The European Commission has announced plans for the biggest reform of EU VAT rules in a quarter of a century, based around four fundamental principles, or ‘cornerstones’, of a new definitive single EU VAT to be introduced by 2022 and four ‘quick fixes’ to come into force by 2019.
The European Commission has announced plans for the biggest reform of EU VAT rules in a quarter of a century, based around four fundamental principles, or ‘cornerstones’, of a new definitive single EU VAT to be introduced by 2022 and four ‘quick fixes’ to come into force by 2019. The ‘cornerstones’ are:
tackling fraud, by charging VAT on cross-border trade between businesses;
a one-stop shop, allowing traders to make declarations and payments using a single online portal in their own language and according to the same rules and administrative templates as in their home country;
greater consistency, through the ‘destination’ principle, whereby the final amount of VAT is always paid to the member state of the final consumer and charged at the rate of that member state; and
less red tape, allowing sellers to prepare invoices according to the rules of their own country, even when trading across borders.
The Commission has also introduced the notion of a ‘certified taxable person’, which is a category of trusted business that will benefit from much simpler and time-saving rules.
The transition to the ‘destination’ principle will be introduced in two legislative steps. The first deals with the VAT treatment of intra-union B2B supplies of goods, while the second will extend this treatment to all cross-border supplies after a period of monitoring, approximately five years after implementation of the first step.
The first step will consist of an October 2017 package and a 2018 technical package. The October 2017 package involves:
amendments to the VAT directive (see http://bit.ly/2yYrnAm), introducing the ‘certified taxable person’ (modelled on the existing concept of authorised economic operator in the field of customs), the destination principle and the one-stop shop; and
an amendment to the administrative cooperation regulation (see http://bit.ly/2xyvSVY) to ensure the inclusion of the certified taxable person status in the VAT Information Exchange System (VIES).
This package will also introduce the four ‘quick fixes’ (see http://bit.ly/2g0xSLt) available to certified taxable persons:
simplified rules for suppliers in one member state moving stock to another member state for sale at a later stage to a known buyer (off-stock arrangements);
requiring the VAT identification number of the customer as a substantive condition for exempting intra-community supplies of goods;
simplified rules for chain transactions; and
simplified rules for providing proof of the intra-community transport of the goods for exempting intra-community supplies (through an amendment to the implementing regulation).
The 2018 package will include:
a directive and implementing regulations for the legal cornerstones of the definitive VAT system, including IT developments;
measures to combat fraud through a legislative proposal reinforcing the existing instruments for administrative cooperation; and
reports to the EU Parliament and Council on procedures for registering taxable persons and collecting VAT, and on the use of mutual assistance between member states for the recovery of taxes.
As announced in the 2016 VAT action plan, the Commission will, by November 2017, introduce a proposal allowing member states greater flexibility in setting VAT rates and a simplification package for SMEs.
The Commission estimates the introduction of the definitive VAT system could reduce EU VAT fraud by 80%. In October, the EU Parliament voted to approve the establishment by 20 member states of the European Public Prosecutor’s Office (EPPO), which will focus initially on investigating missing trader VAT fraud involving €10m and above. Although eight member states, including the UK, have declined to participate, Richard Asquith, VP of global indirect tax at Avalara, believes that the size of the EU’s VAT fraud problem, amounting to around €50m a year, has forced the other 20 member states to act. ‘The creation of a pan-EU anti-VAT fraud office is a controversial early step towards a supranational prosecutor,’ Asquith commented. However, he thinks the dissenting states may be persuaded to join later, if the new office proves successful.
The European Commission has announced plans for the biggest reform of EU VAT rules in a quarter of a century, based around four fundamental principles, or ‘cornerstones’, of a new definitive single EU VAT to be introduced by 2022 and four ‘quick fixes’ to come into force by 2019.
The European Commission has announced plans for the biggest reform of EU VAT rules in a quarter of a century, based around four fundamental principles, or ‘cornerstones’, of a new definitive single EU VAT to be introduced by 2022 and four ‘quick fixes’ to come into force by 2019. The ‘cornerstones’ are:
tackling fraud, by charging VAT on cross-border trade between businesses;
a one-stop shop, allowing traders to make declarations and payments using a single online portal in their own language and according to the same rules and administrative templates as in their home country;
greater consistency, through the ‘destination’ principle, whereby the final amount of VAT is always paid to the member state of the final consumer and charged at the rate of that member state; and
less red tape, allowing sellers to prepare invoices according to the rules of their own country, even when trading across borders.
The Commission has also introduced the notion of a ‘certified taxable person’, which is a category of trusted business that will benefit from much simpler and time-saving rules.
The transition to the ‘destination’ principle will be introduced in two legislative steps. The first deals with the VAT treatment of intra-union B2B supplies of goods, while the second will extend this treatment to all cross-border supplies after a period of monitoring, approximately five years after implementation of the first step.
The first step will consist of an October 2017 package and a 2018 technical package. The October 2017 package involves:
amendments to the VAT directive (see http://bit.ly/2yYrnAm), introducing the ‘certified taxable person’ (modelled on the existing concept of authorised economic operator in the field of customs), the destination principle and the one-stop shop; and
an amendment to the administrative cooperation regulation (see http://bit.ly/2xyvSVY) to ensure the inclusion of the certified taxable person status in the VAT Information Exchange System (VIES).
This package will also introduce the four ‘quick fixes’ (see http://bit.ly/2g0xSLt) available to certified taxable persons:
simplified rules for suppliers in one member state moving stock to another member state for sale at a later stage to a known buyer (off-stock arrangements);
requiring the VAT identification number of the customer as a substantive condition for exempting intra-community supplies of goods;
simplified rules for chain transactions; and
simplified rules for providing proof of the intra-community transport of the goods for exempting intra-community supplies (through an amendment to the implementing regulation).
The 2018 package will include:
a directive and implementing regulations for the legal cornerstones of the definitive VAT system, including IT developments;
measures to combat fraud through a legislative proposal reinforcing the existing instruments for administrative cooperation; and
reports to the EU Parliament and Council on procedures for registering taxable persons and collecting VAT, and on the use of mutual assistance between member states for the recovery of taxes.
As announced in the 2016 VAT action plan, the Commission will, by November 2017, introduce a proposal allowing member states greater flexibility in setting VAT rates and a simplification package for SMEs.
The Commission estimates the introduction of the definitive VAT system could reduce EU VAT fraud by 80%. In October, the EU Parliament voted to approve the establishment by 20 member states of the European Public Prosecutor’s Office (EPPO), which will focus initially on investigating missing trader VAT fraud involving €10m and above. Although eight member states, including the UK, have declined to participate, Richard Asquith, VP of global indirect tax at Avalara, believes that the size of the EU’s VAT fraud problem, amounting to around €50m a year, has forced the other 20 member states to act. ‘The creation of a pan-EU anti-VAT fraud office is a controversial early step towards a supranational prosecutor,’ Asquith commented. However, he thinks the dissenting states may be persuaded to join later, if the new office proves successful.
