EU ECOFIN VAT reforms update

Sat 23rd Jun 2018

On 22 June 2018, the European Union’s monthly meeting of finance ministers, ECOFIN, discussed three EU VAT reform issues:

1 Free exchange of information

There was political agreement on new tools to close the €50billion VAT fraud gap. These tools facilitate the free exchange of information between member states to aid co-operation. This includes:

  • Improvements in shared IT systems
  • Exchange with EU enforcement agencies of information on fraud gangs’ activities
  • Improved investigations between tax authorities and enforcement agencies

2 EU standard VAT rate

The minimum EU standard VAT rate has been set permanently at 15%. This rate had been in effect on a temporary basis since 1993.

3 Four quick fixes to current VAT system

Four quick fixes to improve the day-to-day functioning of the current VAT system for goods. These received agreement. However, a new, fifth cost-sharing mechanism in financial services was proposed by several delegations. There was no unanimity for this fifth proposal. The Commission did not accept it as it may interfere with free establishment and distort the operations of the single market.  France and Spain rejected agreement on all the fixes as a result of the exclusion of the fith, and therefore discussions will still have to continue.

The four quick fixes are:

  • Simplification of VAT rules for companies moving goods from one Member State to another Member State where they are to be stored before being supplied to a customer known in advance. The described situation is referred to as “call-off stock arrangements”. This simplification is limited only to certified taxable persons – a concept which is explained in the following section;
  • Simplification provided for chain transaction situations identifying the supply with which the intra-Community transport of goods should be linked. This simplification is limited only to certified taxable persons;
  • Simplification of the proof of transport of goods between two Member States needed for the application of the exemption to intra-Community supplies. This simplification is limited only to certified taxable persons;
  • Clarification that, in addition to the proof of transport, the VAT number of the commercial partners recorded in the electronic EU VAT-number verification system (VIES) is required in order to apply the cross-border VAT exemption under the current rules.

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