PURPOSE: to improve the Union VAT system in the
context of cross-border business-to-business (B2B) trade between
Member States and to define the principles for a definitive VAT
system.
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 European Commission has long-standing
commitment to implementing a definitive VAT system that is
well-suited to the functioning of the single market. The main idea
in this regard was that doing business across the European Union
should be as simple and as secure as engaging in purely domestic
activities.
In its April 2016 action
plan on VAT, the Commission announced, inter alia, its
intention to adopt a definitive VAT system for intra-Union
cross-border trade based on the principle of taxation in the Member
State of destination of the goods in order to create a robust
single European VAT area.
The Council reiterated its view that the
principle of taxation in the Member State of origin of the
supply of goods or services should be replaced by the
principle of taxation in the Member State of
destination.
In its resolution
of 24 November 2016, Parliament also welcomed the
Commissions intention to propose a definitive VAT system by
2017 that is simple, fair, robust, efficient and less susceptible
to fraud.
On 8 November 2016, the Council stated that, while the
Commission is working on the definitive VAT system for intra-Union
trade, improvements to the current VAT system should be made in
the meantime.
IMPACT ANALYSIS: the preferred option, chosen in the
impact assessment, would reduce cross border VAT fraud by EUR 41
billion and compliance costs for businesses by EUR 1
billion.
CONTENT: this proposal to amend Directive
2006/112/EC (VAT Directive) is a step forward to
replacing 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 of goods will be
treated in the same way.
It makes improvements to the current VAT system and
lays the foundations for the definitive system for intra-Union B2B
exchanges. Its main elements are:
1) Certified taxable person: the Commission proposed introducing the concept of
the certified taxable person which would allow for an attestation
that a particular business can globally be considered to be a
reliable taxpayer. The concept is important because certain
simplification rules, which could be fraud-sensitive, will apply
only where a certified taxable person is involved in the relevant
transaction.
The provision sets out the overall criteria on
the basis of which the Member States will be able to certify
taxable persons.
In parallel, a proposal
to amend the Regulation on administrative cooperation is
presented in order to enable the certified taxable person status of
taxable persons being integrated in the VIES (VAT information and
exchange system).
2) Call-off stock: the
proposal provides for a simplification and uniform treatment for
call-off stock arrangements in cross-border trade. The proposed
solution consists in considering the call-off stock arrangements as
giving rise to a single supply in the Member State of departure and
to an intra-Community acquisition in the Member State where the
stock is situated. This simplification is limited to certified
taxable persons who will no longer need to register and pay VAT in
another Member State when they store goods there.
3) VAT identification number: the proposed amendments provide as a substantive
condition for the application of the exemption, that the acquirer
has to be identified for VAT purposes in a Member State other than
that in which dispatch or transport of the goods begins. The
correct filing of the VIES listing becomes a substantive condition
which can lead, where that condition is not met, to the rejection
by the tax administration of an applied exemption
4) Chain transactions:
VAT rules when determining the VAT treatment of chain transactions
would be further harmonised. The Commission proposed that
the simplification for those elements of a chain transaction which
do not involve the physical movement of goods, for example when
goods are sold via several traders, but physically the goods move
directly from the original seller to the final buyer. This
simplification is limited to certified taxable persons.
5) Definitive system for intra-Union
trade: the main foundations of the
new single and definitive VAT area shall be:
VAT shall be levied on cross-border
business-to-business exchanges within
the Union;
·
the definitive VAT system for intra-Union trade
is based on the principle of taxation in the Member State of
destination of the supply of goods or services; of liability
for VAT of the supplier, or the acquirer if he is a certified
taxable person, and of a single registration scheme for the
declaration, payment and deduction of the tax;
·
where the person liable for VAT is not
established in the Member State where the tax is due, he shall be
able to settle his declaration and payment obligations via a
so-called One-Stop Shop system. Use of that system shall
also be possible for the deduction of input VAT.
Lastly, although at this stage not yet explicitly
stipulated, the system could or should further be based on the
abolition of the recapitulative statement (the so-called
VIES listing), the application of the overall invoicing rules of
the Member State of the supplier, and the harmonisation of certain
rules related to invoicing (such as the time of issuing of
invoices).