The proposals – which, if approved, will result in two new EU Directives and one EU Regulation – contain six elements intended to simplify the current Value Added Tax compliance obligations imposed on cross-border traders who supply goods and services to other EU Member States.
These are:
- A proposal to give a trader the option of using the VAT number by which he is identified in his own Member State for all supplies made to other Member States and of making VAT declarations to one single electronic portal. This information would then be submitted automatically to the different Member States where he supplies goods or services. The trader would pay the VAT directly to the Member State where the VAT is due. Non-EU traders would also have the option of using this scheme.
- A similar "one-stop-shop" approach would be introduced for requesting refunds of VAT from other Member States. The electronic portal would ensure that the refund request was directed to the Member State where the expenses were incurred, which would refund directly to the applicant. The deadline for repayment of VAT would also be reduced from six months to three months and a Member State would, if it exceeded the deadline, be required to pay interest of 1% a month, calculated on the amount refunded.
- The categories of expenses for which Member States may choose to apply restrictions to the right to deduct VAT would be harmonised.
- The use of the reverse charge mechanism - whereby a receiving trader rather than the supply trader is responsible for paying the VAT- would be extended.
- The threshold under which traders, in particular SMEs, would be exempt from VAT could be set by Member States at a maximum of €100, 000.
- The arrangements concerning distance selling of goods subject to VAT would be simplified by introducing a global threshold, set at €150, 000, calculated on all supplies to other Member States. At present different Member States have different thresholds for distance selling.
"The European Council has identified the reduction of the administrative burden on business as an important element for fostering economic growth," said Frits Bolkestein, Commissioner for the Internal Market and Taxation. "This proposal is a valuable contribution towards that objective".