Cross-border VAT: challenges, opportunities and the future of tax compliance

Amanda Attard

Ganado Advocates, Malta

aattard@ganado.com

Report on a session presented at The New Era of Taxation conference in Milan by the IBA Taxes Committee

Friday 12 September 2025

Co-chairs

Wouter Vosse Hamelink & Van den Tooren, Amsterdam

Mariana Eguiarte-Morett Garrigues, Mexico City

Speakers

Christina Rinne Niederer Kraft Frey, Zürich

Pietro Bricchetto Gatti Pavesi Bianchi Ludovici, Milan

Lars Gläser Glaeser Law, Vienna

Matthias Oldiges KMLZ, Düsseldorf

Introduction

The panel discussed the complexities of VAT on cross-border transactions with a specific focus on the supply chain of goods supplied by a non-European Union taxable person into the EU and subsequent intra-community supplies. As the panel was composed of experts from Germany, Italy, Austria and Switzerland, each of the speakers shared their insight on the VAT treatment and challenges encountered in their respective jurisdictions.

Panel discussion

The panel was co-chaired by Wouter Vosse and Mariana Eguiarte-Morett, who set the tone for a highly technical yet practical discussion. Vosse introduced the panel; Eguiarte-Morett outlined the objectives of the session and explained that the session would be structured around three scenarios:

1. importation of goods into the EU and Switzerland, focusing on VAT implications at the border;
2. domestic and intra-community supplies, examining what happens once goods are imported and how VAT applies when traded within a single EU country or across EU Member States; and
3. e-commerce and digital platforms, looking at cases where online platforms stand between suppliers and customers, with comparisons between the EU and Switzerland, in respect of which the latter has recently introduced new rules.

This structured approach allowed the speakers to present both general frameworks and jurisdiction-specific examples, offering the audience a clear understanding of common challenges and divergent practices across the EU and Switzerland.

Scene setting: supply chains and VAT neutrality

Lars Gläser opened with a general overview of how international supply chains typically operate. Goods often move from manufacturers outside the EU (eg, Mexico, Asia or Switzerland) through wholesalers and retailers before reaching business-to-business customers within the EU.

He reminded the audience of a core VAT principle – that VAT should be neutral along the chain. At each stage, VAT is collected but also deducted or refunded, so that the final consumer ultimately bears the tax. However, neutrality is fragile. If one actor in the chain fails to comply, the burden of VAT can shift, creating unexpected costs. In extreme cases, these costs can lead to insolvency, particularly where large import VAT amounts cannot be recovered.

Gläser stressed the importance of determining the importer of record (IOR). Customs duties and import VAT must be settled at the border, and an EU-based entity is required to file customs declarations. While non-EU manufacturers can act as the IOR, they must appoint a customs agent in the EU, and many agents are reluctant to assume this liability. The practical takeaway was that there must always be someone established in the EU to act as declarant and bear the responsibility for compliance.

Scenario 1: importation and Procedure 42

The first scenario explored the VAT implications of goods imported into Austria with onward transport to another EU Member State, such as Germany.

Procedure 42 was highlighted by the panel as a valuable simplification. Under this mechanism, goods imported into Austria and destined for Germany are released into free circulation without Austrian import VAT being charged. Instead, VAT liability shifts directly to the German recipient as an intra-community acquisition. While customs duties still apply in Austria, this approach avoids cash flow blockages and unnecessary VAT reclaim procedures. Matthias Oldiges added that this procedure not only simplifies compliance but also offers significant cash flow advantages in the Member State where the procedure is applied, while also preserving tax neutrality throughout the supply chain.

Christina Rinne highlighted that Procedure 42 is also commonly used by Swiss importers bringing goods into the EU. In such cases, the Swiss importer registers for VAT in the Member State of importation, and uses Procedure 42 to ensure a smooth flow of goods and tax neutrality.

When goods are imported into Switzerland, Rinne highlighted that Switzerland has abolished customs duties for industrial goods (ie, except agricultural products) as of 1 January 2024. Therefore, importers only need to consider the import VAT, which is set at a rate of 8.1 per cent (or at 2.5 per cent depending on the goods). When a wholesaler in Switzerland imports goods destined for another taxable person in Switzerland, the end customer typically acts as the IOR. However, the wholesaler can opt to be the IOR if the wholesaler has applied for an import licence with the Swiss Federal Tax administration. This allows the wholesaler to claim import VAT on importation and then be considered to have made a domestic supply in Switzerland to the business customer, charging domestic VAT to the recipient of the goods.

The panel discussed chain transactions involving cross-border supplies where goods are shipped directly from a non-EU manufacturer to the final customer. The central issue under discussion was who can reclaim import VAT. Although the VAT Directive states that the IOR may claim import VAT, some Member States (eg, Austria and Germany) instead grant this right to the party who has a right of disposal of the goods, which may not necessarily be the one who filed the customs declaration. This deviation from the general framework creates uncertainty, as the person acting as the IOR may assume they can claim input VAT, leading to potential complications.

Despite numerous Court of Justice of the EU (CJEU) rulings and national guidelines, the panel agreed that there remains no absolute legal certainty on this issue. Businesses therefore need to carefully structure contracts and supply chains, and where necessary, seek advance rulings from national tax administrations.

Scenario 2: domestic and intra-community supplies (fixed establishment considerations)

The panel next examined the VAT treatment of domestic and intra-community supplies once goods are already within the EU. A central issue concerned chain transactions involving multiple taxable persons across different Member States but with a single transportation of goods.

The panel examined intra-community supplies between Germany and Italy. Typically, goods moving from one Member State to another are zero-rated, if the German supplier (in this case) can prove the transport of goods from Germany to Italy. Complications arise, however, when the goods are first moved to the supplier’s warehouse in Italy before delivery to the Italian customer. The question then is whether this should be treated as a single continuous supply from Germany to Italy, or as a split transaction.

Matthias explained that the German tax authorities, consistent with CJEU case law, opine that this transaction qualifies as a direct intra-community supply provided three conditions are met:

1. the customer is determined at the beginning of transport;
2. the movement of goods is continuous; and
3. there is proof of a temporal and factual link between the supply and the transport.

If any of these conditions are not satisfied, the supply is treated as split: first an intra-community supply from Germany to the Italian warehouse, followed by a domestic supply in Italy from the German supplier to the Italian customer. The panel highlighted that the implications are significant, as misclassification can result in VAT exposure and penalties.

The panel also addressed the treatment of a fixed establishment in Italy in the context of intra-community supplies. Under EU rules, if goods move directly from one Member State to another (Germany to Italy in this case) without any intervention from the supplier’s Italian fixed establishment, the transaction should be regarded as:

• a VAT-exempt intra-community supply in Germany (place of departure); and
• a taxable intra-community acquisition by the customer in Italy (place of arrival).

The mere existence of a fixed establishment in Italy does not affect the VAT treatment unless the goods physically pass through that establishment and its human and technical resources are actively involved in performing the supply.

Pietro noted that the Italian tax authorities take a broader and more aggressive interpretation, often treating the supply as a split transaction even if the Italian fixed establishment is only involved at an administrative level. This is regardless of the fact that the goods are transported directly from Germany to the Italian customer’s premises without passing through the establishment’s warehouse.

This approach creates uncertainty and potential VAT exposure in Italy. Given this risk, Pietro recommended making a case-by-case assessment and, where possible, seeking an advance ruling from the Italian tax authorities to mitigate exposure and potential penalties.

Scenario 3: e-commerce and digital platforms

The final scenario addressed by the panel concerned e-commerce and the VAT treatment of platform sales. To combat the widespread VAT evasion relating to online sales, in 2021 the EU introduced the deemed reseller model. Oldiges explained that, under this model, a platform is treated for VAT purposes as if it buys the goods from the seller and resells them to the customer, even though under civil law it is merely an intermediary. This shift makes the platform liable for VAT on sales made through it.

The panel discussed an example where a Chinese seller lists goods on a German platform and sells to a German customer – in such a case, the platform is deemed to make a domestic supply in Germany and must charge German VAT. If the platform is based in Italy, the sale is treated as a distance sale subject to Italian VAT. In such case the platform must either register in Italy or use the One Stop Shop (OSS) scheme.

In both cases, the VAT liability shifts away from the non-EU seller (eg, in China) to the EU platform, ensuring compliance and closing gaps previously exploited for evasion.

Oldiges underlined the compliance obligations for platforms – including registration, documentation and reporting – and stressed the importance of meeting these requirements to avoid penalties.

Rinne also noted that Switzerland adopted a similar deemed reseller model in January 2025, whereby platforms selling to Swiss customers must register for Swiss VAT and are treated as the IOR. Non-compliance carries harsh consequences in Switzerland: the Swiss authorities can seize and even destroy goods from unregistered platforms. As of September 2025, Rinne noted that only 17 platforms had registered for VAT in Switzerland, signalling an urgent need for compliance in this area.

Conclusions

The panel concluded with a discussion on the challenges and opportunities in the evolving landscape of international VAT. The experts agreed on the need for businesses to stay informed and compliant with VAT regulations to avoid financial and legal repercussions. They emphasised the importance of understanding the specific rules and requirements in each jurisdiction to ensure compliance and avoid potential pitfalls.

The session ended with a Q&A segment, where the panellists addressed questions from the audience, providing further clarity on the subjects discussed.

The event was a valuable opportunity for professionals to gain insights into the complexities of VAT in cross-border trade.