The European Commission has published the summary of responses to its consultation on reduced VAT rates for electronically supplied publications (see FEE Tax Policy Update from 5 August for…
Summary Report Responses received on the Commission’s consultation on reduced VAT rates for electronically supplied publications – 4 November 2016
The European Commission has published the summary of responses to its consultation on reduced VAT rates for electronically supplied publications (see FEE Tax Policy Update from 5 August for further details). 94% of the respondents agree that Member States should be allowed to apply a reduced VAT rate to e-books, whilst 88% of the respondents agree that Member States should be allowed to apply a reduced VAT rate to e-newspapers and e-periodicals as well. Most (50%) of the respondents were readers, followed by companies (16%).
EU Finance Ministers agree on improvements to EU VAT rules – 8 November 2016
At the same ECOFIN meeting of EU Finance Ministers in November, Member States agreed on guiding conclusions for their preferred approach to improving the current EU VAT rules for cross-border transactions. These conclusions are a reaction to the European Commission’s VAT Action Plan published earlier this year, and the imminent Commission proposals (30 November) to improve the VAT dimension of cross-border operation of businesses within the Single Market. The Council conclusions establish, in particular, the following:
- the VAT identification number as an additional condition for application of an exemption in respect of an intra-EU supply
- in order to better tackle VAT fraud, improving the quality and reliability of data used in the EU’s VAT information exchange system
- determining “uniform criteria” for the VAT treatment of the transaction chain, including ‘triangular transactions’ (where goods are shipped from a member state other than that of the supplier and the customer)
- simplifying rules for call-off stock (where goods are sent to a customer’s storage facility in another member state)
- work concerning the exemption from VAT of intra-EU supplies, and in particular for the exploration of possibilities for a common framework of recommended criteria for the documentary evidence required to claim an exemption for intra-EU supplies
The Member States call on the Commission to come up with studies and legislative proposals on these items.
Malta to push for VAT agenda – 8 November 2016
According to Tax News, Malta will give particular priority for the Commission’s VAT reform agenda during its Presidency, which begins in January 2017. The Maltese concerns relate, in particular, to changes brought about e-commerce as well as the need to ensure that smaller businesses are not subject to undue compliance burdens and to tackle VAT fraud more effectively. Commission is expected to propose a major VAT simplification package for e-commerce on 30 November, together with measures to improve cooperation between tax administrations and to evaluate the Directive on the mutual assistance for the recovery of tax debts.
Court ruling on the VAT rules governing the supply of horses to horse race organisers – 10 November 2016
The Fourth Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the VAT rules governing the supply of horses to horse race organisers. The case code is C-432/15. In its ruling, the Court establishes a number of clarifying decisions on the VAT treatment of transactions related to the supply of horses to horse races, with regard in particular to reduced rates and deductions.
Property taxation in Europe – 3 November 2016
The European Commission has replied to a question asked by the MEP Theodoros Zagorakis (EPP/GRE) with regard to property taxation in Europe. In his question, Mr. Zagorakis asks the Commission whether it can provide information on property taxation in Member States, and whether it has comparative data on the taxation of income from property, tax on property, tax on transfers, VAT, tax on increased property value, inheritance tax and objective property values. In his reply, Commissioner Moscovici states that the Commission provides information about national taxes in the ‘Taxes in Europe’ database (TEDB). For property taxes that fall under the scope of the TEDB, the information is collected in the TEDB and can be found on the Commission website. Moreover, data on all relevant taxes are published in the Taxation Trends Report. The new report will be published in mid-November 2016. Provisional data are, however, already available on the Commission website.
The European Commission has launched its long-anticipated VAT simplification package for e-commerce.
The package proposes changes to the existing EU VAT legislation in order to:
- Further facilitate and simplify cross-border trade
- Provide equal VAT treatment for online publications
- Ensure a level-playing-field between businesses – the Commission maintains that currently EU businesses are at a clear disadvantage to non-EU businesses which can legitimately and through high levels of non-compliance make VAT-free supplies into the EU
The main objective of the proposals is to modernise the EU VAT system to the particularities of increasingly digitalised economies. In the Commission’s words, the VAT rules that apply in Europe today were created before the boom of the internet and online sales
The Commission also published a factsheet on the major changes that its proposals intend to introduce (link to the factsheet: http://ec.europa.eu/taxation_customs/sites/taxation/files/vat-e-commerce-factsheet.pdf). As a whole, the package consists of:
- Two amendments to the VAT Directive (2006/112/EC), namely:
– VAT rates applied to e-books, -newspapers and –periodicals: http://ec.europa.eu/transparency/regdoc/rep/1/2016/EN/COM-2016-758-F1-EN-MAIN.PDF
– The main chunk – amendments with regard to VAT obligations for supplies of services and distance sales of goods, including an extension of the One Stop Shop (OSS): http://ec.europa.eu/transparency/regdoc/rep/1/2016/EN/COM-2016-757-F1-EN-MAIN.PDF
- One amendment to the Regulation on administrative cooperation and combating VAT fraud (Regulation No 904/2010). The main purpose here is to provide for the IT tools and forms of administrative cooperation need to accommodate the extension of the OSS: https://ec.europa.eu/taxation_customs/sites/taxation/files/com_2016_755_en.pdf
- One amendment to Regulation 282/2011
– Pieces of evidence required for businesses with cross-border intra-Community sales of telecommunications, broadcasting and electronically supplied services
- The Directive covers the rules and procedures for electronic exchanges between taxable persons and their tax administrations, as well as between Member States’ tax administrations of VAT information concerning VAT identification, VAT returns and VAT payments within the OSS
Procedure and next steps:
For all four legislative texts, the Council will decide on (and amend) the Commission proposals by unanimity. European Parliament only provides its non-binding opinion, which de juro gives it delaying powers but this is seldom used.
Work in the Council will begin on all four dossiers shortly at a technical level (tax attaches). A final agreement on them will be formulated and concluded at the Finance Ministerial level within the upcoming months.
VAT treatment of e-publications:
- Member States will be allowed to apply the same VAT rates to e-publications as they currently apply to printed publications, including reduced, super-reduced and zero rates
VAT simplification for small businesses – applicable from 2018:
- Only one piece of evidence for the identification of the location of customers is required for businesses with cross-border intra-Community sales of telecommunications, broadcasting and electronically supplied services amounting up to €100 000 in the current and the preceding calendar year
- The previous requirement for two pieces of evidence was deemed onerous for SMEs and microbusinesses in particular
- Commission proposes the introduction of a yearly VAT threshold of €10,000 under which cross-border sales for online companies are treated as domestic sales, with VAT paid to their own national tax administration
Action against VAT fraud:
- Small consignments imported into the EU that are worth less than €22 are currently exempt from VAT, which the Commission maintains disadvantages EU businesses and currently provides opportunities for VAT fraud by non-EU businesses
- The Commission therefore proposes to remove the exemption altogether
Extended One Stop Shop (OSS) – applicable from 2021:
- The current Mini One Stop Shop (MOSS) applicable to e-services will be extended to intra-Community distance sales of tangible goods and services other than e-services, as well as to distance sales of goods from third countries
- This means that all companies that sell goods online may handle all of their VAT obligations in the EU through a single digital online portal, the OSS, hosted by their own national tax administration and in their own language
- As part of the OSS, the applicable VAT rate for a transaction will be automatically calculated and the sum transferred to the country of the recipient
- In parallel, the Commission proposes the removal of the existing intra-Community distance sales thresholds which, it argues, are a cause of distortions in the single market