to ensure that the sales flows are set up correctly, the correct VAT determination is applied, tax codes are correctly allocated, and the transactions are reported accurately.
With an expected timeframe of only 10 days to report all transaction level data relating to intra-Community dispatches to the respective EU VAT Authorities in line with DDR, businesses must ensure that they have a robust process in place for both VAT determination and also for VAT compliance.
ERS and Self-Billing
Many businesses, particularly in the automotive industry, operate Evaluated Receipt Settlement (ERS) or self-billing processes in SAP. Invoicing formats relating to sales made under the mandatory reverse charge may need to be changed by the customer as of July 2028, to ensure that these are issued under the VAT ID of the country of establishment of the EU-based supplier, and that the exemption text indicating the reverse charge (Article 194 of the EU VAT Directive) is clearly shown on the invoice.
Where summary invoices are issued, which is typical for consignment stock sales, these may not exceed a calendar month and will need to be issued by the 10th day of the following month.
The Importance of an effective VAT Determination Solution
A longstanding challenge in SAP is the handling of complex VAT determination scenarios, particularly where reverse charge mechanisms, stock transfers, and cross-border transactions interact.
As ViDA introduces:
- Expanded OSS reporting,
- Mandatory domestic reverse charge rules in certain scenarios,
- New transfer-of-own-goods reporting requirements,
the risk of incorrect VAT treatment increases significantly, especially where the business is VAT registered in EU Member States due to carrying out other taxable activities which cannot be reported under SVR.
For this reason, many businesses may need to strengthen their VAT determination framework through specialised VAT determination solutions capable of applying the correct treatment automatically.
Under ViDA, VAT compliance will become increasingly data-driven. The quality of VAT logic embedded within SAP will directly impact the accuracy of eInvoicing, digital reporting and OSS compliance.
Where Meridian can help
In the context of ViDA, the OSS expansion under SVR, and digital reporting, many businesses will find that standard SAP VAT logic will struggle to ensure consistent compliance across multiple jurisdictions.
VAT determination in SAP often relies on a combination of correct and complete master data, and country-specific configurations that can struggle to keep pace with dynamic rules such as reverse charge applicability, SVR logic, and reporting distinctions between genuine supplies and movements of own goods. Even where the master data is correct, standard SAP determination logic is inherently limited in its ability to evaluate complex VAT legislation.
Meridian Global Services is a well-established VAT and SAP expert with extensive experience in supporting businesses simplify their determination and compliance processes, ensuring correct results and optimal processes. If you would like to discuss your current set-up or explore how our solutions could support your business, please reach out to us, or visit our website for further details to learn what we can do for you -> www.meridianglobalservices.com