The terms ‘intra-Community acquisition’ and ‘importation’, both apply in the context of goods. So, what makes these different from one another? Each definition has its own characteristics which once assessed, the difference between the two becomes quite visible. Broadly speaking, the main difference concerns the movement of goods whereby; in the case of intra-Community acquisitions, as the word ‘intra-Community’ implies, it refers to the movement of goods between one EU Member State to another; whilst importation refers to goods coming from a third country/territory and arriving in an EU Member State.
In our Article Series 3, we discussed the term intra-Community supply (‘ICS’) of goods. Now, an ICS of goods in one EU Member State always leads to an intra-Community acquisition (‘ICA’) of goods in another EU Member State. So, how does it work?
In a situation where a Dutch business sells goods to a Maltese business identified for Malta VAT purposes and the goods are moving from The Netherlands to Malta, the Dutch business is deemed to be making an ICS of goods (subject to conditions being met) whilst the Maltese business is deemed to be making an ICA of goods.
Therefore, even though prima facie, only one supply is taking place, for VAT purposes, the ICS made by the Dutch business and the ICA made by the Maltese business are deemed to be separate supplies.
An importation of goods irrespective of whether a consideration is paid, can be made by any person, being a taxable or non-taxable person. What does this mean?
This means that whether it’s a business or a student, purchasing a laptop from a non-EU jurisdiction which is being delivered to Malta, both would pay the same amount of VAT once imported into Malta. It is only once all Customs Formalities are adhered to that the laptop would be released into free circulation that is, free to be used or possibly, resold as part of an economic activity.
An ICA of goods takes place where the transport of those goods ends whilst an importation of goods occurs in the Member State in which the goods are imported. Essentially, both rules refer to the place of destination rather than the place of departure as oppose, to ICS of goods and export of goods.
An ICA of goods is declared in Boxes 3 / 6 of the Malta VAT Return whereby Malta VAT at 18% is self-charged by the taxable person. Subsequently, the transaction is also declared in Boxes 9 / 13 whereby the taxable person may claim back the input tax, to the extent allowable in accordance with the VAT legislation.
On the other hand, an importation of goods on which Malta VAT at the standard rate applies, should be recorded in Boxes 27 / 34 based on the Customs valuation. However, if the goods being imported were subject to a reduced rate of VAT of 5% these should be recorded in Boxes 28 / 35. In cases where the importation of goods is zero-rated, it should be recorded in Box 27 without a VAT element in Box 34.