EC adopts draft definitive VAT regime Directive

The European Commission today adopted a new draft EU VAT Directive for the operation of the definitive VAT system. This includes changing to a destination-based VAT regime, and withdrawing zero-rating on intra-community supplies. The aim is to help eliminate and estimated €50billion in VAT fraud, particularly carousel fraud.

The new draft includes over 200 amendments to the existing VAT Directive 2006/112/EC. The changes the new Directive includes:

• Withdrawal of zero-rating intra-community supplies on B2B transactions. Instead, vendors will be required to charge the VAT rate of the customer (defined by where the transport ends).
• Introduction of the One-Stop-Shop portal (based on the MOSS portal) for the VAT charged on the above to be recording and paid in the home country of the vendor
• Enforcing the VAT invoicing rules of the vendor’s country on such transaction 

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