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EU: Proposal for new single VAT system

EU: Proposal for new single VAT system

The European Commission today proposed the detailed technical amendments to EU rules on value added tax (VAT) that would supplement a recent proposal to revise the VAT system to make it more “fraud-resilient.”

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According to today’s EC release, the measures would substantially modify the VAT rules and create a single EU VAT area. Under the current VAT system, trade in goods between businesses is viewed as two transactions: (1) a VAT-exempt sale in the EU Member State of origin; and (2) a taxed acquisition in the EU Member State of destination. Today's proposal would end this treatment, and would define the cross-border trade of goods as a single taxable supply so that goods are taxed in the EU Member State where the transport of the goods ends.

The amendments would allow for a “one stop shop” for all business-to-business EU traders with respect to VAT (as announced in October 2017 reform proposals). This system would also be available to companies outside the EU that want to sell to other businesses within the EU and that would otherwise be required to register for VAT in every EU Member State. These businesses would simply have to appoint one intermediary in the EU to take care of VAT for them.

Today’s announcement clarifies that it is the seller that would charge the VAT on a sale of goods to a customer in another EU country, at the rate of the EU Member State of destination. Only when the customer is a “certified taxable person” (i.e., a reliable taxpayer, recognized as such by the tax administration) would the acquirer of the goods be liable for VAT.

 

Read a June 2018 report prepared by the KPMG member firm in the UK

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