Chargeable event and chargeability

Value Added Tax (VAT) becomes chargeable when tax authorities acquire the legal right to claim payment. Hence, a chargeable event is when the legal conditions for VAT to become chargeable are met. However, in most cases, VAT needs only to be paid to the tax authorities when the return for the relevant period is filed. 

Usually, the chargeable event and chargeability 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 on precisely when the VAT becomes chargeable are different in each of these cases: 

• Supply of goods/services 
• Intra-EU acquisition of goods 
• Importation of goods from outside the EU 

Legislation on the chargeability of VAT is in Title VI (Articles 62-71) of the VAT Directive. 

Supply of goods and services 

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 

When successive statements of account are issued or successive payments received for goods or services supplied over an extended period (e.g. phased payments during a construction project), there is a chargeable event at the end of each period to which the statements or payments relate (Article 64 VAT Directive). 

This rule does not apply to: 

• goods hired for a certain period or 
• goods sold on deferred terms (e.g. hire-purchase) 

In case of continuous intra-EU supplies of goods over a period of more than one calendar month which are supplied VAT-exempt or which are transferred VAT-exempt to another EU country by a taxable person for the purposes of its business, VAT is chargeable at the end of each calendar month until the supply comes to an end. 

In case of 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). 

Specific rule for continuous cross-border B2B services without statements of account or payments 

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). 

Derogation for supplies of goods made by a deemed supplier 

(Article 66a VAT Directive) 

Special rule for exempt intra-EU supplies and transfers of goods 

(Article 67 VAT Directive) 

The above-mentioned exempt intra-EU supplies and transfers of goods are not subject to any of the following: 

• the special rule for continuous supplies of goods/services giving rise to successive statements of account or successive payments (which are regarded as being completed on expiry of the period to which the statement of account or payment relates) 
• the provision allowing Member States to make VAT chargeable at least once every calendar year for any other type of continuous supply of goods/services 
• the special rule for payments on account  

Optional alternative times of chargeability 

Instead of applying the above rules, the EU country may choose for certain transactions or certain types of businesses to make VAT chargeable at any of the following times (Article 66 VAT Directive): 

• 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, then before a specified time, which can be either 
• no later than the deadline for issuing invoices, or 
• if there is no such deadline, within a specified time after the chargeable event 

This option may not be used: 

• for supplies of services where the customer is liable to pay the VAT under the reverse-charge mechanism 
• for exempt intra-EU supplies or transfers of goods by a taxable person for the purposes of its business 

Intra-EU acquisition of goods 

The chargeable event for an intra-EU acquisition of goods occurs when the acquisition is made (Article 68 VAT Directive), i.e. when a supply of similar goods in the EU country of acquisition would be regarded as completed. 

However, VAT is chargeable on whichever is earlier (Article 69, VAT Directive): 

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

Importation of goods from outside the EU   

Normally, the chargeable event occurs – and VAT becomes chargeable – when the imported goods enter the EU (Article 70 VAT Directive). Goods from EU territories not covered by EU VAT rules (but forming part of the customs territory) that are in free circulation are treated as imported goods. 

Exception – suspensive customs arrangements 

(Article 71 VAT Directive) 

Where imported goods are placed under one of the below arrangements or situations, the chargeable event occurs and VAT becomes chargeable only when the goods cease to be covered by that arrangement or situation: 

• temporary storage pending presentation to customs 
• free zones or free warehouses 
• customs warehousing arrangements or inward processing arrangements 
• admission into territorial waters 
• where the goods are to fuel/provision drilling or production platforms, or  
• where the goods are to be incorporated into drilling or production platforms to build, repair, maintain, alter or fit out such platforms, or to link them to the mainland 
• internal transit procedure 
• temporary import arrangement with full exemption from import duties 
• external transit arrangements 

However, where imported goods are subject to customs duties, to agricultural levies or to charges having equivalent effect established under a common policy, the chargeable event occurs and VAT becomes chargeable when the chargeable event in respect of those duties occurs and those duties become chargeable. 

Where imported goods are not subject to any of these duties, EU countries must apply the customs duties rules, as regards the chargeable event and the moment when VAT becomes chargeable. 

Legal texts 

Council Directive 2006/112/EC on the common system of value added tax