PURPOSE: to implement the definitive VAT system to
improve the operation of VAT arrangements for cross-border B2B
trade on goods within the Union.
PROPOSED ACT: Council Directive.
ROLE OF THE EUROPEAN PARLIAMENT: the Council adopts
the act after consulting the European Parliament but without being
obliged to follow its opinion.
BACKGROUND: the creation of a simple, modern and
fraud-proof VAT system is one of the fiscal priorities set out
by the Commission. In its 2016 VAT
action plan, the Commission announced its intention to propose
a definitive VAT system for the EU.
This proposal is part of a package of measures aimed
at radically changing VAT rules by ending 25 years of a
'transitional' VAT system in the single market. This arrangement,
as far as Business-to-Business (B2B) transactions on goods are
concerned, split the cross-border movement of goods into two
different transactions: an exempt supply in the Member State of
departure of the goods and an intra-Community acquisition taxed in
the Member State of destination
The proposal presented by the Commission puts an end
to this artificial split of a single commercial
transaction.
Besides the change to the definitive VAT system for
cross-border trade, this move includes two other proposals to
modify Directive
2006/112/EC (VAT Directive): one as regards VAT
rates and one as regards the special scheme for small
enterprises. In addition, it includes a proposal
for a Council Regulation on combating fraud in the field of
VAT.
As regards the change towards a definitive VAT system
based on the principle of taxation in the Member State of
destination a gradual two-step approach was announced: a first step
settling intra-Union B2B supplies of goods and a second step
covering supplies of services.
The first step was further divided into two sub-steps.
The first sub-step, presented simultaneously with the
Communication, was a legislative proposal
which outlined the cornerstones for a simpler and fraud-proof
definitive VAT system for intra-Union trade.
The current proposal represents the second sub-step.
It contains the detailed arrangements to put these cornerstones in
place for intra-Union B2B supplies of goods.
IMPACT ASSESSMENT: a back to back impact assessment
and evaluation was carried out which covered both the setting of
the cornerstones of the definitive VAT system and the detailed
arrangements for putting these cornerstones into place. The
preferred option would reduce cross-border VAT fraud by up to
EUR 41 billion per annum and reduce compliance costs for
businesses by EUR 938 million per annum.
The Regulatory Scrutiny Board gave a positive opinion
to the impact assessment with some recommendations, in particular
on the link of the proposal to other elements of the VAT Action
Plan, the need for a staged approach and the concept of certified
taxable person, that have been taken on board.
CONTENT: this proposal amends the VAT Directive as
regards the introduction of detailed technical measures for the
operation of the definitive VAT system for the taxation of trade
between Member States. It is intended to replace the transitional
arrangements applicable since 1 January 1993 by a definitive VAT
system for intra-Union B2B trade under which domestic and
cross-border transactions involving goods will be treated in the
same way.
The main elements of the proposal are as
follows:
Simplifying how goods are taxed: in the current VAT system, trade in goods between
businesses is split into two transactions: a VAT-exempt sale in the
Member State of origin and a taxed acquisition in the Member State
of destination.
It is proposed that cross-border B2B supplies of goods
within the Union should be combined into a single type of
transaction for VAT purposes: an intra-Union supply of goods. A
definition of the concept of intra-Union supply of goods is
integrated.
Place of supply rules:
the combination of the definition of intra-Union supplies of goods
and the new proposed place of supply rule ensures the taxation of
cross-border B2B supply of goods in the Union in the Member State
of destination.
Chargeability of the tax: an amendment is proposed that determines a single
rule for the chargeability of VAT on intra-Union supplies.
According to this rule VAT shall become chargeable on issue of the
invoice, or on expiry of the time limit if no invoice has been
issued by that time (fifteenth day of the month following that in
which the chargeable event occurs).
Person liable for payment of VAT: the principle remains that VAT shall be payable by
any taxable person carrying out a taxable supply of goods or
services, unless in other provisions, it is stipulated that VAT is
payable by another person.
As an exception, a new Article is proposed according
to which VAT shall be payable by the person to whom the goods are
supplied insofar he is a certified taxable person if the
goods are supplied by a taxable person not established within the
territory of the Member State in which the VAT is due.
As regards intra-Union supplies of
goods, the supplier shall, in
principle, be liable for the payment of the VAT in the Member State
of arrival of the goods except where the supplier is not
established in the Member State of taxation and the customer is a
certified taxable person. In the latter case, the customer
will pay the VAT due by way of reverse charge in the Member State
of arrival of the goods.
Identification: an
amendment is proposed according to which Member States shall take
the measures necessary to ensure that a non-taxable legal person
who is the recipient of an intra-Union supply is identified by
means of an individual number.
Reduced administrative formalities: the changes reboot the self-policing
character of VAT and will reduce the amount of administrative
steps that need to be taken by businesses when they sell to other
companies in other Member States
Intra-Union supplies of goods should under the
proposed system no longer be included in the recapitulative
statements. The principle of VAT being charged by the
supplier on the intraUnion supply re-installs the self-policing
character of VAT. Consequently, ensuring an administrative
follow-up to the physical flow of goods through the recapitulative
statement within the Union is no longer justified.
Single online portal: in
order to make the change to VAT rules as
seamless as possible for businesses, the proposed amendments would
introduce the necessary provisions to put in place an online portal
or 'One Stop Shop' for all business-to-business (B2B) EU
traders to sort out their VAT. This system will also be available
to companies outside the EU who want to sell to other businesses
within the Union and who would otherwise have to register for VAT
in every Member State. Once in force, these businesses will simply
have to appoint one intermediary in the EU to take care of VAT for
them.