At their monthly meeting held on 22nd June 2018, finance ministers from the Economic and Financial Affairs Council (ECOFIN) discussed certain VAT reform proposals with the following outcomes:
Political agreement was reached by Member States on new tools to combat VAT fraud in the EU. Use of these rules (the application of which may be deferred until 1st January 2020), is anticipated to promote free flow of exchange of information between Member States and foster cooperation among national tax and law enforcement authorities. The rules will lead to:
- Strengthened administrative cooperation between Member States, enabling them to tackle VAT fraud including online VAT fraud, more effectively;
- Greater use of IT systems instead of manual processing;
- Shared VAT information and intelligence with EU enforcement bodies on organised gang activity relating to serious VAT fraud; and
- Enhanced investigative cooperation between tax administrations and law enforcement authorities at both national and EU level.
The EU minimum standard VAT rate has been set permanently at 15%. The Council adopted without discussion, a directive making the 15% minimum standard rate, previously a provisional measure, a permanent feature of the new VAT system.
Expected approval of the reform relating to improvements to the current EU VAT rules for cross-border transactions was not received and will need further discussion. These improvements (quick fixes) detailed in the 4th October 2017, definitive VAT system proposal, are simplification rules which relate to call-off stock; triangulation arrangements; proof of transport of goods; and, the setting as a condition of cross-border exemption, provision of the customer’s VIES number. These original improvements had been agreed upon. However, on 20th June 2018 a fifth quick fix was added: the option to use the cost-sharing exemption for financial services, which directly contravenes recent CJEU case law prohibiting the application of the mechanism to that sector. Consequently, certain Member States including France, Italy and Luxembourg refused to approve the first package of 4 quick fixes without inclusion of the latest “fifth” fix.
These measures are still expected to come into effect from 1st January 2019 but will need ratification. When this will happen is unknown at present.