The European Commission has published its long-anticipated White Paper on the Future of the EU 27 by 2025. The paper was launched in view of the Rome Summit on 25 March…
Commission publishes White Paper on the future of EU, prospect of further tax harmonization 1 March 2017
The European Commission has published its long-anticipated White Paper on the Future of the EU 27 by 2025. The paper was launched in view of the Rome Summit on 25 March in which the EU will celebrate its 60th anniversary. The White Paper puts forward five different scenarios for the future direction of the EU 27, from which the Member States will need to choose their preferred one. The scenarios range from taking integration deeper to establishing a loose trading block and having a so-called multi-speed Europe where groups of Member States advance integration at different paces. Of particular interest, Option 3 proposing for groups of Member States to integrate at different paces singles out taxation as one of the areas where stronger cooperation is needed. This section of the paper states, notably, that “greater harmonisation of tax rules and rates reduces compliance costs and limits tax evasion. The Commission will organise together with the European Parliament and interested Member States a series of Future of Europe-debates across Europe’s cities and regions. The Commission’s intention is for the EU 27 to reach some form of agreement on their preferred approach for the future of the EU by the end of this year.
European Commission launches public consultation on whistleblower protection – 3 March 2017
The European Commission has launched a public consultation on the protection of whistleblowers. Overall, the Commission’s questionnaire takes a balanced approach, providing the opportunity to argue against or in favor of whistleblower protection, or to take a more nuanced position. The Commission’s definition of whistleblowing goes beyond the reporting of illegal activities as it also includes the disclosure of information on a threat or harm to the ‘public interest’. The approach goes beyond currently existing EU sectorial whistleblowing legislation. As a consequence, for example tax evasion and avoidance are put together in the same box. Including (formally legal) tax avoidance in the scope of whistleblower protection raises problematic questions about criteria and the types of tax activities that can justifiably be reported. The deadline for responding is 29 May.
European Parliament publishes draft report on tax dispute resolution, calls for the Directive to possibly cover indirect taxes in the future – 6 March 2017
The European Parliament’s draft report on tax dispute resolution has been published. The leading MEP on the dossier is Michael Theurer (ALDE/GER). The report proposes several amendments to the Commission proposal which was published on 25 October 2016 (for further details on the Commission proposal, please refer to Accountancy Europe’s Tax Policy Update from 28 October).
These include, amongst others, further accelerating different procedural stages and ensuring that Member States dedicate an adequate level of human, technical and financial resources for this purpose; not imposing sanctions on the taxpayer submitting a complaint requesting the resolution of double taxation in relation to the same matters until a binding decision is taken; for the Commission to review the functioning of the new rules within five years and then assess the possibility of extending its scope to cover other areas of taxation, such as indirect taxes, personal income taxes, or inheritance taxes; and to extend the scope of the Directive to German Gewerbesteuer and the Italian Imposta regionale sulle attività produttive which, according to the rapporteur, might also cause double taxation cases.
In terms of next steps, a vote in Committee is currently scheduled for 8 June. As direct taxation is a matter of Member States’ competence, the European Parliament may only submit its non-binding opinion which neither the European Commission nor the Council need take into account.
Draft report on VAT rates for e-publications published – 9 March 2017
The European Parliament’s draft report on reduced VAT rates for e-publications has been published. The leading MEP on the dossier is Tom Vandenkendelaere (EPP/BEL). In the report, Mr. Vandenkendelaere criticises the current different VAT treatment of physical and electronic publications, and agrees largely with the Commission’s proposed amendments to the VAT Directive to allow for the equal VAT treatment of the two types of publications (for further details on the Commission proposal, please see Accountancy Europe’s Tax Policy Update from 9 December). In terms of next steps, a vote in Committee is scheduled for 3 May, whilst a plenary vote is expected for 31 May. As VAT is a matter of Member States’ competence, the European Parliament may only submit its non-binding opinion which neither the European Commission nor the Council need take into account.
Commission publishes working paper on VAT implications of transfer pricing adjustments – 29 March 2017
The European Commission has published a working paper in which the VAT Committee was requested for an opinion about the possible VAT implications of transfer pricing adjustments. The Committee is asked to reflect on whether transfer pricing adjustments could be seen as a consideration given in exchange for a supply. The document states, in broad terms, that there is a tension between the transfer pricing rules set out for the purposes of direct taxation which, based on the arm’s length principle seek to arrive at the arm’s length valuation of a transaction (i.e. the open market value), and VAT rules, generally based on the existence of a supply for consideration, where consideration is seen as a subjective value (i.e. the price actually paid).
Amendments published for draft report on VAT rates for e-publications – 5 April 2017
A total of 25 amendments have been tabled for the European Parliament report on VAT rates applicable to e-publications. The dossier in the Parliament is led by the MEP Tom Vandenkendelaere (EPP/BEL). An ECON Committee vote should be expected in the upcoming weeks, whilst a vote in Plenary on the dossier is currently scheduled for 31 May. As a reminder, the European Parliament may only submit its non-binding opinion, whilst the Member States will decide by unanimity on the proposal.
Commission launches public consultation on general arrangements for excise duty – 11 April 2017
European Commission has launched a public consultation on the harmonisation and simplification of general arrangements for excise duty, ahead of a possible revision of the Council Directive 2008/118/EC. According to the Commission, there might be scope to improve the Directive in order to reduce administrative burden for both Member States and economic operators and reduce distortions in the internal market. The consultation is intended to gather the views of relevant stakeholders on a set of possible options for the revision.
The Directive sets out the general procedures for the holding and movement of excise goods (alcohols and alcoholic beverages, manufactured tobacco products, energy products) in the EU. It also explains the procedures for deferring payment of excise duty available to authorised traders who hold or move excise goods.
March ECOFIN to see progress on key VAT files – 9 March 2017
EU Finance Ministers will gather together on 21 March at the ECOFIN meeting to discuss a number of pending agenda items. On the menu, political guideline debates on the proposals on reverse charge mechanism as well as reduced VAT for e-publications. It appears that France is seeking the opinion of the Council Legal Service on the legality of the proposed derogation from the VAT Directive to allow for the application of the reverse charge mechanism. Consequently, Czech Republic may be considering the option of blocking the proposal on e-publications; the former proposal has been consistently called for by the Czechs, whilst the latter is much to the liking of the French. Otherwise, agreement on the main provisions of the proposal on e-publications is close, but on the reverse charge mechanism Czech Republic has been calling for agreement on VAT derogations to be made with qualified majority – rather than by unanimity. The Netherlands has already confirmed that it supports both the e-books proposal as well as granting the option for Member States to temporarily apply the reverse charge mechanism. The Dutch are not planning to apply the reverse charge mechanism themselves, but are interested to observe the impact that its application will have on carousel fraud and shifts to alternative forms of VAT fraud in other Member States.
Italy requests a derogation from the VAT Directive – 11 April 2017
Italy has requested a derogation from the VAT Directive (applicable to Articles 206 and 226 of the Directive). According to the proposed derogation, Italy is requesting for an extension of its current right to require that VAT due on supplies to public authorities is to be paid by those authorities to a separate and blocked bank account of the tax authorities (split payments). This derogation currently expires on 31 December 2017, and Italy is requesting for an extension lasting until 30 June 2020.
OECD Global Forum on VAT takes place, OECD launches recommendation on the VAT treatment of trade in services and intangibles – 12/14 April 2017
Approximately 300 participants, representing over 100 delegations from countries, jurisdictions and international organisations, as well as representatives from the business community and academia have gathered together to discuss solutions for common challenges in the design and operation of VAT systems. The participants agreed that attention must now be turned to the implementation of the VAT/GST Recommendation. The participants also discussed the boom in e-commerce, and the solutions to address the VAT challenges stemming from the sector.
For the occasion, the OECD’s Deputy Secretary-General Rintaro Tamaki announced the release of the Recommendation of the Council on the application of VAT/GST to the international trade in services and intangibles. The Recommendation is the first OECD Act in the area of VAT and open for non-OECD members as well. The Recommendation incorporates the International VAT/GST Guidelines.
The IVA was asked to give a keynote speech which will be discussed at the Lisbon conference.
Court of Justice of the EU
Ruling on the VAT treatment of e-publications – 7 March 2017
The Grand Chamber of the Court of Justice of the EU (CJEU) has issued a ruling on the VAT treatment of e-publications. The case-code is C‑390/15. In its ruling, the Court confirms that the VAT Directive forbids Member States from applying a reduced VAT – normally applicable only to physical publications – to e-publications. The case concerns, in particular, the VAT treatment of the supply of digital books electronically compared to a reduced rate which is permitted for the supply of digital books on all physical means of support (such as CD-ROMs), which the VAT Directive allows.
European Commission – Questions & Answers
VAT in e-commerce – 1 February 2017
The European Commission has replied to a question asked by the MEP Christel Schaldemose (S&D/DEN) with regard to VAT in e-commerce. In her question, Ms. Schaldemose refers to the Commission’s proposed new Regulation on geo-blocking (2016/0152(COD)), and asks for clarifications with regard to the proposal’s potential VAT implications. First, what is the legal situation on the application of VAT in cases where an online shop does not deliver goods to consumers in other EU countries, but merely provides links between a customer and a number of independent carriers. Second, she maintains that the Regulation may be in contradiction to the destination principle, as it establishes that VAT is payable in the country in which the company concerned is based, if the consumer assumes responsibility for transporting the goods or arranges for an independent carrier to do so. And third, she asks the Commission what it will do to maintain a level playing field between online shops established in high and low VAT EU countries. In his reply, Commissioner Moscovici maintains that the geo-blocking regulation does not change the VAT rules applicable to distance sales of goods laid down in the VAT Directive. Moreover, Member States in the VAT Committee have agreed to a guideline stating that the case of distance sales also covers situations where the supplier intervenes indirectly in the transport or dispatch of the goods. He also clarifies the conditions established in the proposal on VAT for e-commerce regarding the application of distance sales rules where the supplier intervenes ‘directly or indirectly’. And finally, Commissioner Moscovici maintains that the issue of level playing field is addressed, yet again, by the proposal on VAT for e-commerce which replaces the annual distance sales thresholds with one annual EU-wide threshold of €10 000.
VAT refunds in airport duty-free shops – 28 February 2017
The European Commission has replied to a question asked by the MEP Izaskun Bilbao Barandica (ALDE/SPA) with regard to VAT refunds in airport duty-free shops. In her question, Ms. Bilbao Barandica asserts that duty-free shops at European airports may have been committing VAT fraud by not refunding the VAT recuperated to the customers. Instead, the money is kept by the companies which operate the shops. As this money should be going to the people making the purchases, there is no information on whether it shows up in the companies’ operating accounts or how it is taxed. She therefore asks the Commission whether it is aware of this practice and if so, does it consider it to be legal. Moreover, she asks the Commission whether it will take action to inform consumers of their right to receive these refunds, and what information does the Commission have about how this revenue is recorded in the shops and how it is taxed. In his reply, Commissioner Moscovici confirms that the Commission is aware of the situation but that VAT on sales to travelers leaving the EU is not applied and, consequently, no VAT needs to be refunded. The practice is, according to the Commissioner, in line with EU VAT legislation. It is the commercial decision of shopkeepers to decide to apply a single or a different price for sales of intra-EU and third country travelers, and the competent Member State authorities must lay down the conditions for the correct application of VAT in such situations.
EU plan for potential VAT change – 1 March 2017
The European Commission has replied to a question asked by the MEP Lefteris Christoforou (EPP/CYP) with regard to potential EU plans for VAT reform. In his question, Mr. Christoforou refers to un-specified discussions about a potential abolition of VAT. He asks the Commission whether, indeed, it is planning to abolish VAT, what was Member States’ VAT contribution to the EU budget, whether the Commission plans to introduce changes to this, whether Member States return VAT for goods bought by non-EU nationals and what is the amount of VAT returned in this way by each Member State, and is there any plan to abolish this VAT return procedure. In his reply, Commissioner Moscovici states that the Commission is not planning to abolish VAT. He describes the planned reforms of the EU VAT system as presented in the VAT Action Plan, and confirms that as long as the current EU own resource provisions remain unchanged, there will be no changes to Member States’ VAT contributions to the EU budget either. Finally, with regard to the conditions for the application of the exemption of supplies of goods to customers leaving the EU, the Commission does not hold data on the amount of VAT returned in this way by each Member State. The Commission, moreover, does not intend to propose any changes to this provision which is in line with the principle of taxation at destination.