Good Faith Protection for Intra-Community Supplies (§ 6a(4) of the German VAT Act)

Good faith does not protect you. Proven good faith protects you.

A business that zero-rates a cross-border supply within the EU relies on facts it cannot fully control: the customer’s status as a taxable person, the actual movement of the goods, the country of arrival. If it emerges years later that the customer lied, the zero-rating is at stake – and with it 19 per cent of the turnover, retroactively, plus interest. For exactly this situation, German law has built a switch: Section 6a(4) of the German VAT Act (Umsatzsteuergesetz – UStG). It releases the honest supplier and shifts the tax to the deceiving customer. But the switch does not set itself. It is set by the evidence.

At the end of 2025, Germany’s Federal Fiscal Court surveyed this switch at the highest judicial level. In a landmark judgment of 18 December 2025 it held: good faith protection does not presuppose a confirmation of arrival (Gelangensbestätigung) – it suffices that the supplier obtains the customer’s commitment to provide it at the time of supply. At the same time, the court approved, for the first time, a concrete, transaction-time diligence checklist – qualified confirmation of the VAT identification number, verification of identity and authority to represent, commercial register extract, copy of an identity document, contractual export commitment – and expressly drew a line against the opposite tendency: nobody can be referred to security deposits or the like, and demanding more in hindsight would “overstretch the standards of diligence”. The practical point: no confirmation of arrival needed. What decides the case is the documented verification path at the time of supply.

The starting point: an exemption with a built-in evidence risk

An intra-Community supply is zero-rated where the goods actually move to another Member State, the customer is a taxable person registered in another Member State, and the acquisition is subject to tax there. Since the EU “Quick Fixes” took effect on 1 January 2020, the bar has been raised: the customer’s valid VAT identification number and a correct EC Sales List entry (in Germany: the Zusammenfassende Meldung) are no longer formalities but substantive conditions of the exemption. German commentary noted early on that verification and reporting processes thereby acquired criminal-law significance – and that the qualified confirmation query with Germany’s Federal Central Tax Office moved from convenience to de facto obligation.

The evidence risk sits structurally with the supplier: it must keep documentary and accounting proof of transport, although the transport is often in the customer’s hands. Where the customer collects the goods, the customer supplies the documents – and whoever intends to deceive, deceives in the paperwork first. That is not a footnote; it is the standard entry gate of fraud: the honest supplier is infected by someone else’s false statements.

The switch: what Section 6a(4) UStG provides

This is where good faith protection comes in. Where a supplier treated a supply as zero-rated although the conditions were in fact not met, the supply nevertheless remains zero-rated if two elements coincide: the exemption was claimed on the basis of incorrect information provided by the customer, and the supplier could not have recognised the incorrectness even when exercising the diligence of a prudent merchant. In that case the customer owes the lost tax – not the supplier.

That is the switch in our infographic. Green track: the deception came from outside, the supplier’s own verification was diligent and is documented – the zero-rating stands, the tax debt travels to the deceiver. Red track: warning signs were overlooked or ignored, verifications were skipped, the file is empty – the reassessment lands on the supplier. Between the two tracks lies not a value judgement but a question of proof: what was checked, when, and who can still show it today?

The European root: Teleos and its progeny

The switch is not a German peculiarity; it implements a fundamental European decision. In Teleos (2007), the Court of Justice of the European Union ruled for a UK supplier whose customers collected the goods and forged the transport evidence: a supplier who acted in good faith, took every measure reasonably required of him, and whose evidence later turns out to be falsified, must not be made to account for the VAT afterwards. The Court reasoned from legal certainty and proportionality – and from an idea that still carries the doctrine: the allocation of risk between supplier and treasury must not make the honest tax collector bear third-party fraud risk.

The line has long outgrown intra-Community supplies. In Litdana, the Court protected a dealer who had relied on his supplier’s invoice statements regarding the margin scheme: denial requires proof that the dealer knew or should have known the statements were wrong. In Vetsch, the Court held that an importer’s customs declarant in good faith does not lose the import VAT exemption because the recipient of the goods commits fraud later: another party’s downstream fraud does not pass through to someone who had nothing to do with it. Germany’s Federal Fiscal Court, for its part, has recently shown in chain-transaction settings how tightly transport-allocation and evidence questions are interwoven – and how much depends on the transport information available to the supplier at the time of supply.

The sum: in EU VAT, protection of legitimate expectations is the principle, not the exception. The exception is its denial – and the denial must be justified.

What destroys protection – and what does not

Concession first: good faith protection is no carte blanche. A supplier who skips the confirmation query although it suggests itself, who simultaneously accepts cash payment, collection by changing drivers and a freshly issued VAT ID without asking a single question, cannot later invoke good faith. Failure to run the qualified VAT ID confirmation can, by itself, forfeit protection.

But – and this turn matters: protection does not fail because of the industry you are in. The point has been made precisely in recent German doctoral scholarship: good faith protection does not founder abstractly on sector risk, but only on concrete risk indicators that were recognised or negligently ignored. A wholesaler in consumer electronics does not owe a criminal investigation of its entire customer base – it owes a functioning warning-sign management: baseline verification for everyone, enhanced checks where there is cause, a documented decision in every case. What such counterparty due diligence without blanket suspicion looks like in practice is covered separately.

A second point is regularly overlooked: the decisive perspective is the knowledge available at the time of supply. What the tax administration knows years later from cross-border data exchange, audit files and criminal investigations was not accessible to the supplier then. Hindsight is not a diligence test.

The second line of defence: the ban on formalism

Even where good faith protection does not apply, reassessment is not automatically lawful. In 2025, the Court of Justice recalibrated the limits of formal evidence requirements in two decisions. In W. sp. z o.o., it held: where the movement of the goods is objectively established – there, through customs documents available to the authority itself – the exemption must not fail because the supplier cannot produce the prescribed transport evidence; it is even irrelevant who furnishes the proof. In FLO VENEER, it added: the evidence catalogue of the EU Implementing Regulation is not exhaustive; authorities must assess alternative evidence. German commentators Schmidt and Riel distilled the line into a formula: there are only two exceptions to the primacy of the substantive conditions – where formal defects prevent reliable proof that those conditions are met, or where the supplier risks being implicated in tax evasion. The principle behind it has a name: substance over form – free assessment of all evidence instead of exhaustive document catalogues. German commentary, too, now sharply criticises the formalism of the fiscal courts’ line on Section 6a(4).

For practice this means: documentary and accounting proof under the German rules remains the safe path – Germany’s twin structure of transport presumption and confirmation of arrival is more workable than the European catalogue. But a missing form is not a taxable event. With electronic freight documentation rolling out across the EU from 2027, evidence will migrate further into the data world – one more reason to think document processes and data trails together today.

The third dimension: audited once – and still reassessed?

A particular harshness of German practice: the tax office audits the supplies, accepts the evidence – and returns years later with a different view, relying on the standing “subject to review” reservation under which most German tax assessments are issued (Vorbehalt der Nachprüfung, Section 164 of the Fiscal Code). Müller and Wu confronted this practice in 2025 with a widely noted analysis: under the Court of Justice’s case law – from Teleos through Mecsek-Gabona to Santogal – legal certainty, proportionality and the protection of legitimate expectations bar the subsequent reassessment of a good-faith supplier where the administration has already examined and accepted the evidence presented. The national review reservation is, to that extent, curtailed by EU law; the exception – bad faith – must be proven by the tax authority. Practical consequence: after an audit, apply for the formal lifting of the review reservation. A small procedural step with substantial protective effect.

Outlook: protection is moving to where liquidity is decided. Since February 2025, a referral by Germany’s Federal Fiscal Court has been pending before the Court of Justice on the question whether good faith is to be examined in the assessment procedure itself, rather than only in a separate equitable-relief procedure – and the referring senate “is inclined” to answer yes. The case at hand concerns the margin scheme; the structural significance reaches far beyond it – to input VAT deduction and to Section 6a. For affected businesses this would mean: protection arrives where reassessment and liquidity are actually decided. We are monitoring the proceedings before the Court.

Evidence architecture for the switch

What remains is a sober insight: Section 6a(4) UStG does not reward good faith; it rewards documented diligence. Four trails belong together: the documented and repeated VAT ID verification, consistent transport and arrival evidence, the plausibility of customer, payment and goods flow – and the file note showing that anomalies were seen, examined and decided. A business that keeps these trails sets the switch before anyone else does.

Source box

Case law (CJEU): - CJEU, judgment of 27 September 2007 – C-409/04, Teleos and Others, ECLI:EU:C:2007:548, paras 50, 58 et seq., 65 et seq. - CJEU, judgment of 6 September 2012 – C-273/11, Mecsek-Gabona, ECLI:EU:C:2012:547. - CJEU, judgment of 14 June 2017 – C-26/16, Santogal M-Comércio e Reparação de Automóveis, ECLI:EU:C:2017:453, paras 71 et seq. - CJEU, judgment of 18 May 2017 – C-624/15, Litdana, ECLI:EU:C:2017:389. - CJEU, judgment of 14 February 2019 – C-531/17, Vetsch Int. Transporte, ECLI:EU:C:2019:114. - CJEU, judgment of 1 August 2025 – C-602/24, W. sp. z o.o.. - CJEU, judgment of 13 November 2025 – C-639/24, FLO VENEER, ECLI:EU:C:2025:888, para 20.

Case law (Germany): - Federal Fiscal Court (BFH), judgment of 22 November 2023 – XI R 1/20, BStBl II 2024, 530 (export chain transaction; allocation of the moved supply; discussed by Wäger, UR 2025, 81 [98 et seq.]). - Federal Fiscal Court (BFH), judgment of 18 December 2025 – V R 3/25, ECLI:DE:BFH:2025:U.181225.VR3.25.0, paras 25, 31 et seq. (good faith protection without confirmation of arrival; approved transaction-time diligence checklist; prohibition on overstretching the standard of diligence; lower court: Hessian Fiscal Court, 1 K 1247/21). - Federal Fiscal Court (BFH), referral to the CJEU of 19 February 2025 – XI R 23/24, ECLI:DE:BFH:2025:VE.190225.XIR23.24.0, paras 39, 62 (good faith to be examined in the assessment procedure itself; CJEU case number being monitored).

Statutes: - Section 6a(1)–(4) UStG; Section 4 no. 1(b) UStG; Section 18a UStG (EC Sales List); Section 18e UStG (qualified VAT ID confirmation); Sections 17a, 17b of the German VAT Implementing Regulation (UStDV); Article 138 of the VAT Directive 2006/112/EC; Article 45a of Implementing Regulation (EU) No 282/2011; Section 164 of the German Fiscal Code (AO).

Literature (German-language): - Müller/Wu, NWB No. 21 of 23 May 2025, 1442 et seq. (sections IV and V: EU-law curtailment of the review reservation; burden of proving bad faith on the authority). - Schmidt/Riel, UR 2026, 361 (362 et seq., 365: ban on formalism and its two exceptions; 364 et seq.: Sections 17a/17b UStDV; 367: eFTI/e-CMR). - Burgmaier, in: Wäger, UStG, 4th ed. (as of 6/2026), § 6a margin nos. 246.1–246.6 (criticism of the formalism of the fiscal courts’ line on Section 6a(4) UStG). - Grommes, UR 2021, 461 (463: prudent-merchant standard, Section 18e query; 461–464: Quick Fixes). - Bick, TCMS als systematischer Vorsatzausschluss bei innergemeinschaftlichen Lieferungen, 2026, pp. 43–46 (good faith and concrete risk indicators); pp. 33–51 (red-flag system). - Wäger, UR 2025, 81 (98 et seq.).

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