EU Commission publishes draft VAT Directive to amend existing VAT rules

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Summary
The EU Commission has
announced that it is to draft new
VAT rules for cross-border trade in
goods and services. The changes will
have a significant impact on any
business involved with supplies of
goods or services to consumers
resident in other Member States of
the EU.
The Commission has identified
three reasons for the proposals:
• to simplify reporting obligations
for affected businesses
• to remove distortions of
competition between EU and
Non-EU suppliers and
• to stem the loss of valuable tax
revenues to Member State
Treasuries
05 December 2016
European Commission
The EU Commission has announced far reaching proposals to amend the current EU VAT system.
Following the implementation of the 2015 VAT Package changes, the Commission accepts that the
current system is both complex and costly for smaller businesses to administer. In addition, the
current system is also open to distortion of competition between EU and non-EU established
suppliers. The system discourages businesses from doing business in the EU – a barrier to trade
which should be removed - but it also leads to substantial tax losses at Member State level.
The main proposals for change are:
• the MOSS system will be extended to cover intra-community distance sales of both goods and
services as well as to distance sales of goods from non-EU countries
• removal of existing intra-community distance sales thresholds
• removal of the existing VAT exemption for the importation of small consignments from non-EU
suppliers
• introduction of Community-wide simplification including VAT turnover thresholds (€10,000) for
supplies of electronic services and distance sales and new, simpler rules relating to the
identification of customers
• the adoption of 'home country' rules in relation to matters such as invoicing and record keeping
These measures are intended to remove micro-businesses from the MOSS system and to reduce the
administrative burdens for other businesses. The measures are also intended to level the playing field
between EU businesses and non-EU businesses.
It is proposed that certain measures will come into force on 1 January 2018 with others (such as the
extension of the system to include supplies of goods on a B2C basis) being introduced from 1
January 2021.
Comment – The Commission's proposal is a game changer. Any business selling goods or
services to consumers within other EU Member States will need to understand the impact of
the proposals on their VAT reporting requirements and systems. Supplier's based outside
the EU will also need to understand their obligations if the supply goods or services on a
B2C basis to customers established in the EU.
EU Commission proposes major VAT
changes
VAT Alert
Contact
Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556
Vinny
McCullagh
London & South East Vinny.mccullagh@uk.gt.com (0)20 7383 5100