Tax

Changes in EU VAT system: will it finally happen?

Bob van der Steen Bob van der Steen

This week, the European Commission (EC) announced the biggest changes in European VAT regulation since a quarter of a century. The substantial changes must lead to less fraud, less complicated VAT legislation and a lesser administrative burden for companies to meet their VAT obligations. Below you will find five changes that may impact your organisation.

Five proposals

  1. B2B Intracommunity supplies of goods within the EU
    B2B Cross-border supplies within the EU are now charged with 0% VAT. If the proposal will become legislation, these kind of supplies will be taxable at the VAT rate of the country where the goods are shipped to.

  2. One-Stop-Shop Registration
    Entrepreneurs providing B2B cross-border supplies of goods may remit the VAT they charge via one One-Stop-Shop registration at, for example, the tax office in the country of establishment. They do not have to register in the countries of destination.

  3. 'Country of destination' principle
    The intention is that as many supplies of goods and services as possible, will be taxed according to the 'country of destination' principle. There will be only a limited amount of exceptions.

  4. Invoice requirements of the country of establishment will be leading
    The EC propose that entrepreneurs may follow the invoice requirements of the country of establishment and do not have to meet the invoice requirements of the country of destination. Often, these requirements differ from each other, which gives additional complications in for example IT systems.

  5. Certification 'taxable person'
    There will be some kind of certification as 'taxable person'. The certified tax payer can benefit from simplified arrangements, procedures, etc. Maybe, this will be already available by 2019.

Difficult to comply with various VAT regulations per country

We warmly welcome these proposed changes. In our daily international VAT practice, we notice how difficult it is for companies to meet all specific regulations per country. Companies are getting confused and are facing significant costs to meet all VAT obligations. Entrepreneurs who want to be compliant will be rewarded and no longer punished because others do not take it so closely.

The Member States must, of course, approve the proposals of the EC, which often proves to be a difficult step. If everything goes smoothly, the EC would like to get the regulatory changes into force as of 2022.

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