EC Adopts Proposal Implementing VAT Package

by Ulrika Lomas, Tax-News.com, Brussels

21 December 2009

The European Commission has adopted a proposal on implementing measures for the European Union (EU) VAT Package, which makes important changes to place of supply rules in the EU and which is scheduled to come into force on January 1.

The new provisions will see VAT for business-to-business services paid in the country of consumption rather than the country where the supplier is located, while for business-to-consumer services, VAT will continue to be paid in the member state in which the supplier is established.

The proposal adopted by the Commission on December 17 includes a number of measures related to the VAT Package, in particular to prevent situations of double taxation that could arise as a result of diverging interpretations of the new rules. For example, there are guidelines for suppliers on establishing the location and tax status of the customer, as this will determine the rate of VAT that must be paid.

Other guidelines focus on the provisions within the VAT Package which complement or provide exceptions to these general new rules.

The VAT Package was adopted by member states at the Ecofin Council in February 2008 and also provides for a faster, more effective electronic procedure for businesses to reclaim the VAT that they pay in a member state other than the one in which they are established.

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