How intra-community acquisitions work
An intra-community acquisition is the counterpart to an intra-community supply. While the supply represents the seller’s perspective of shipping goods to another EU country, the acquisition represents the buyer’s perspective of receiving those goods from another EU member state.
The key principle governing ICAs is that VAT is applied according to the rules of the destination country where the goods are received, not the country of origin. For example, when a French company purchases goods from a supplier in Germany, Spanish, or any other EU country, the transaction is subject to French VAT rates and regulations.
VAT treatment and declaration process
In an intra-community acquisition, the supplier invoices the goods without charging VAT (net of tax). The responsibility for declaring and paying VAT then falls on the purchasing company in their home country. This mechanism ensures that VAT is collected in the country where the goods will be used or consumed.
The purchasing company must declare the VAT due on intra-community acquisitions alongside the VAT collected from their regular business activities. In France, this is accomplished through the standard CA3 declaration form. The VAT becomes due on the 15th of the month following the delivery date.
Reverse charge mechanism
A significant advantage for businesses engaged in intra-community acquisitions is the reverse charge mechanism. When a company is entitled to deduct VAT, they can offset the tax due on acquired goods against the VAT they have collected from their own sales. This effectively means that VAT-registered businesses conducting legitimate business activities can often reclaim the VAT paid on intra-community acquisitions.
Requirements for ICA transactions
For a transaction to qualify as an intra-community acquisition, both parties must be VAT-registered companies located in different EU member states. The goods must physically move from one EU country to another, and proper documentation including valid VAT identification numbers must be maintained to comply with EU regulations and enable VAT deduction where applicable.
