The Certified Taxable Person (CTP)

On 4 October 2017, the European Commission published details of its plan for reform of the EU VAT system in respect of cross border trade. This plan was accompanied by a proposal to adapt the VAT Directive, a proposal to adapt the VAT Implementing Regulation and a proposal to adapt the Regulation on administrative cooperation and combating fraud to implement the cornerstones of the definitive VAT regime and introduce some quick fixes to the current system.

20 October 2017

At the heart of these proposals is the Certified Taxable Person (CTP). A new concept to be introduced that applies to reliable taxable persons. This article focusses on this concept and answers the question whether or not it is interesting for businesses to apply for the CTP status in the future.

The future of VAT in cross border trade

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What is a CTP?

Currently the European legislation does not distinguish between entrepreneurs that can be considered reliable taxable persons and taxable persons that cannot. The CTP concept will bring an end to that. It introduces a status for reliable taxable persons that can benefit from simplifications as of 1 January 2019. In short these simplifications are:

  1. A simplification for call-off stock.
  2. A simplification for chain transactions.
  3. A simplification for the proof of the exemption for intracommunity supplies.

As of 1 January 2022 according to the European Commissions plans cross-border B2B supplies of goods will be subject to VAT in the Member State of arrival of the goods. The CTP status will allow the taxable person to apply the reverse charge rule when purchasing goods cross-border in the EU. This may provide a cash flow benefit for the customer and may prevent that the supplier must charge VAT of a different EU Member State than its Member State of establishment with the consequence that it must also determine the VAT treatments, such as which rate is applicable. For suppliers it might therefore be interesting to deal with CTPs only when supplying goods cross border. They may however also consider cash flow benefits. A supplier doesn’t have to be a CTP to apply the reverse charge rule, only the customer.

The CTP status does not affect the number of VAT audits or give the taxable persons a favorable treatment in his relations with the tax authorities otherwise.


The CTP status can only be obtained if the following conditions are met:

  1. The taxable person has its head office or fixed establishment in the EU.
  2. The taxable person is involved in intra-Community trade or is supplier or customer in a call-off stock arrangement.
  3. There is an absence of any serious infringement or repeated infringements of taxation rules and customs legislation and no record of serious criminal offences relating to the economic activity of the taxable person.
  4. The taxable person must demonstrate a high level of control of his operations and of the flow of the goods by means of a system managing commercial and, where appropriate, transport records. The system must allow appropriate tax controls by means of a reliable or certified audit trail.
  5. There is evidence of financial solvency of the taxable person. This can be proven by a good financial standing or the taxable person can provide guarantees provided by insurance or other financial institutions or by other economically reliable third parties.

Taxable persons that fall within the scope of the flat-rate scheme for farmers, the exemption for small enterprises or taxable persons carrying out supplies of goods or services in respect of which VAT is not deductible cannot apply. Looking at the way it is formulated a single supply for which the VAT cannot be deducted, such as a loan to an EU party, makes it impossible for the taxable person to apply for the CTP status. It is unclear if this is the intended meaning of the Commission.

It seems that it is up to Member States to set the bar to determine for example situations where the infringement of taxation rules is serious and to determine whether or not a guarantee is acceptable or if the system used by the taxable person demonstrates a high level of control. This will most likely result in 28 different regimes being applicable to obtain the CTP status.

We note that for obtaining the AEO status the Union Customs Code Implementing Act (UCC-IA) and the non-binding AEO guidelines provide for some more guidelines on whether or not there is financial solvency, high level of control and absence of serious or repeated infringements of taxation and customs legislation.

I believe that guidelines or explanatory notes would be welcome for the concept of CTP as well. The UCC-IA and AEO guidelines can serve as guidance for drafting these guidelines for the concept of CTP. These guidelines will better ensure equality between Member States for taxable persons applying for the CTP status.


It also seems up to Member States to lay down rules for the procedure of taxable persons applying for the CTP status and the granting of that CTP status. There are limited procedural rules in the proposed amendment of the VAT directive, which are:

  1. Member States are obliged to grant a taxable person the CTP status when the conditions have been met.
  2. If an application is to be refused Member States must communicate the grounds for refusal. The taxable person must have a right of appeal against that refusal.
  3. Once obtained the CTP status can be lost by withdrawal of the CTP status by the tax authorities. Taxable persons have the obligation to inform the tax authorities without delay of any factor arising after the decision was taken and which may affect that decision.

Other than this there are currently no procedural rules proposed for obtaining or losing the CTP status. What’s more there are no deadlines proposed for tax authorities on when they ultimately have to respond to an application. This may also cause differences between Member States. Maybe more procedural rules are provided in the proposals that are expected in November 2017 and the Spring of 2018.

Taxable persons will not have an option to choose in which Member State they apply for a CTP status. They will have to apply in the Member State of the head office or if the head office is located outside the EU in the Member State of the fixed establishment that holds the main accounts of the taxable person within the EU. Member States will have to recognize each other’s CTPs. So this means that once the Member State of e.g. the head office grants the CTP status, the CTP status applies in all Member States.

If a taxable person has it head office in one Member State and one or more fixed establishments in one or more other Member States he has to revert to the Member State of its head office to obtain the CTP status. Once obtained I assume that the CTP status includes the fixed establishment(s) also. This will require close cooperation between the Member State of the head office and the Member State of the fixed establishment(s). Both head office and fixed establishment(s) taken together must meet the requirements for being a CTP. Maybe the Proposal to reinforce administrative cooperation between Member States that is expected in November 2017 will provide some more guidance on this matter.

In case of group companies that qualify as separate taxable persons I assume each of them has to obtain the CTP status separately because the CTP status is granted to a taxable person as such. However the requirement of high level of control of operations and the flow of the goods may be assessed on a group level when they use the same system managing commercial and transport records. It is yet unclear if a VAT group can apply for a CTP status as a whole or that each group company must apply separately.

The AEO guidelines provide some guidance on monitoring the AEO status both for taxable persons and customs authorities and on re-assessment of the AEO status. Both guidelines are absent in case of the CTP. I believe it is important for tax authorities to establish a framework based on which they can both guide taxable persons in monitoring their position and do the necessary monitoring needed from the side of the tax authorities.


AEOs can obtain the CTP status without further testing of the requirements for the CTP status. This makes sense since similar requirements apply for obtaining the AEO status. It does not work the other way around, though. A CTP cannot be considered to meet the requirements of the AEO status, because there are some extra requirements for AEO status, such as security and safety standards for AEOS and practical standards of competence or professional qualifications for AEOC. However, I believe that due to the similarity of the requirements of the CTP status and the AEO status customs authorities can take the granted CTP status into consideration when testing whether the AEO requirements are met. CTPs should thus be able to obtain the AEO status quicker and with less procedural implications.

Non-EU taxable persons

Non EU taxable persons are not eligible to obtain the CTP status. This will also affect UK based companies without an establishment overseas in the EU because of Brexit.

I assume that non-EU taxable persons are excluded from the CTP system because they are not easy to monitor since their administration and operations are located outside the EU. However, in case there is a treaty or agreement for mutual cooperation in place the EU in my opinion should evaluate and may then consider extending the CTP regime to taxable persons established in those countries.

Do you want to be a CTP?

As of 1 January 2019 the CTP status is of interest to you if you supply goods cross-border in the EU to other taxable persons and one of the following situations is applicable:

  1. You bring your stock to another Member State in order to serve as a call-off stock for a known buyer that is a CTP. In this respect I note that some Member States already have call-off stock (and/or consignment stock) VAT rules in place without the requirement of the supplier and customer being a CTP. It is unclear whether these Member States will make the CTP status an additional requirement for their rules.
  2. You are involved in chain transactions (ABC-transactions), where the intermediary party, party B, arranges the transport and there is a need for certainty about which supply is the intracommunity supply and party B has or can obtain the CTP status.
  3. You are in a position where you feel it is unclear whether you have sufficient documents to prove your entitlement to the exemption for intracommunity supplies, for example because your customer picks up the goods or you supply goods sending or transporting them from different Member States and you want to apply the same rules for each Member State on the proof of the exemption.

As of 2022 the CTP status is important if you want to purchase goods without VAT when you purchase goods cross-border. In case you as a customer are a CTP the VAT is reverse charged to you if your supplier is not established in your Member State. You may want to apply the reverse charge because of a cash flow advantage. There is also a possibility that your supplier wants to do business with CTPs only because supplies cross-border to CTPs prevents the supplier from having to charge, report and pay VAT of another Member State than its own. Suppliers will however also take into account possible cash flow opportunities.

The Netherlands – horizontal monitoring

The Dutch tax authorities were one of the first approaching the enforcement of taxation rules in a new way. Instead of auditing taxable persons in a classical vertical fashion they developed the concept of horizontal monitoring that is based on the concepts of mutual trust, understanding and transparency. If a taxable person participates in horizontal monitoring the supervision of the tax authorities is adjusted based on the extent to which the taxable person is ‘in control’ of its operations. The taxable person must have a tax control framework in place. Horizontal monitoring is open to large companies on an individual basis and for SME’s through agreements with their industry association or their tax advisor.

I can imagine that taxable persons to which horizontal monitoring applies will be granted the CTP status without much further ado in the Netherland. The requirements for horizontal monitoring however are more extensive than the requirements for the CTP status. Because the Netherlands will be obliged to grant taxable persons that meet the CTP-requirements this status the CTP status can thus not be limited to taxable persons operating under horizontal monitoring.

I do however note that the concept of horizontal monitoring has some aspects that give tax authorities more certainty as to the reliability of a taxable person, such as face to face conversations between tax authorities and representatives of the company (including the board of the company), monitoring and periodic evaluation (each 1 or 2 years). Even though this requires more investments of time and means of both tax authorities and taxable persons such establishment of a relationship between taxable person and tax authorities in my opinion better ensures that CTPs are indeed reliable taxable persons and are not fraudsters in disguise (for example fraudster first showing compliant behavior to obtain the CTP status or fraudsters purchasing a company that has a CTP status with the objective to use it to commit VAT fraud).

Do we need the CTP concept?

I believe that the CTP status for the reverse charge rule as of 2022 is an important measure in the battle against VAT fraud. Even though it is still possible to purchase goods in another Member States without VAT being charged, taxable persons who can do so have been checked extra by the tax authorities and are qualified as being reliable. However as described above there is no guarantee that CTPs are not in fact fraudsters in disguise. The concept of horizontal monitoring as applied by the Netherlands better ensures the reliability of taxable persons.

For the quick fixes it is questionable whether they should be open only to taxable persons that qualify as CTPs. I point out that many Member States currently have call-off stock rules in place similar to the once proposed now by the European Commission and do not require the taxable person to meet the proposed requirements for a CTP.

For telecommunications, broadcasting and electronic services (tbe-services) there is a similar rule to the one for the proof of the exemption for intracommunity supplies in place. The rules for tbe-services do not require the taxable person to be a CTP. Finally, the suggested simplification for chain transactions seems more or less a codification (with a little more certainty) of the CJEU’s case law in the Eurotyre Holding and Toridas case and should in my opinion be open to all taxable persons, not only CTPs.

Last but not least, the CTP concept seems to be introduced because of the success of the AEO concept for customs. However, the favorable treatment of a CTP is more limited. The AEO concept for example results in less physical and document-based controls by customs authorities and priority as regards controls that take place. What’s more the AEO concept is based on a customs-business partnership that is based on mutual trust and understanding. The CTP concept currently does not express this. Furthermore the AEO status is a trade mark that can be used to show the outside world that a person is a reliable taxable person. It is yet unclear if this will be the same for a CTP. We will have to await the November 2017 and the Spring 2018 proposals to see if we are getting more clarity on the CTP concept, but there already seems room for improvement.

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