Commission proposes legislative amendments to improve VAT for e-commerce and anti-fraud measures…
Commission proposes legislative amendments to improve VAT for e-commerce and anti-fraud measures – 11/12 December 2018
The European Commission has published new legislative amendments to provide technical details and clarifications to facilitate the EU framework for VAT on e-commerce.
In total four legislative texts were published, details of which are outlined below. For the proposed texts, the usual rules apply – member states in the Council will have to approve them by unanimity, whilst the European Parliament provides its non-binding opinion.
Measures to facilitate VAT obligations for e-commerce
Firstly, on 11 December the Commission proposed new implementing measures aiming to facilitate e-commerce and better combat VAT fraud. These come in the form of an amending Directive and Implementing Regulation.
According to these proposals, starting from 2021 companies selling goods online will be able to fulfil their VAT obligations via an online portal – the one-stop shop (OSS) mechanism – instead of having to register for VAT in each member state where they sell goods.
Also from 2021 onwards, major online marketplaces will be required to collect the correct amount of VAT when they facilitate the sale of goods by third country companies to consumers in the EU.
This will ensure that tax authorities can claim the tax due when sellers established outside the EU have not complied with the relevant obligations.
The new legislative texts provide clarifications on these matters.
Additional measures to combat VAT fraud in the e-commerce sector
In addition, the Commission published on 12 December legislative proposals to better combat VAT fraud in the e-commerce sector. These come in the form of an amending Regulation and Directive.
These measures aim to harness payment service providers to improve VAT compliance. The Commission emphasises that payment intermediaries such as credit card and direct debit providers have immense data about online transactions that could help EU tax administrations to enforce VAT obligations in cross-border sales of goods and services.
The new rules also establish quarterly information exchange obligations for payment service providers that will allow the EUROFISC network to exchange and analyse certain payment data on cross-border sales. To this end, the Commission plans to develop a new Central Electronic
Payment Information System (CESOP), which is expected to be launched in three years’ time.
Information on incoming payments will enable EU member states to identify domestic suppliers who sell goods and services abroad without fulfilling their VAT obligations, while information on outgoing payments would help identify suppliers established abroad who should pay VAT in a given member state.
Commission publishes Roadmap for moving to QMV on tax decision making – 20 December 2018
The European Commission has published a Roadmap on a prospective move to Qualified Majority Voting (QMV) on taxation. This would mean that member states would abandon the unanimity rule and co-legislate with the European Parliament on an equal footing.
The Commission is planning to publish on 15 January 2019 a Communication proposing to abandon unanimity on (all or parts of) tax files. The Roadmap provides the background and rationale for the Commission’s upcoming Communication. The upcoming Communication would be legally non-binding, and its sole objective will be to spark discussion in the Council and in the EU more broadly on a prospective move to QMV on taxation.
Any subsequent legislative proposals (effectively, making use of the Passerelle Clause to unanimously decide to expand QMV to tax) would have to come during the next Commission’s term.
In the Roadmap, the Commission puts forward a number of reasons for why it considers moving to QMV on tax as a necessary and desirable step, including:
- In today’s interconnected economy and especially in the EU, the tax decisions of one member state will inevitably impact all the others. Therefore, to continue to defend tax unanimity on the basis of national sovereignty is flawed
- Unanimity is an obstacle to meaningful and strategic tax reforms, rather than legislating ad hoc due to unexpected crises and scandals
- Unanimity may have worked on tax when either there were fewer member states (such as when common VAT base rules were established), but it is more difficult now with 28 (and likely soon-to-be 27) member states
- This argument might appear odd on the surface, given that the countries that appear to drag their heels on tax the most are “older” member states such as Germany, Ireland, Luxembourg and Scandinavians
Plenary votes on generalised reverse charge mechanism – 11 December 2018
The European Parliament Plenary has adopted its final position on the generalised reverse charge mechanism (GRCM) with 337 votes in favour, 100 votes against and 222 abstentions. The file in the Parliament was led by the MEP Gabriel Mato (EPP/SPA).
S&D Group abstained from voting due to their disagreement with certain specificities of the position as adopted.
As always on tax files, the European Parliament only provides its non-binding opinion. However, its opinion is nonetheless needed for the proposal to become EU law even if member states have already adopted it.
Overall, the MEPs are in favour of applying the mechanism until 30 June 2022 for supplies exceeding an invoicing threshold of EUR 25,000 – instead of the EUR 10,000 proposed by the Commission – in member states where carousel fraud represents at least 25% of the VAT gap.
However, they objected to the possibility for a member state sharing a border with another member state that applies GRCM to also apply it under certain conditions.
MEPs discuss possibility of abandoning unanimity in tax decision making, Commissioner hints at sustainable taxation as next priorities
The discussion on QMV, in turn, was opened by Commissioner Oettinger (budget) who noted that the DST file has showed how difficult it is to agree on taxation when using unanimity in the Council. He re-iterated that the Commission will present a Communication in early 2019 (most likely on 15 January). The Commissioner believes that QMV is particularly justifiable for files such as the C(C)CTB, digital taxation and VAT definitive regime.
Hinting at sustainable taxes being high on the Commission’s future agenda, Commissioner Oettinger also stressed that QMV in taxation would have a broader scope and as such can help achieve tax policy objectives in environmental protection or in energy policy. He explicitly cited energy and environmental taxes as examples.
Next Council Presidencies seek progress on digital tax and definitive VAT regime – 30 November 2018
The next three 6-month Presidencies of the Council will be held by Romania, Finland and Croatia, respectively. The three countries have prepared a joint programme outlining their coordinated priorities for the next 18 months ahead.
On taxation, the document stresses that “fair and effective taxation” will remain a key priority. In this respect, the three countries commit to prioritizing digital taxation – most likely meaning both the Commission’s digital tax proposals as well as work at the OECD-level. Moreover, the three Presidencies will attempt to “achieve results” on the Commission’s definitive VAT regime proposals.
Romania began its 6-month Presidency in January 2019. Finland will succeed in July 2019, and Croatia will in turn take over in January 2020.
Court of Justice of the EU – Rulings
C‑17/18: VAT for immovable property used for commercial purposes – 19 December 2018
The CJEU has ruled that:
- The concept of “transfer of a totality of assets or part thereof”, within the meaning of Article 19 of the VAT Directive, does not cover the transaction by which an immovable property which was used for commercial purposes is let with all capital equipment and inventory items necessary for that use, even if the lessee pursues the activity of the lessor under the same name
- Article 135(1)(l) of the VAT Directive means that a lease contract for an immovable property which was used for commercial purposes and for all capital equipment and inventory items necessary for that use, constitutes a single supply in which the letting of the immovable property is the principal supply
C‑422/17: travel agents and VAT special scheme – 19 December 2018
The CJEU has ruled that:
- Articles 65 and 306 to 310 of the VAT Directive mean that when a travel agent who is subject to the special scheme laid down in Articles 306 to 310 of that Directive, receives a payment on account for tourist services which it will provide to the traveller, the VAT is chargeable on receipt of that payment on account, provided that, at that time, the tourist services to be supplied are precisely designated.
- Article 308 of the VAT Directive means that the margin of the travel agent, and, consequently, its taxable amount, corresponds to the difference between the total amount, exclusive of VAT, to be paid by the traveller and the actual input cost incurred by the travel agent in respect of supplies of goods and services provided by other taxable persons, in so far as those transactions are for the direct benefit of the traveller. When the amount of the payment on account corresponds to the total price of the tourist service or to a significant part of that price, and the travel agent has not yet incurred any actual cost, or has incurred only a limited part of the individual total cost of that service, or even when the individual actual cost of the trip incurred by the travel agent cannot be determined at the time when the payment on account is made, the profit margin can be determined on the basis of an estimate of the total actual cost which it will ultimately have to incur. For the purpose of such an estimate, the travel agent must take into account, where relevant, the costs which it has already actually incurred at the time of receipt of the payment on account.
- For the purpose of the calculation of the margin, the estimated total actual cost is deducted from the total price of the trip and the taxable amount for VAT to be paid at the time of receipt of the payment on account is obtained by multiplying the amount of that payment on account by the percentage corresponding to the part of the total cost of the trip that the estimated profit margin, thus determined, represents.
C‑552/17: VAT for supply of holiday accommodation – 19 December 2018
The CJEU has ruled that Articles 306 to 310 of the VAT Directive establish that the mere supply by a travel agent of holiday accommodation rented from other taxable persons or such a supply of a holiday residence combined with the supply of additional ancillary services, regardless of the importance of those ancillary services, each amount to a single service covered by the special scheme for travel agents. Moreover, Article 98(2) means that the supply of travel agent services consisting of the supply of holiday accommodation, covered by Article 307 of that Directive, cannot be subject to a reduced tax rate or one of the reduced rates set out in Article 98(2).
C‑51/18: VAT on the royalty payable to an author of an original work of art – 19 December 2018
The CJEU has ordered that Austria violated the VAT Directive by providing that the royalty payable to an author of an original work of art on the basis of the resale right is subject to VAT. It thus orders Austria to pay the costs instead.
C‑414/17: VAT for intra-Community acquisitions of excise goods – 19 December 2018
The CJEU has ruled that:
- Article 2(1)(b)(iii) of the VAT Directive applies to intra-Community acquisitions of excise goods, in respect of which the excise duty is chargeable in the member state of destination of the dispatch or transport of those goods, carried out by a taxable person whose other acquisitions are not subject to value added tax pursuant to Article 3(1) of that directive
- Article 2(1)(b)(iii) of the VAT Directive means that, in a chain of successive transactions which gave rise only to a single intra-Community transport of excise goods under an excise duty suspension arrangement, the acquisition carried out by the trader liable for payment of the excise duty in the member state of destination of the dispatch or transport of those goods cannot be classified as an intra-Community acquisition subject to value added tax under that provision, where that transport cannot be ascribed to that acquisition
- Article 2(1)(b)(i) of the VAT Directive establishes that where there is a chain of successive acquisitions concerning the same excise goods and which gave rise only to a single intra-Community transport of those goods under an excise duty suspension arrangement, the fact that those goods are transported under that arrangement does not constitute a decisive factor in determining to which acquisition the transport is to be ascribed for the purposes of applying value added tax under that provision