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EU tax advisers challenge Single VAT Area

  • Sep 2, 2018 | Richard Asquith

EU tax advisers challenge Single VAT Area

The European trade association for small and medium sized businesses, CFE, has raised concerns around the proposed Single VAT Area reforms of the European Union.

Overhaul of EU VAT regime

In 2017, the European Commission issued a set of proposed reforms to help simplify the operations of the pan-European VAT regime, and reduce VAT fraud. The measures include:

  • Four quick fixes for 2019 to improve the existing regime, including simplifications for: chain supplies; call-off stocks; proof of transport rules; and rules on validating B2B customer VAT numbers. The first three of these fixes would only be available to a new category of ‘Certified Taxable Persons’ (CTP). These would be certified by the national tax authorities as having a long-term, clean VAT compliance history.
  • Extension of the Mini One-Stop-Shop single EU VAT filing to B2C supplies of goods from 2021.
  • Introduction of a destination-based VAT regime, removing nil-VAT rating on B2B intracommunity supplies from 2022.

Reforms mean heavy compliance burden and undefined requirements

CFE has now questioned the above proposals on several grounds, including:

  • the administrative burden of the CTP on small businesses, and the threat that this would shut them out of the four quick fixes. CFE points out that the qualifying criteria for CTP is vague, and would leave too much scope to the national tax authorities, including the outcome for VAT groups.
  • The compliance burden and financial risks of having all businesses properly determine and charge VAT in each country, with varying rules, under the destination-based VAT regime proposal. The CFE commented. “It can already be difficult and expensive for businesses to accurately determine their obligations in a purely domestic context.”

A number of member states, including Finland, have also questioned the reforms for the same reasons.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.