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EU VAT Cooperation Proposals To Be Amended

by Ulrika Lomas,, Brussels

27 April 2018

The European Parliament's Committee on Economic and Monetary Affairs has requested a number of changes to the EU Commission's proposals for enhanced administrative cooperation in value-added tax matters, according to a document released on April 23, 2018.

The document explains the amendments of the Committee to the Commission's "amended proposal for a Council regulation amending Regulation (EU) No 904/2010 as regards measures to strengthen administrative cooperation in the field of value-added tax."

Such includes provisions to ensure greater cooperation between agencies responsible for tackling fraud within the EU. A new Public Prosecutor's Office is proposed to be established, to pool expertise in areas such as crime analysis, tax, accounting, and IT, and provide smooth communication channels without any language barriers, and the EU is seeking VAT cooperation pacts with third countries, having signed its first with Norway in February 2018.

The Committee has recommended that the legislative proposal should be amended to "strike the right balance between requests for and analyzing of information on the one hand and data protection and privacy on the other." Several amendments therefore have been put forward that are said to seek to more clearly define the operating boundaries of Eurofisc, the existing framework for cooperation between member states, as well as the processing and use of information by the authorities.

The proposal has also been amended so as to strike a "better balance" between the interests and responsibilities of the requesting and the requested authorities, the explanatory statement says. "Without undermining the ability for the requesting authorities to launch administrative inquiries, the rights of the requested authorities are now better served. Furthermore, a more simplified mechanism on how the member states deal with outstanding VAT liabilities is introduced," it says.

Finally, it notes that provisions on the concept of "certified taxable person" have been deleted. The proposal for the concept has been a contentious issue during debates on the matter, with some stating that the framework is unnecessary given that the EU will soon adopt a definitive VAT regime centered on taxation under the destination principle – that goods and services be taxable in the location of the consumer or where they are effectively enjoyed, under that state's rules – as these reforms are expected to dramatically reduce the potential for VAT fraud.

The EU's VAT Fraud Prevention Plans

The EU's plans for a definitive VAT regime were set out in October 2017. The plan aims to reduce fraud, estimated to cost member states EUR50bn (USD61.6bn) per year, by EUR40bn. In the area of fraud, the definitive regime provides that VAT should be charged on cross-border trade between businesses. Currently, this type of trade is exempt from VAT, providing an easy loophole for unscrupulous companies to collect VAT and then vanish without remitting the money to the relevant country's government (so-called carousel fraud).

The plan also proposed the concept of a Certified Taxable Person – a category of trusted business that will benefit from much simpler and time-saving rules. Provided that companies – small or big – meet a set of criteria, they would receive a certificate allowing them to be considered throughout the EU to be a reliable VAT taxpayer.

It has also separately proposed that the reverse charge mechanism on a defined list of goods and services, provided for in Article 199a(1) of the VAT Directive, and the Quick Reaction Mechanism (QRM) in Article 199b(1), should be extended beyond December 31, 2018, to tackle VAT fraud, until the new "definitive VAT regime" is introduced.

TAGS: compliance | VAT tax authority guidance | tax | business | value added tax (VAT) | mining | interest | VAT legislation | accounting | Norway | tax authority | legislation | regulation | trade | services | VAT compliance matters | Europe | Tax

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