Overview: intra-community supplies within the EU
An Intra-Community Supply of goods (ICS) refers to the supply of goods by a VAT-registered supplier in one EU Member State to a VAT-registered customer in another EU Member State, where the goods are dispatched or transported cross-border within the EU. In most cases, the VAT treatment is an exemption in the country of departure (or 0% VAT rate) and a corresponding intra-community acquisition taxed by the customer in the country of arrival under the reverse charge. In short: the seller does not charge VAT on the invoice; the buyer accounts for VAT as an intra-community acquisition of goods in their VAT return.
Legal basis and scope: VAT within the European Union
ICS is rooted in the EU VAT framework (the common system of value-added tax) that coordinates VAT laws across the 27 EU Member States. While the Directive sets common rules for intra-community supplies of goods, each Member State of the EU implements them in local legislation (e.g., “Article 7 of the VAT Act” in some countries). Always verify local tax regulations for details such as documentation, deadlines, and penalties.
Conditions that must be met for an ICS
To treat a cross-border B2B movement of goods as an intra-community supply, the following conditions must be met:
- Supplier and customer are businesses in different Member States, both registered for VAT (valid VAT number for the customer).
- The goods must be dispatched or transported from one EU Member State to another EU Member State (i.e., physical movement of goods across an internal EU border).
- The supplier can prove the transport to another EU country with appropriate documentation (e.g., CMR, bill of lading, carrier confirmation).
- A correct VAT invoice is issued that refers to the supply as an intra-community supply, quotes both VAT numbers, and applies the 0% VAT rate.
- The transaction is reported correctly in VAT compliance filings (domestic VAT return, EC Sales List/recapitulative statement, and possibly Intrastat).
If any of these conditions fail, the supply might be subject to local VAT in the country of departure.
VAT treatment: exemption in the country of departure
For a qualifying ICS, the supplier applies a 0% VAT rate (exemption with credit) in the country of departure and reports the sale as an intra-community supply. The customer reports an intra-community acquisition in their Member State and calculates and collects VAT via the reverse charge (self-assessment). This intra-community supply and acquisition mechanism keeps VAT due where consumption occurs—i.e., where the goods occur at arrival.
Intra-Community Acquisition (ICA): the buyer’s side
When goods arrive in the buyer’s Member State, the buyer records an intra-community acquisition of goods. The buyer usually:
- Self-assesses output VAT at the local VAT rate applicable to the purchase of goods.
- Claims the same amount as input VAT (subject to normal deduction rules), resulting in a wash for fully taxable businesses.
- Includes the acquisition in the VAT declaration/VAT return.
This is the “mirror image” of ICS and is essential for correct VAT compliance within the EU.
ICS at a glance — comparison table
| Topic | Intra-Community Supply (ICS) — Seller (Member State of departure) | Intra-Community Acquisition (ICA) — Buyer (Member State of arrival) | Domestic B2B sale (no cross-border) |
| VAT on invoice | 0% VAT (exempt with credit) if conditions are met | No VAT on supplier invoice; usually buyer self-assesses VAT (reverse charge) at local rate | Supplier charges domestic VAT at local rate |
| Reporting | VAT return (exempt sale); EC Sales List; Intrastat dispatches (if threshold) | VAT return (acquisitions); Intrastat arrivals (if threshold) | VAT return; no ESL/Intrastat cross-border duties |
| Mandatory invoice data | Both EU VAT numbers; ICS wording (e.g., “intra-Community supply — 0%”); transport reference if required | Buyer’s valid VAT number; internal reference to ICA (accounting side) | Standard domestic invoice elements |
| Proof required | Evidence of transport A→B (e.g., CMR, bill of lading, carrier confirmation) | Keep purchase docs; transport proofs received from supplier/carrier | Not applicable (no cross-border movement) |
| Typical checks | Validate buyer VAT number (VIES), match invoice↔logistics↔ESL/Intrastat | Correct VAT rate for self-assessment; timely acquisition reporting | Correct domestic rate and invoice rules |
| Common pitfalls | Missing/invalid VAT number; missing transport proof; late ESL/Intrastat | Omitting ICA in VAT return; applying wrong VAT rate | Misclassifying installation/assembly supplies |
| Applicable schemes | Not OSS (B2B); classic reverse charge applies | Reverse charge; input VAT deduction per local rules | Domestic rules; OSS not relevant |
Documentation and evidence: invoice + transport proof
To support the exempt from VAT treatment:
- VAT invoices must show both parties’ VAT numbers, the phrase “intra-community supply,” the 0% VAT rate, and the place of supply logic (reverse charge by the customer).
- Proof of transport is critical. Keep shipping documents, carrier confirmations, and correspondence showing that goods to other EU countries actually left the territory of the supplier’s Member State and were deliver to the buyer.
- Align data across the invoice, logistics documents, EC Sales List, and Intrastat to reduce audit risk.
Place of supply for goods: one EU to another EU Member State
For intra-community supplies, the place of supply for the seller’s exemption is the country of departure provided the goods physically leave to another EU Member State. Usually, the buyer’s intra-community acquisition is taxed in the country of arrival. If goods or services include installation or assembly, local rules can change the place of supply.
Triangulation and chain transactions: simplify complex flows
When there are businesses in different EU countries in a chain (A → B → C) and goods to another Member State move directly from A to C:
- Triangulation simplification can remove the need for the intermediary (B) to register for VAT in the destination state.
- Correct identification of the single intra-community supply linked to the movement of goods and the deemed acquisition by the intermediary depends on which party arranges transport and how conditions must be met.
- Accurate VAT invoices, valid VAT numbers, and correct recapitulative statements are essential to preserve the simplification.
Compliance filings: VAT return, EC Sales List, Intrastat
Typical VAT compliance steps for an ICS (seller) include:
- Report the net sale as intra-community supply in the domestic VAT return.
- File the EC Sales List (ESL/recapitulative statement) listing VAT numbers and values of intra-community supplies of goods.
- Submit Intrastat dispatches if thresholds are met, as the movement of goods is a statistical obligation separate from taxation.
On the buyer side (ICA), include acquisitions in the VAT return and Intrastat arrivals where required.
Worked example: basic ICS and acquisition of goods
- A Polish business (PL VAT-registered) sells machinery to a German business (DE VAT-registered). The goods are shipped from Poland to Germany.
- The Polish supplier issues a VAT invoice at 0%, citing both VAT numbers and ICS wording. It reports the sale in the Polish VAT return, the EC Sales List, and Intrastat (if over thresholds).
- The German customer declares an intra-community acquisition of goods in Germany and reverse charges VAT at the German VAT rate. For a fully taxable purchaser, input VAT recovery typically offsets the self-assessment.
ICS checklist for suppliers (within the EU)
- Verify the customer’s VAT number (and status) before shipping.
- Ensure the goods must move from one EU Member State to another EU Member State; align Incoterms and carriers.
- Issue a compliant VAT invoice with ICS wording and 0% VAT rate.
- Collect and archive proof of transport and commercial correspondence.
- Report the sale in the domestic VAT return, EC Sales List, and Intrastat where applicable.
- Review special rules for new means of transport and excise goods.
- For chain or triangulation deals, confirm who is the supplier and customer for the intra-community supply and acquisition, and apply simplifications correctly.
You can find more information here:
https://taxation-customs.ec.europa.eu/taxation/vat/vat-directive/place-taxation_en
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02006L0112-20240101
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