A stock abroad can either be established as a call-off stock or as a consignment stock. The latter type generally requires the Danish company to be registered for VAT in the country in which the stock is located.
It is not uncommon for Danish export companies to establish stocks abroad – either based on customer requests or because it is logistically appropriate. Such storage is established either as a call-off stock or as a consignment stock. In both cases, the Danish company retains ownership of the goods until the goods are withdrawn from the stock.
Only a single customer has access to a call-off stock. It can be located either at the customer’s premises or at third parties, but the customer controls the stock and can take off the inventory whenever he needs it. The customer must be able to document movements. Billing occurs when items are taken off the stock.
Several customers have access to a consignment stock. The owner documents movements. Also in this case, billing occurs as items are taken off the stock.
The VAT implications of establishing a stock abroad vary from country to country. However, many countries have similar rules.
When establishing a stock in another EU country, as a starting point, the Danish company - regardless of the type of stock chosen - must be registered for VAT in the country where the stock is established and pay VAT on the purchase price of the goods. Usually, this can be deducted on the VAT declaration in the same country.
When the foreign customer collects goods from the stock, this is considered a domestic delivery. This means that the Danish company must issue an invoice to the customer and apply the VAT rate of the country in question concerning the goods withdrawn from the stock. However, some countries - excluding Denmark - have introduced rules meaning that the seller does not always have to register for VAT abroad. In the following, the rules for certain countries are listed to illustrate the significant differences.
Germany and the UK
In both of these countries, the seller is not required to register for VAT, if the established stock is a call-off stock. In this case, the movement of goods is considered a EU sale of goods directly to the customer and can therefore be completed without Danish VAT. Instead, the customer must pay VAT locally on the purchase price of the goods. In Germany, this is a relatively new practice. Hence, the exact requirements in order to be exempt from VAT registration are not entirely clear.
In the Netherlands, the simplification applies to both call-off stocks and consignment stocks.
All goods must be processed by customs before entering Norway, and the Danish company will have to pay import VAT. Only if the end customer is specified as an importer, VAT registration can be omitted.
The above article is taken from tax:watch, our electronic English newsletter on Danish Tax and VAT matters. tax:watch is issued on the last Friday of each month and is free of charge. Please sign up here.