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EU cross-border VAT dispute resolution pilot extended for a further year

Out-Law News | 23 Jan 2014 | 4:12 pm | 1 min. read

An EU VAT dispute resolution pilot, allowing businesses located in participating member states to receive a ruling in advance if they expect to participate in complex cross-border transactions, has been extended until the end of 2014, the European Commission has announced.

The pilot has also been extended to additional member states than those already participating, according to the announcement. Finland has joined the 13 states currently involved, which include the UK, France and Spain.

VAT expert Darren Mellor-Clark of Pinsent Masons, the law firm behind Out-Law.com, said that although the programme was being marketed to small and medium-sized businesses (SMEs), the extension of the scheme was good news for a variety of businesses with cross-border issues.

"It's good to see the extension of this trial programme," he said. "The previous programme was probably too short to allow effective evaluation of the process. Businesses with cross-border issues would be well advised to take this opportunity to attempt bi-lateral resolution."

"The increasing reliance on consumption taxes to fund state expenditure means that there must be an effective framework to reduce instances of double- and indeed non-taxation. The lack of a treaty network comparable with that applicable to corporation tax has denied international businesses a framework to resolve such issues; while at the same time the VAT Directive has allowed such situations to arise without providing an effective resolution framework," he said.

The dispute resolution pilot began in June 2013, and is open to businesses trading between two or more of the participating member states. It allows tax authorities in the member state where the business making the request for a ruling is registered for VAT purposes to consult, and share information with, tax authorities in the member state where the trade is taking place where this is explicitly requested. The programme does not guarantee that the authorities will be able to agree on the correct VAT treatment of the situation envisaged if a request for a ruling is made.

According to an information notice on the scheme (3-page / 113KB PDF), published by the European Commission, companies requesting a cross-border ruling should do so in the member state where they are registered for VAT purposes. If two or more companies are involved, the request should only be introduced by one of them and be accompanied by a translation into one of the languages accepted by the other member state or states concerned. Requests should be introduced in line with the conditions governing national VAT rulings in the member state concerned.

The member states involved in the programme are Belgium, Estonia, Spain, France, Cyprus, Latvia, Lithuania, Malta, Hungary, the Netherlands, Portugal, Slovenia, Finland and the UK. The EU VAT Forum, which is administering the scheme, will publish the names of other member states as soon as they confirm their participation.

A mid-term review of the programme is scheduled for June 2014, and the Commission may choose to further extend it if the results are positive, it said.