Which are the risks for fiscal or VAT representatives?

Many (European) customs brokers and forwarders offer Fiscal Representation for VAT (“VAT-Rep”) as service to their customers. On many occasions the service is seen as an additional administrative service. Fees are usually not high. Risks can, however, be quite big for the VAT Representative.

The obvious risk for any VAT-Rep is financial: having to pay VAT, fines and/or interest to Tax Authorities without being able to collect same from the principal.

Another risk is that in order to be able to file correct VAT returns, any VAT-Rep must have access to his principals books and records. The VAT-Rep must be aware of the VAT treatment of transactions by his principal’s customers, particularly in case of ABC transactions as mentioned above.

VAT fraud in many occasions concerns intracommunity supplies to non-existing buyers, who receive the goods without reporting and paying VAT. A VAT-Rep should, always verify the VAT number of his principal’s customers.

Because a VAT-Rep may also have to have a clear view of the flow of goods (and have supporting documentation available) I wouldn’t want to advise any logistics provider to become VAT-Rep for a principal whose logistics are taken care of by another service provider, unless the VAT-Rep has complete access to the administration regarding the logistics operation and has satisfied himself that it is adequate and correct.