In short, these changes cover the following topics:
- The possibility to apply reduced VAT rates to e-publications. This should end the discussion on unequal treatment of publications on paper vs. e-publications.
- Introduction of a Community-wide threshold of EUR 10.000 below which the place of supply of electronic B2C services remains in the Member State of the supplier even when the customer is located in another EU Member State. This will help stimulate SMEs and micro-businesses to engage in the supply of electronic services.
- Application of home-country rules as regards invoicing and book-keeping obligations for supplies under the Mini One Stop Shop (MOSS). - Reduction of the obligation to collect evidence supporting the place of supply of e-services for businesses whose total annual turnover resulting from these supplies does not exceed EUR 100.000.
- Extension of the scope of the current MOSS system to distance sales of goods. In this respect, the existing threshold to determine the place of supply for distance sales will be replaced by a uniform threshold of EUR 10.000.
- Extension of the scope of the one stop shop mechanism for non-EU suppliers.
- Removal of the VAT exemption for import of small consignments (EUR 150). In conjunction with the abolition of this exemption, the proposal introduces the so-called “import scheme”, a new One Stop Shop system for import of goods, as well as various other compliance simplifications.
- Extension of the deadline for submitting MOSS declarations and introduction of the possibility to correct previous declarations in a subsequent return. For a more detailed analysis of these measures we refer to our memo on the subject.
In general, these changes show the conviction of the EU Commission to promote the “One Stop Shop” mechanism which enables taxable persons to declare and pay all EU VAT in one single VAT return. According to the EU Commission, the current One Stop Shop mechanism is a success. This explains why the Commission has decided to propose an extension of its scope to other activities. It should however be emphasized that some EU Member States, particularly the larger countries, are adopting a skeptical attitude towards widening the scope of the One Stop Shop, as it implies that they will become more and more dependent on other EU Member states to monitor and ensure effective collection of VAT revenue on their behalf.
In addition, the proposed measures aim to tackle mismatches (cf. e-books) and loopholes (avoidance via the small consignment relief for import) of the current VAT system.
As always, it is highly uncertain whether the European Council will adopt the proposals in their current form given the unanimity rule in tax matters. However, the EU Commission seems to be convinced that a big part of these proposals will be adopted as such. If so, these changes will mainly be relevant for businesses that are active in the field of e-commerce and businesses that are involved in high volume small consignment import transactions.
The new rules also have the potential to create more opportunities for SME’s by specifically introducing simplifications tailored to their needs.
Finally, please note that these changes are part of the EU VAT Action plan of the EU Commission. This plan provides for other important changes to the current VAT system. Recently, the EU Commission submitted a proposal for new and modernized rules on VAT collection, including closer co-operation between Member States, more efficient tax administrations and rules on voluntary compliance. More importantly, it is the intention of the EU Commission to submit a proposal in 2017 to completely overhaul the current VAT rules on intra-community trade by introducing the “definitive VAT system”. In short, this definitive system aims to introduce taxation of intra-community supplies in the Member State of Destination in combination with an extension of the scope of the One Stop Shop mechanism. Furthermore, the EU Commission wants to liberalize the current rules on reduced VAT rates, making it more flexible for Member States to introduce reduced VAT rates, this in order to stop endless discussions between Member States on this topic (cf. e-books, restaurant services). As the EU Commission has already started with the preparation of these legislative initiatives it is clear that things are moving on an EU level and that changes can come sooner than expected. We will continue following these developments in our future newsletters.
For more information about this topic, please contact our VAT team:
Stijn Vastmans - Partner (email@example.com)
Stein De Maeijer – Senior Associate (firstname.lastname@example.org)
Gert Vranckx - Associate (email@example.com)
Loulou Geboers - Associate (firstname.lastname@example.org)
Nils Vanhassel - Associate (email@example.com)
1 COM/2016/755: Proposal for a COUNCIL REGULATION amending Regulation (EU) No 904/2010 on administrative cooperation and combating fraud in the field of value added tax (link)
COM/2016/756: Proposal for a COUNCIL IMPLEMENTING REGULATION amending Implementing Regulation (EU) No 282/2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax (link)
COM/2016/757: Proposal for a COUNCIL DIRECTIVE amending Directive 2006/112/EC and Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and distance sales of goods (link)
COM/2016/758: Proposal for a COUNCIL DIRECTIVE amending Directive 2006/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals (link)