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News from Accountancy Europe April 2018

By April 12, 2018July 10th, 2021No Comments

The Commission has published a report looking into the effects of the reverse charge mechanism (Article 199 a. and b. of the VAT Directive) on combatting fraud and on the impacts of the mechanism more broadly…

European Commission

Commission will extend VAT Reverse Charge Mechanism – 8 March 2018

The Commission has published a report looking into the effects of the reverse charge mechanism (Article 199 a. and b. of the VAT Directive) on combatting fraud and on the impacts of the mechanism more broadly.

The report assesses the effectiveness of the reverse charge mechanism and provides an overview of the compliance costs for businesses. It concludes that the reverse charge mechanism should be extended beyond the current deadline of 31 December 2018.

In terms of findings, the report demonstrates that member states tend to consider the reverse charge mechanism a very effective and efficient tool in fighting VAT fraud. Its application has led to a significant decrease or even disappearance of VAT fraud in the defined sectors. The Commission points out that this view is also held by consulted business stakeholders. Therefore, the Commission report concludes that the reverse charge mechanism should be extended either to another later date, or until the definitive regime is in place.

The Commission will issue an appropriate legislative proposal in the second quarter of 2018 prolonging the existing measures.

European Parliament

ECON hearing on VAT rates – 20 March 2018

The ECON Committee held a first and very brief exchange of views on the Commission proposal to extend the 15% VAT minimum rate to also apply under a future definitive regime. The leading MEP on the file, Roberto Gualtieri (S&D/ITA) published earlier his draft report welcoming the Commission’s proposal and urging member states to swiftly agree to it.

During the Econ exchange of views, none were raised on Mr. Gualtieri’s report or the Commission’s proposal:

  • Roberto Gualtieri (S&D/ITA): the report concerns a small but important component of the Commission’s VAT package that makes permanent the minimum rate of 15%. This was agreed in 1992; and the

  • Commission is now making it permanent. He welcomed this move

  • Roberts Zile (ECR/LAT): the ECR Group can support this

  • Pervenche Beres (S&D/FRA): also welcomed the proposal and called for a solid system for minimum rates

As always on tax matters, the European Parliament only submits its non-binding opinion. Member states will have to agree by unanimity.

VAT definitive regime: the Commissioner confirmed that the Commission will publish in May further proposals on the definitive regime.

Court of Justice of the EU – Rulings

Case C‐533/16: right to claim a refund of VAT – 21 March 2018

The Second Chamber of the CJEU has ruled against member state legislation under which, in circumstances in which VAT was charged to the taxable person and paid by it several years after delivery of the goods in question, the benefit of the right to claim a VAT refund is denied on the grounds that the limitation period provided for by that legislation for the exercise of that right began to run from the date of supply and expired before the application for a refund was submitted – see above under Germany for more details on this.

Other News

EESC publishes opinion on latest VAT reform package – 14 March 2018

The European Economic and Social Committee (EESC) has published its opinion on the Commission’s latest VAT reform package. The opinion includes the following:

  • Welcomes the Commission’s determination to close the VAT gap and the involvement of the European Public Prosecutor’s Office in cases of VAT fraud above EUR 10 million

  • Recommends that tax authorities investigate how upcoming technologies can contribute to the fight against VAT fraud and be used as a helpful tool for simplifying the administrative burden on both businesses and tax administrations. In particular, member states should create appropriate fora for the exchange of best practices in revenue collection and on how to develop technologies to facilitate proper tax collection in cross-border trade situations

  • Underlines the importance of tax neutrality between different companies, pointing out that VAT payments should not be allowed to adversely affect the liquidity of some businesses

  • Notes that with regard to the certified taxable person (CTP) the Commission deems this concept to be important for the transition towards a VAT system based on the destination principle and agrees that businesses whose tax reliability is proven should be able to benefit from appropriate simplification measures

EESC’s opinions are legally non-binding, but do enjoy legitimacy given that it brings together Europe s industry and labour associations.