Many Danish export companies have difficulty finding out what reports they must make about their sales of goods to customers in other EU countries.
When companies within the EU sell goods or services to companies in other EU countries (B2B sales), the sale must take place without charging VAT on the invoice, because the sale is covered by the reverse charge mechanism. This means that the buyer must settle the VAT.
In Denmark, certain conditions must be met for the invoice to be issued without VAT. Among other things, the seller must ensure that the buyer’s VAT number is correct, just as the seller must report the sale in blank B on the VAT return, but also to the EC Sales List – that is in two places.
Reporting to the EC Sales List has become an actual duty in Denmark, but there are apparently some companies that are not aware of this. The Danish Tax Agency has therefore in the autumn of 2020 sent letters to around 10,000 companies and made them aware of the duty. At the same time, they have asked them to report their EC sales to the EC Sales List with retroactive effect by January 2020.
The EC Sales List
The list a control system that the tax authorities in the respective EU countries use to ensure correct VAT processing of the goods and services traded within the EU. It is a supplement to the companies’ duty to verify the validity of their EU customers’ VAT number. A verification that must take place on an ongoing basis and at least quarterly.
The reporting to the EC Sales List is used at European level to coordinate trade between two companies in different countries. The amount that the seller reports they have sold goods or services for to the buyer must be able to be reconciled with the amount that the buyer reports that they purchased for in other EU countries. In this way, the authorities in the various countries can control that the VAT due is paid.
In Denmark, the reporting must typically take place on the 25th of the following month, and the reporting must correspond to the amount that is reported in blank B on the VAT return.
Consequences of non-reporting
Non-reporting to the EC Sales List is an indication that the sale does not meet the conditions for having taken place with VAT and may result in an inspection from the Danish tax authorities. If it can’t be proven that the buyer has a valid VAT number at the time of sale, the authority can require the seller to settle VAT with 25% of the invoice amount.
The risk of not being able to verify the buyer’s VAT number obviously increases over time. Partly because the costumer may have changed VAT number or been sold, terminated or gone bankrupt. In addition, the work effort of having to verify a previous customer’s VAT number will be much greater than in relation to a current customer. There are therefore many good reasons to ensure proper reporting to the EC Sales List.
In addition, a missing report will entail that there is no agreement between the statements from the parties involved in a commercial transaction. This also means that the authorities in the buyer’s country do not receive information via the report that a given company has purchased goods or services in another EU country, for which they are liable to pay in their own country. This weakens the control potentials.