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Next steps towards definitive VAT system

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The European Commission has put forward technical amendments to the principal VAT directive, which is a necessary step towards implementation of the measures set out in the its proposal on ‘cornerstones’ of the definitive EU VAT system.

The amendments provide for single intra-EU supplies of goods (abolishing intra-EU acquisitions), supported by an online one-stop-shop. Sellers would be responsible for charging VAT, at the rate applicable in the member state of destination, except where the customer is a ‘certified taxable person’.

The Commission’s vision for the definitive VAT system was first set out in its VAT action plan, published in April 2016, based on the principle of taxation in the member state where the customer is located, creating a single European VAT area. The plan envisaged a two-stage approach to the definitive regime, the first taking in B2B supplies of goods, before moving on to cover supplies of services.

The Commission’s first step in relation to supplies of goods was its October 2017 proposal setting out the ‘cornerstones’ of a simpler and more fraud-proof system.

This latest proposal is the second step in relation to supplies of goods, containing the necessary technical changes to the VAT directive. A further amendment will be made to the regulation on administrative cooperation in the field of VAT before the VAT directive changes take effect.

See The planned date for entry into force of the definitive regime is 1 July 2022.

Two further sets of proposals connected with the VAT action plan and the definitive regime received a setback at the ECOFIN meeting on 25 May, as the Council was unable to reach the unanimous agreement required. These concerned:

  • amendments to the administrative cooperation directive for increased exchange of information and cooperation between national tax authorities and law enforcement bodies, and new powers for Eurofisc (first proposed by the Commission in November 2017); and
  • temporary application of the reverse charge mechanism to all domestic supplies of goods and services above an invoice threshold of €10,000, as an anti-fraud measure pending implementation of the destination principle across the EU in 2022.
Issue: 1401
Categories: News , Indirect taxes , VAT