You may also like
Building on earlier initiatives and directives aimed at creating an environment for fair and transparent taxation, the EU has expanded the scope of its Directive on Administrative Cooperation. With the introduction of Council Directive 2018/822 of 25 May 2018, the EU creates mandatory disclosure rules for intermediaries and taxpayers with respect to potentially aggressive cross-border tax planning arrangements.
Effective 1 July 2021, businesses which focus on e-commerce supplies of goods within the EU will be subject to new VAT rules
The concept of VAT fixed establishments has been discussed at the European Commission level, in ECJ cases and in court cases across EU Member States - but uncertainty remained. Businesses looked to the decision of the recent Dong Yang case (C-547/18) for clarification. Would the outcome offer businesses the opportunity to avoid discussions with tax authorities?
Quick Fixes for VAT: 6 months on
Since 1 January 2020, the European VAT legislation has contained four so-called ‘Quick Fixes’. According to the EU Commission, they are intended to simplify cross-border trade within the EU.
Some countries slow to react
The Quick Fixes entered into effect several months ago. Notwithstanding this, authorities are still struggling to adapt their legal system to the new rules.
An overview published by the EU Commission points out that a number of Member States (including Greece, Italy and Portugal) have not yet adopted any national legislation on the Quick Fixes. To motivate these countries to be compliant with EU law, the Commission has indicated that it will start up infringement procedures against them, bringing their cases before the European Court of Justice.
Businesses struggling too
Whilst various Member States are lagging behind with their implementation, businesses also prove to be struggling. The primary reason is that the new rules require considerable changes to ERP-configurations and business processes (eg invoicing, warehousing, administration). In addition, the incomplete implementation of the Quick Fixes in the EU makes it difficult for businesses to know which rules apply where, and from what moment onwards.
In practice, we have received feedback that some businesses find the Quick Fix on the call-off stock too complicated, as it relies on many strict and formal conditions (eg the 12-month limitation period). Companies also struggle with the Quick Fix on the VAT ID number, as the new rules require significant changes to the administrative processes. This being said, the Quick Fix on the allocation of transport is generally received favourably, as it enables parties operating within a supply chain to determine the correct VAT treatment of their supplies in a simpler manner. As regards the Quick Fix on the proof of transport, some confusion remains; it appears that some countries are inclined to make it mandatory, whereas others use it as an optional measure.
Reviewing the feedback from corporate actors, one may question to what extent the Quick Fixes have indeed led to a simpler intra-Community business environment. This being said, we believe that the Quick Fixes offer various opportunities. Once the new rules are properly in place in all EU countries, they may allow businesses to streamline their logistic flows and reduce their VAT reporting and registration obligations.
This article was first published on www.bakertilly.nl on 1 July 2020 and has been republished with the authors' permission.
Meet the experts
|Jayant Rakhan||Marisa Hut|
|Partner VAT Advisory||Manager VAT & Customs|