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Pending changes in the area of international VAT

Thursday 27/09/2018
International VAT

In the previous edition we discussed the expected changes in terms of VAT at a national level. In this article we will briefly consider the VAT changes that are expected internationally.             

Brexit

In principle, on 30 March 2019, the ‘Brexit’ will finally be a reality. The United Kingdom will no longer be an EU Member State with which intra-Community transactions are carried out, but will be considered a 'third country' which involves import and export and the associated customs formalities (depending on what kind of 'Brexit' will ultimately be implemented). Companies in the United Kingdom will become non-EU companies after Brexit. This will, among other things, have a VAT impact on their VAT registration (mandatory appointment of a responsible representative), the use of the MOSS scheme, the request for a refund of VAT, etc. However, more clarity about Brexit remains necessary.                
 

VAT changes regarding E-commerce

Threshold of 10,000 EUR for electronically supplied services, telecom and communications services to individuals by EU companies. In a previous article we already mentioned that, as part of the 'VAT Action Plan', a new optional turnover threshold of 10,000 EUR will be introduced from 1 January 2019 for electronically supplied services, telecom and communication services, to private individuals and other non-taxable customers. (Reference to Article EDIJ 'Europe announces far-reaching VAT reform: first changes in effect from 1 January 2019’). In principle, such service providers must charge the VAT of their customer's country on their services. However, as long as the turnover threshold of 10,000 EUR is not exceeded in the current or previous calendar year, they may apply the VAT of the country of establishment. This avoids the application of the MOSS scheme or VAT registration in other Member States, and thus the administrative burden and costs involved, when their combined sales in all EU Member States resulting from services to private individuals or non-taxable customers remains below this threshold.  

Other changes relating to electronically supplied services, telecom and communications services to private individuals or non-taxable customers. We also reported on the following changes as of 1 January 2019 in the previous edition:

  • The service provider will only need to provide one piece of evidence to prove the place of (habitual) residence of his customer (instead of two at the moment). This, however, with the proviso that his annual turnover from electronic, telecom or broadcasting services does not exceed 100,000 EUR. The following supporting documents are possible: bank details, mobile country code of a SIM card, IP address, billing address, ....
  • ompanies located outside the EU which already have a VAT registration in an EU Member State for other activities will also be able to apply the MOSS scheme for non-EU companies.
  • These service providers will be allowed to prepare their invoices according to the invoicing rules of their country of establishment (this will also be the case for distance sales).               
Other changes in the context of the VAT action plan.

Introducing the concept of "Certified Taxable Person" (CTP)

The inspiration for this new concept was probably taken from customs regulations where a similar concept is used (the “AEO” or Authorised Economic Operator). When EU VAT taxpayers meet specific criteria (e.g. being financially solvent, no serious breaches of tax or customs legislation or serious criminal offenses, a solid, reliable internal company control system, ...) they will be able to obtain a certificate within their member state of establishment with which they will be regarded as a certified taxable person throughout the European Union. Once they have acquired this status, they will be able to appeal to all kinds of simplified procedures (see below).  

In principle this concept will be introduced in 2019 and it should be clear through VIES which market participants are 'Certified Taxable Persons'. AEOs will automatically obtain this status in principle. In view of the latest European news, it remains to be seen whether and when this concept will actually be introduced.

Introducing four 'Quick Fixes'

Europe intends to thoroughly reform the VAT system in order to make it more modern, simpler, more accessible and more fraud-proof (the VAT Action Plan). Among other things, a new definitive system for intra-Community goods transport would be introduced, whereby the current system of the exempted intra-Community supply on the one hand and the taxed intra-Community acquisition on the other will disappear (and with it the accompanying carousel frauds, hopefully). Only one single intra-Community transaction will remain which will be taxable in the destination country. In principle, the supplier will owe this VAT. He will then be able to transfer it through a portal site in his own member state of establishment (similar to the MOSS scheme), so that he does not have to register for VAT purposes in the member state of destination. However, if the supplier is not established in the member state of destination and his customer is recognised as a Certified Taxable Person, the VAT liability can be transferred to this customer.  

It would be the intention to implement this reform on 1 July 2022. Nevertheless, the European Commission has already proposed a number of measures at the end of last year. The first three measures are reserved for Certified Taxable Persons only:

  • a simplified scheme for maintaining an inventory of goods in another EU member state with the intention of selling these goods directly to customers there;
  • a simplified burden of proof for proving transport in an exempt intra-Community supply (in the period prior to the entry into force of the definitive system);
  • a simplification of the way in which transport in chain transactions can be allocated to a single delivery;
  • implementation of the presentation of a valid VAT identification number of the customer (VIES certificate), granted by an EU member state other than the member state of departure of the goods, as a material condition for the exempt intra-Community supply of goods.  

The intention was that EU member states would already convert these measures into their national regulations by 2019. However, we have observed that no agreement has been reached on these measures at the ECOFIN Council of 22 June 2018. So it remains to be seen whether the measures will come and, if so, when.

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Karolien Vanmeerhaeghe
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Bert Derez
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