Pending a review of the e-commerce directive, the Commission has extended VAT arrangements for e-commerce (implemented in 2003) until the end of 2008.

The Commission is also working on changes to VAT legislation intended to combat 'carousel' or 'missing trader' fraud. Meanwhile proposals for changes made by the UK and Germany, both of which say they have suffered substantial losses from such fraud, have been put on hold. The Commission says that it will propose a 'comprehensive' solution to the problem by June, 2007.

Alongside that solution, the VAT package being worked on by the Commission includes a draft directive on the place of supply of services as concerns VAT payments, which is aimed at changing the place of taxation for VAT from the place where the supplier is located to the place where the customer is located, and two draft directives and a draft regulation on simplification of cross-border VAT obligations and refund procedures for businesses.

The proposals on simplification of cross-border arrangements are aimed at creating a "onestop" scheme to simplify registration and declaration of VAT by businesses in member states where they have no base. They also set out detailed rules for refunds of VAT to such businesses and provide for improved administrative cooperation to prevent fraud. Under the "one-stop" scheme, businesses active in member states where they are not registered would have the option of fulfilling in their home member state a single set of obligations for registrations, declarations and refunds. The home state would transmit the information to the other member states concerned, whose VAT rates and controls would be applicable, and who would collect the tax directly.