EC proposes standard EU VAT return

Thu 24th Oct 2013

In an attempt to simplify the reporting burden for companies doing business across the EU, the European Commission (EC) has presented a draft Directive for a standard EU VAT return.  It is hoped that this can be implemented from 1 January 2017.

Huge variations in European VAT Returns

EU VAT returns are designed to capture monthly/quarterly/annual information on sales and purchases which are liable to VAT.  This can include intra-community supplies of goods or services across EU borders.

Currently, all 28 member states of the EU create their own VAT returns, including the details of information required, and supporting documentation.  This has resulted in a huge variation in the complexity of returns.  For example, the Irish VAT return only has six boxes to potentially complete, whereas the Hungarian VAT return has 99.  By some measures, the Italian VAT return has over 500.

Over 150 million VAT returns per annum are completed in the EU.  The EC estimates that this variation in returns creates a compliance burden of over €15 billion for business.  The EC also believes that a standardised VAT return would help reduce the amount of mis/undeclared VAT, and help reduce the VAT Gap – the difference between expected VAT revenues vs. actual revenues.

Common format for VAT returns

The EC is hoping to introduce a single format return, with just five mandatory boxes.  This will include:

  1. input VAT;
  2. output VAT;
  3. net VAT payable;
  4. value of input transactions; and
  5. value of output transactions.

States will also be able to include up to 21 further boxes, covering intra-community supplies, supplies at different rates, etc.

Monthly returns across Europe

One of the other major complaints of business is the inconsistency between reporting periods between the countries.  There are huge variations between the different states between monthly and quarterly reporting demands.  The EC has proposed monthly reporting for all businesses above €2 million turnover.  Any business operating below this limit will report monthly.

Local differences, rules and language remain.

Whilst this proposal will help reduce the problems of understanding differences in lay-outs of returns, the local VAT rules, deductibility etc will remain.  VAT returns will also still have to be completed in the local language.