EU VAT & Cross-Border Rules

Why A? And why not the others?

Correct answer: A. The supply is taxed in Sweden, where the customer is established, and the Swedish customer self-assesses the VAT under the reverse charge because the Polish supplier is not established there

Article 44 of the EU VAT Directive sets the general B2B place-of-supply rule as the member state where the customer is established, so this advisory service is taxed in Sweden. Because the Polish supplier has no establishment in Sweden, Article 196 shifts liability for accounting for that Swedish VAT onto the Swedish business customer itself under the reverse charge, meaning the supplier issues an invoice without charging VAT and the customer self-assesses it on their own return. The option putting taxation in the supplier's member state describes the older default rule that still applies to B2C services and to certain excepted B2B services, but not to the general B2B rule in the scenario described. The option treating the supply as automatically exempt confuses this services transaction with the separate zero-rating regime for intra-Community supplies of goods under Article 138, which has no equivalent blanket exemption for cross-border B2B services. The option restricting the reverse charge to non-EU suppliers is incorrect because Article 196 applies whenever the supplier lacks an establishment in the customer's member state, whether that supplier is established elsewhere in the EU or outside it entirely.

Source: EU VAT Directive (2006/112/EC), Articles 44 and 196 (place of supply of B2B services and reverse charge liability)

Why B? And why not the others?

Correct answer: B. In the member state where each private consumer is established, has their permanent address, or usually resides, regardless of where the supplier is established

Article 58 fixes the place of supply for telecommunications, broadcasting and electronically supplied services to a non-taxable person as the customer's own member state of establishment, permanent address, or usual residence, and since 1 January 2015 this destination-based rule applies to EU-established suppliers as well as non-EU ones, so the Dutch company owes VAT in each consumer's own member state. The option confining Article 58 to non-EU suppliers describes the rule as it stood before 2015, when destination-based taxation of these services applied only to non-EU suppliers selling into the EU to prevent EU suppliers gaining a competitive edge from lower home-country VAT rates; that asymmetry was removed by extending the same rule to EU suppliers. The option pointing to server location is a common but incorrect proxy, since VAT law looks to the legal test of the customer's residence or permanent address, not the physical location of hosting infrastructure. The option claiming digital products fall outside VAT's scope is wrong because electronically supplied services are expressly defined and taxed under the Directive; they are simply classified as services rather than goods, not exempted from tax.

Source: EU VAT Directive (2006/112/EC), Article 58, as amended by Council Directive 2008/8/EC (place of supply of telecommunications, broadcasting and electronically supplied services), effective 1 January 2015

Why C? And why not the others?

Correct answer: C. It charges VAT at the rate of each customer's member state of consumption but reports and pays all of that VAT through a single quarterly return filed with the tax authority of its member state of identification, which then redistributes the VAT to the other member states

Once the EUR 10,000 threshold is exceeded, intra-EU distance sales of goods are taxed in the customer's member state of consumption at that state's own VAT rate; the Union OSS scheme does not change which rate applies, but it lets the retailer avoid registering in every consumer's member state by filing a single quarterly return with its member state of identification, which collects the VAT and passes it on to the member states where it is actually due. The option applying only the home-country rate to every sale misunderstands OSS as a rate simplification rather than a filing simplification: the destination rate still governs the tax charged, only the reporting is centralised. The option describing OSS as merely a shared login for separate registrations gets the mechanism backwards, since eliminating the need for multiple member-state VAT registrations is the entire purpose of the scheme. The option describing a flat EU-wide digital services levy invents a charge that does not exist in this regime; OSS is a reporting and remittance mechanism for ordinary VAT on distance sales, not a substitute tax.

Source: EU VAT Directive (2006/112/EC), Title XII Chapter 6 (Union scheme of the One Stop Shop), as introduced by Council Directive (EU) 2017/2455 and Council Directive (EU) 2019/1995, effective 1 July 2021

Why D? And why not the others?

Correct answer: D. The retailer charges VAT at the point of sale at the rate of the consumer's member state, declares and pays it through a single monthly IOSS return, and the goods are then released at import without VAT being collected again at the border

IOSS lets a registered seller charge VAT to the consumer at checkout, at the rate applicable in the consumer's own member state, and remit it through one monthly return filed in a single member state; customs then releases the goods on import without collecting VAT again, avoiding double taxation and delay at the border. The option requiring VAT to be paid at first entry and reclaimed afterward describes the opposite of the intended effect: IOSS exists precisely to stop import VAT being collected at the border for goods already carrying point-of-sale VAT under the scheme. The option treating IOSS as automatic below EUR 150 is wrong because the scheme is voluntary; a seller that does not register still faces normal import VAT collection procedures at the border, including handling by the courier, on qualifying low-value consignments. The option limiting IOSS to customs duty misstates the scheme's scope: parcels within the EUR 150 threshold are, in any event, exempt from customs duty regardless of IOSS use, and IOSS itself is specifically the mechanism for VAT, not duty.

Source: EU VAT Directive (2006/112/EC), Title XII Chapter 6 (Import scheme / IOSS) and Article 143(1)(ca); effective 1 July 2021

Why B? And why not the others?

Correct answer: B. At least two mutually consistent pieces of evidence issued by two different, independent parties, drawn from transport documents such as a signed CMR note or bill of lading, and/or supporting documents such as an insurance policy for the transport or a bank confirmation of payment for it

Article 45a creates a rebuttable presumption that goods have been dispatched or transported to another member state where the supplier holds at least two non-contradictory pieces of evidence issued by two different parties that are independent of each other and of the supplier and customer, combining transport documents such as a signed CMR consignment note, bill of lading or airway bill with supporting documents such as an insurance policy covering the transport or bank records showing payment for it. The option relying on a single delivery note fails because the presumption requires at least two independent pieces of evidence, not one document from a single, interested party such as the customer itself. The option treating a valid VAT identification number as the only condition confuses two separate Quick Fixes requirements: a valid VAT number is indeed a substantive condition for the Article 138 exemption itself, but it is entirely distinct from the Article 45a evidentiary presumption about proof of transport, which has its own separate documentary conditions. The option treating the invoice as transport evidence is wrong because a sales invoice records the commercial transaction, not the physical movement of goods, and is not among the transport or supporting documents listed under Article 45a.

Source: Council Implementing Regulation (EU) 2018/1912, inserting Article 45a into Implementing Regulation (EU) No 282/2011, read with Article 138 of the EU VAT Directive (2006/112/EC); effective 1 January 2020

Why A? And why not the others?

Correct answer: A. The transfer of the goods into Spain is not treated as a deemed intra-Community supply at that point and triggers no German VAT registration obligation in Spain; VAT is instead accounted for only when the customer draws the goods from the warehouse, treated as an intra-Community supply by the German manufacturer to the Spanish customer at that later time

Article 17a's call-off stock relief defers the VAT point past the initial cross-border movement of the supplier's own goods: no deemed intra-Community supply arises when the goods enter the destination warehouse, and no VAT registration is triggered there for the supplier, provided the customer is already known, both parties are VAT-registered, the supplier has no fixed establishment in that member state, and the goods are drawn down within 12 months; the taxable intra-Community supply and corresponding acquisition arise only once the customer actually takes the goods from the warehouse. The option requiring immediate Spanish registration and self-assessment at the border describes the position that applied before this relief existed, which is exactly what the simplification was designed to remove. The option requiring the customer to be unidentified inverts a core condition of the relief: the customer's identity must be known to the supplier in advance for the simplification to apply at all, not unknown. The option claiming the movement need not be reported at all is wrong because the supplier must still record the transfer and report it in its recapitulative (EC Sales List-type) statement, even though no VAT becomes due at that stage.

Source: EU VAT Directive (2006/112/EC), Article 17a, as inserted by Council Directive (EU) 2018/1910 (the 2020 Quick Fixes); effective 1 January 2020

Why D? And why not the others?

Correct answer: D. Company B does not need to register for VAT in Austria; it reports its onward sale to Company C as a triangulation-simplification supply on which Company C accounts for the VAT under the reverse charge, while Company B's own acquisition of the goods from Company A is treated as exempt in Austria under the simplification

Article 141's triangulation simplification exists precisely so that an intermediary in a qualifying three-party, three-member-state chain does not have to register in the customer's member state: Company A's sale to Company B is a zero-rated intra-Community supply under Article 138, Company B's deemed acquisition of the goods in Austria is exempted from Austrian VAT under the simplification, and Company B's onward sale to Company C is reported with Company C accounting for Austrian VAT itself under the reverse charge. The option requiring Company B to register in Austria because it holds legal title there is exactly the outcome the simplification is designed to avoid, since without it an intermediary taking title mid-chain would otherwise need a local registration. The option conditioning the relief on Company C arranging transport gets the transport requirement backwards: the goods must move directly from the first supplier to the final customer, arranged by either the first supplier or the intermediary (or someone acting on their behalf), not by the final customer, for the simplification to apply. The option asserting that the first supply is always taxed in the intermediary's member state is wrong because that first leg is a zero-rated intra-Community supply of goods under Article 138, not a domestically taxed sale in Germany.

Source: EU VAT Directive (2006/112/EC), Article 141 (triangulation simplification)

Why C? And why not the others?

Correct answer: C. VAT is charged only on the dealer's profit margin, the difference between the dealer's selling price and the price paid to the private individual, with the VAT itself treated as included within that margin rather than added on top of the full selling price

Under Articles 313 and 315, the margin scheme taxes only the dealer's profit margin, defined as the selling price charged by the dealer less the purchase price paid, with VAT treated as already included in that margin rather than charged on top of the full selling price; this exists because the goods were bought from a private individual who could not have charged or recovered VAT, so taxing the full resale price again would tax the same value more than once. The option charging VAT on the full selling price ignores that the margin scheme changes the taxable amount itself, not merely how records are kept; that is the entire point of the special scheme. The option comparing the selling price to a hypothetical new-goods price uses the wrong reference figure: Article 315 defines the margin by reference to the price actually paid by the dealer to acquire the item, not to any notional replacement-as-new value. The option claiming no VAT is due at all invents a blanket cascading-relief rule that does not exist; the margin scheme still imposes VAT, just calculated on the margin rather than exempting the transaction entirely.

Source: EU VAT Directive (2006/112/EC), Articles 313 and 315 (margin scheme for second-hand goods)

Why B? And why not the others?

Correct answer: B. It notifies its own Slovenian tax authority of its intention to use the cross-border exemption, receives an identifier with an 'EX' suffix from that authority, and then files a single quarterly report to Slovenia disclosing the turnover generated in each other member state where it applies the exemption

The 2025 SME scheme reform lets a small business access the exemption across the EU through a single point of contact: it notifies its own member state of establishment, is issued an identifier carrying an 'EX' suffix, and then files one quarterly report to that home authority showing the turnover it generated in each other member state where it wants the exemption applied, rather than dealing with each destination country separately. The option requiring separate applications to every destination member state describes the old, purely domestic version of the scheme that the 2025 reform specifically replaced by introducing mutual recognition through the home member state. The option treating the exemption as automatic once the turnover figure is confirmed skips the mandatory notification and EX-identifier steps that the reform still requires before the exemption can actually be applied in other member states. The option tying eligibility to Slovenia's own domestic turnover in each destination country conflates two separate thresholds: the domestic threshold (up to EUR 85,000) governs exemption within a business's own member state, while the EUR 100,000 EU-wide ceiling is the specific test that unlocks the cross-border exemption described in the scenario.

Source: Council Directive (EU) 2020/285, amending the EU VAT Directive's special scheme for small enterprises; effective 1 January 2025

Why D? And why not the others?

Correct answer: D. Because the combined total across both years is below EUR 10,000, the seller may treat these supplies as taxed in Ireland under domestic Irish VAT rules, though it can still choose to apply destination-based taxation, including registering for the One Stop Shop, voluntarily instead

Article 59c sets a single combined EUR 10,000 EU-wide threshold, assessed on the current year's turnover together with the previous year's, covering distance sales of goods and cross-border telecommunications, broadcasting and electronic services together; as long as the combined figure for both years stays below that amount, the seller may continue treating these supplies as domestic Irish supplies taxed at Irish rates, while still being free to opt into destination-based taxation and OSS registration voluntarily even though under the threshold. The option splitting the threshold into separate EUR 10,000 allowances for goods and for services misstates the rule, which combines both categories into one shared ceiling rather than doubling the available headroom. The option treating supplies under the threshold as VAT-exempt is wrong because staying under the threshold does not remove the supplies from VAT; it simply lets the seller apply its home member state's domestic VAT rules to them instead of destination-based rules. The option ignoring the prior year's turnover is wrong because Article 59c requires looking at both the current and preceding calendar year's combined sales, not the current year in isolation, to determine whether the threshold has been exceeded.

Source: EU VAT Directive (2006/112/EC), Article 59c (EU-wide distance-selling threshold), as introduced by Council Directive (EU) 2017/2455, effective 1 July 2021