Taxation and Customs Union

Chargeable event and chargeability

The chargeable event is when the legal conditions for VAT to become chargeable are met.

VAT becomes chargeable at the point at which the tax authorities acquire the legal right to claim payment.

However, in most cases, the VAT need be paid only when the return for the relevant period is filed.

Usually, the chargeable event and chargeability of the tax is the completion of a taxable transaction (taxed/exempt) – but sometimes it can be during or before such a transaction, e.g. on receipt of an advance payment.
The EU rules for precisely when the VAT becomes chargeable are different in each of these cases:

The legislation on chargeable event and chargeability of VAT is in Title VI (Articles 62-71) of the VAT Directive.

 

Supply of goods/services

Basic rule

VAT becomes chargeable when the goods or services are supplied (i.e. when the supply is completed) (Article 63 VAT Directive).

 

Special rules for continuous supplies of goods/services

Where goods or services are supplied over an extended period – e.g. phased payments during a construction project – it is better for at least one chargeable event to occur before the supply is complete (to avoid the unnecessary accumulation of all the VAT in a single payment at the end).

(Article 64 VAT Directive)

 

Basic rule
When successive statements of account are issued or successive payments received for goods or services supplied over an extended period, there is a chargeable event at the end of each period to which the statements or payments relate.

This rule does not apply to:

  • goods hired for a certain period or
  • goods sold on deferred terms (e.g. hire-purchase)
  • continuous exempt intra-EU supply of goods if they are supplied over more than 1 calendar month, or transferred by a business, for business purposes*
    (* in this case, VAT is chargeable at the end of each calendar month until the supply comes to an end).

 

Exception for continuous cross-border B2B services

IF …

THEN …

taxable services are supplied to a business or non-taxable legal entity registered for VAT by a business in another EU country:

  • continuously for more than 1 calendar year and
  • no statement of account is issued or payment received during that period

VAT is chargeable at the end of each calendar year until the supply comes to an end.

Optional alternative time for other continuous supplies
EU countries may also choose to make VAT chargeable at least once every calendar year for any other type of continuous supply of goods/services.

 

Special rule for payments on account

When the supply of goods/services is fully or partially paid for in advance, VAT is chargeable when the payment is received. The taxable amount in such a case is the amount received (Article 65 VAT Directive).

Special rule for exempt intra-EU supplies

IF …

THEN …

  • an intra-EU supply of goods is made (i.e. goods are dispatched or transported to another EU country) that is exempt

    OR
  • an exempt intra-EU transfer of goods is made by a business, for business purposes

VAT is chargeable on whichever is earlier:

  • the invoice issue date

    OR
  • the 15th day of the month following that in which the chargeable event (the supply is completed) occurs

Exempt intra-EU supplies are not subject to any of the following:

  • special rules for continuous supplies of goods/services;
  • the special rule for payments on account.

(Article 67 VAT Directive)

 

Optional alternative times

Instead of applying the above rules, the EU country may choose to make VAT chargeable at any of the following times:

  • no later than the date the VAT invoice is issued
  • no later than the date the payment is received
  • (if the invoice is issued late or not at all) before a specified time, which can be either:
    • no later than the deadline for issuing invoices, or
    • if there is no such deadline, a specified time after the chargeable event.

This option may not be used:

  • where the customer is liable to pay the VAT under the reverse-charge mechanism
  • for exempt intra-EU supplies or transfers of goods.

(Article 66 VAT Directive)

Intra-EU acquisitions of goods

Basic rule (Article 68 VAT Directive)

The chargeable event for an intra-EU acquisition occurs when the acquisition is made, i.e. when a supply of similar goods in the EU country of acquisition would be regarded as complete.

... but (Article 69 VAT Directive)

VAT is chargeable on whichever is earlier:

  • the invoice issue date
    OR
  • the 15th day of the month following that in which the chargeable event occurs

(Articles 68-69 VAT Directive)

Importation of goods from outside the EU

Basic rule
The chargeable event occurs – and VAT becomes chargeable – when the following types of goods enter the EU:

(Article 70 VAT Directive)


Exception – suspensive customs arrangements
The chargeable event is suspended in the following cases, where the goods are not released for free circulation but instead put under customs suspension:

  • temporary storage pending presentation to customs
  • a free zone or a free warehouse
  • customs warehousing arrangements or inward processing arrangements
  • goods intended for admission into territorial waters to build, repair, maintain, alter or fit out drilling or production platforms, or to link such platforms to the mainland or fuel/provision them
  • temporary import arrangement with full exemption from import duties
  • external transit arrangements
  • goods in free circulation coming from EU territories not covered by EU VAT rules that are in similar situations as those mentioned above in this list
  • goods in free circulation coming from EU territories not covered by EU VAT rules and put under the internal transit procedure.

If import VAT is suspended, as in the situations listed above, the chargeable event occurs and VAT becomes chargeable only once the goods cease to be covered by suspensive arrangements.
The chargeable event for suspended goods follows customs legislation. This means that the chargeable event may also occur in other cases, when customs duties would become chargeable if these goods were subject to customs duties – e.g. when customs procedures are breached.

(Article 71 VAT Directive)