The EU Commission published on 7 April 2016 its EU VAT Action Plan which sets out its proposals for changes to the VAT system over the coming two years.
Broadly, the proposals cover 4 areas:
- Tackling Fraud – countries will continue to be given tools to tackle VAT fraud. These will include derogations to implement measures to combat specific instances of fraud (i.e. the implementation of reverse charges for certain supplies) and improving cooperation between tax authorities in all countries, both EU and non-EU. This should assist in reducing the current estimated VAT gap of EUR 170 billion;
- Making compliance for e-commerce businesses easier – a mini-one-stop-shop (MOSS) for B2C supplies of goods has been proposed alongside EU-wide simplification measures such as lower thresholds for small start-up ecommerce businesses and removal of the low value consignment relief for personal imports of goods bought from non-EU traders;
- More efficient B2B trading of goods – a proposal to change the way VAT is accounted for on cross border supplies. The current system of having VAT free despatches and acquisition tax would be replaced by one where suppliers account for VAT in the country of destination. There would be no need to register in other Member States as all VAT due would be accounted for on an online portal in the suppliers own country and revenues shared by Member States; and
- Greater control over rates – two options have been put forward to help give EU Member States more control over the rates that apply to supplies made in their countries. These options consist of extending and having regular review of the goods and services eligible for reduced rates whilst the second would be to abolish the list of items and allow individual countries greater control of the rate that is applied.
It should be noted that the EU Commission has set out a timeline across the next 2 years to provide proposals and evaluations on these points. Therefore, no sudden changes should be expected to take place to the existing rules (so it is still business as usual) although we will continue to monitor progress on these issues and provide updates as and when further action occurs.