The European Commission has today published its Action Plan on VAT. We will be reflecting on the comments made and providing our insight on this in the next few days. In summary the key features of the proposals are:
• Fundamental changes to the way cross-border retailers deal with their VAT compliance. Draft law is to be published by the end of 2016 to introduce a system where the retailer is registered in one member state and accounts for VAT at the rate in force in the other 27 member states on sales to customers in those countries. This is effectively an extension of the one-stop shop (MOSS) that applies to suppliers of electronic services and telecommunications;
• Removal of the low value consignment relief for non-EU suppliers of goods;
• Simplification for SMEs in respect of VAT compliance across the EU;
• A new set of VAT rules to be published to replace the existing rules (they were drafted in 1993 as transitional rules). The objective is to move all VAT determination to be based on a place of supply of destination;
• A set of measures to reduce the VAT gap (the difference between what the EU and member states believe is the amount of VAT that should be paid and what has actually been paid); and
• More freedom for member states to choose VAT rates.