VAT News

EC-B2B sales proposal to reduce fraud

Currently within the EU, supplies of goods dispatched from one member state to another are not subject to VAT where substantive conditions are met. As a result of this, billions of pounds of VAT has been lost by tax authorities as a result of fraudulent activity. To counter this, the EC has released proposals which radically change the treatment of such supplies.

The proposal has identified 4 key 'cornerstones:

1-Tackling fraud

2-One stop shop

3-Greater consistency

4-Less red tape

The major change proposed is that B2B supplies of goods between member states will now be subject to VAT at the applicable rate in the destination country. The VAT must be declared by the supplier, but rather than register in each country to which goods are supplied, a one stop shop solution will be introduced and business will declare all B2B cross border supplies of goods to their home tax authority. Note that supplies of services are not in the scope of these changes, nor are any B2C sales of goods which will remain subject to the current distance selling rules.

In addition to the above, the changes will also see the removal of the requirement to submit EC Sales Lists/Recapitualtive statements across the EU. Intrastat requirements will remain.

Whilst these changes will affect many businesses, there will also be a concession of sorts for so-called 'certified taxable persons'. Businesses will be able to apply for this status if they meet pre-defined criteria such as regular payment of taxes, reliable internal control systems, and proof of solvency. Holding this certification will provide the business with a number of benefits such as:

1-Purchasing goods free of VAT (and accounting for acquisition VAT) as per the current system

2-Removal of registration requirements for businesses holding certain consignment stocks

3-Harmonised and uniform rules to make it easier to provide evidence of goods being transported cross-border

The proposal also outlines a 'quick-fix' whereby under the current rules for B2B cross-border supplies of goods, the business customer must be registered on the VIES system.

The proposal will now be forwarded to the European Parliament for consultation and to the Council of Ministers for agreement. Note that agreement must be obtained from all member states. Following this, adoption of a second proposal is timetabled for 2018, with a definitive regime envisaged to enter into application from 2022.

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