Last reviewed 14 March 2012
By Paul Clarke
Doing business in more than one Member State often means dealing with several tax administrations in different languages. Coping with multiple VAT obligations can accordingly be both burdensome and costly for companies. With this in mind, the European Commission has put forward a proposal which it sees as a first step towards a One Stop Shop for all electronically delivered services which, if approved, will benefit businesses from 1 January 2015. As set out in last December's Commission Communication on the future of VAT (COM(2011) 851), the One Stop Shop approach for EU trade across borders will be applied first to e-commerce, broadcasting and telecom services. In the future the Commission will seek to extend the concept on a gradual basis to other goods and services.
Since July 2003, such a system has been in place to simplify VAT obligations for non-EU suppliers of electronic services to EU consumers. The system has functioned well, the Commission argues, allowing non-EU traders who are liable to pay VAT in the Union to choose a single place for VAT compliance. Via this single electronic portal, a single VAT declaration and payment is submitted. On the basis of the information supplied, this payment is allocated automatically to the different Member States where VAT is due.
The VAT Directive (2006/112/EC) provides that, as from 1 January 2015, all telecommunications, broadcasting and electronic services are to be taxed in the Member State in which the customer is established or has his or her permanent address or usual residence, regardless of where the taxable person supplying these services is established. As the VAT becomes due where the customer belongs, this makes it necessary to broaden the current scope of the existing One Stop Shop system. Currently, a scheme is already in operation for non-EU businesses supplying electronic services. The scheme will now extend to both EU and non-EU businesses and — in addition to electronic services — will incorporate telecommunications and broadcasting services.
It will allow suppliers to use a web portal in the Member State in which they are identified to account for the VAT due in other Member States on supplies of these services to private consumers. Where a VAT return is incomplete or incorrect, is submitted late or the payment of VAT is late, any interest, penalties or any other charges due will be paid directly to the Member State of consumption.
The proposed measures only relate to those aspects (definitions, scope of the schemes, reporting obligations, identification, exclusion, VAT returns, currency, payments, records) for which a common understanding is needed before designing the IT systems. Other measures, notably relating to the determination of the location of the customer, will be proposed by the Commission at a later stage.
The intention is to extend the One Stop Shop to even more activities, including supplies of goods. The Commission has at this stage called on all Member States to agree to these measures in 2012 as a common approach is seen as key to designing the IT systems which will provide the necessary exchange of information between tax authorities in 27 Member States and to ensure its full implementation by 2015.
Algirdas Semeta, Commissioner for Taxation, Customs, Anti-fraud and Audit, said: “The complexity of the current EU VAT system is an obstacle to doing business in the Single Market. The One Stop Shop will greatly facilitate cross border expansion of European start ups. This in turn will help to generate growth and jobs.”
The full text of the draft regulation, amending Regulation 282/2011 which provides binding rules on the application of certain provisions of the VAT Directive, can be found at http://bit.ly/yZdv0n.