Summary

Navigating the global tax compliance landscape successfully is complex and resource-intensive. Every country has a specific and constantly evolving set of legislated e-invoicing requirements.

Non-compliance, intentional or not, can result in significant financial penalties, business disruption, and reputational damage.

Updates

08.19.22

  • Country updates
VAT in the Digital Age – public consultation published We previously communicated that the European Commission was busily engaged with a public consultation on the ‘VAT in the Digital Age’ initiative. The underlying aim of the initiative, as the name suggests, deals with how the EU’s fiscal, and specifically VAT rules, can be adapted alongside a more digitised working mechanism, and how technology can circumvent tax fraud, which in turn will reduce VAT gaps. It is hoped that a digitised platform can counter these problems and output a streamlined, automated and efficient working mechanism, coupled with cost benefits. The public consultation covered multiple facets of the vision to fully digitise VAT. On a high level, the following observations were collated during the public consultation:
  • Most stakeholders negatively regard the current Digital Reporting Requirements (DRRs), implying that reform is a necessity
  • Progress in the digitisation era is regarded slow, and EU intervention is paramount to accelerate progress in this area.
In terms of requisite action:
  • Most stakeholders supported the introduction of EU level DRRs for intra-community transactions, with or without the inclusion of domestic transactions.
Clear consensus was not reached on the following issues:
  • Recording data on VAT transactions in a standard digital format
  • Adopting non-binding commission recommendations to introduce uniformity regarding reporting obligations across the EU
  • Removing the requirement for Member States to request an explicit derogation for the introduction of B2B e-invoicing mandates.
The following specific issues were highlighted by respondents during the public consultation:
  • Member States applying different VAT treatments, ranging from different rates, different treatment of electronically supplied and intermediary services, to different thresholds for the application of VAT to SMEs
  • Problems with either double-taxation or non-taxation
  • Problems concerning the definition of supplies, the status of the supplier and customer, and the place of supply
  • Problems attributable to platform providers, for example, due to a lack of appropriate invoicing from their side, or the application of an erroneous VAT rate.
  • Problems when dealing with non-EU counterparts, such as uncertainty over whether VAT should be applied, and if so, what rate this would be.
While the virtues of the One Stop Shop (OSS) and Import One Stop Shop (IOSS) were not extolled, it was acknowledged that these implementations have enjoyed moderate successes. OSS specifically allows online businesses to report certain B2C EU supplies in a single Member State. Similarly, the IOSS allows a taxable person to register in a single Member State and pay VAT on imported goods. Both schemes endeavour to reduce the compliance burden on taxpayers. The schemes were commended for the following:
  • minimising the need for businesses to hold multiple VAT registrations
  • simplifying and facilitating VAT compliance
  • reducing fraud and increasing VAT revenue
  • modernising the VAT rules.
In terms of policy options:
  • The strongest agreement among stakeholders was for the option to extend the OSS to cover all B2C supplies of goods and services by non-established suppliers. Only slightly less respondents agreed with extending the OSS to intra-Community supplies and acquisitions of goods, and to B2B supplies of goods and services, together with the introduction of a deduction mechanism into the OSS.
  • More than half of responses were in favour of making the reverse charge available for all B2B supplies conducted by non-established suppliers, and with removing the 150 Euros threshold for the IOSS.
  • However, the option of making the IOSS mandatory, either for all distance sales of goods above a certain threshold or for marketplaces only, did not have majority agreement.
The Commission's summary report on the consultation can be accessed via the following link: https://circabc.europa.eu/ui/group/cb1eaff7-eedd-413d-ab88-94f761f9773b/library/caee6205-b1d0-4705-8f64-213f4050e06a A list of more detailed reports can be found below:
  • Final report. Volume 1, Digital reporting requirements
  • Final report. Volume 2, The VAT treatment of the platform economy
  • Final report. Volume 3, Single place of VAT registration and import one stop shop
  • Final report. Volume 4, Consultation activities.
All reports can be downloaded from the following website: https://op.europa.eu/en/publication-detail/-/publication/a07ffdc4-0966-11ed-b11c-01aa75ed71a1/language-en

07.07.22

  • Country updates
Group on the future of VAT – e-invoicing and the need for EU standards and interoperability

The Group of the Future of VAT has discussed the "Working Paper on E-invoicing and the need for EU standards and interoperability" published by the European Commission. The study carried out on the Digital Reporting Requirements (DRR) part of the VAT in the Digital Age concludes that the policy options providing the most significant advantages are the partial and total harmonisation of DRRs across the EU.

More details around this can be found here.

04.28.22

  • Country updates
Extension of fraud reverse charge measure An overriding objective relating to the implementation of e-invoicing has always been to reduce VAT fraud. A specific means to achieve this is through the reverse charge mechanism. The reverse charge mechanism is where liability to pay the VAT shifts to the buyer rather than the supplier. This is important, as cross-border transactions in theory, by virtue of intra-community supplies, should be subject to zero VAT. However, to exploit this, it is possible to sell goods / services domestically, charge and then pocket the VAT. The reverse charge counters this as responsibility to pay VAT lies with the buyer, and not the supplier. It has been proposed that this is extended until 31 December 2025.

04.28.22

  • Country updates
Public consultation – VAT in the digital age The duration of the public consultation in the digital age has been extended until 5 May 2022.

04.28.22

  • Mandate information
European Parliament and the harmonisation of e-invoicing One of the underlying aims of the European Parliament has been the harmonisation of e-invoicing across Member States. This naturally will lead to increased automation, efficacy and reduced costs associated with the e-invoicing process. To this effect, the European Parliament has called on the European Commission to set up a common standard by 2022. In related objectives, there is also a request to consider the role of e-invoicing in real-time reporting. We have already seen some EU Member States such as Hungary successfully deploy this. Following the success of mandate in Italy in significantly reducing the VAT gap, the European Parliament has called for a gradual adoption of obligatory e-invoicing- with an emphasis on small and medium enterprises (SMEs). Considering the upcoming French mandate, there has also been renewed interest to consider the needs of this particular group of taxpayers, and it looks like this this is gaining traction in Europe, too. Furthermore, there is a call for invoices to only be administered via certified systems to ensure full data protection. By 2023, it is anticipated that the system will produce compliant documents for taxpayers, again with a focus on SMEs.

03.23.22

  • Country updates
European parliament resolution: how to reduce the VAT gap On 16 February 2022, the European Parliament published a resolution on the implementation of the Sixth VAT Directive (2020/2263(INI), concerning how the VAT gap can be reduced. The main incentives behind the report were to make improvements to the current Directive and establish a more streamlined, simple, fraud-proof and effective VAT system. It is envisaged that digitalisation will be a means to achieve these aims. The website of the European Parliament provides further details around this.

02.04.22

  • VAT/G(S)ST rate information
VAT in the digital age – public consultation

The European Commission has launched the public consultation on the “VAT in the Digital Age” initiative. The underlying aims of this initiative include ensuring the proper functioning of the single market, reducing business compliance costs and promoting economic interests of the EU and Member States.
The Commission is seeking feedback on VAT reporting obligations and e-invoicing, VAT treatment in the digital age and single EU VAT registration. The Commission aims to put forward legislative proposal in the latter part of the year to this effect. It is clear that a major initiative of the consultation is to harmonise fiscal measures across Europe.
The public consultation is open for 12 weeks from 21 January 2022 – 15 April 2022.

01.04.22

  • VAT/G(S)ST rate information
EU Council reaches agreement on updated rules for VAT rates

On 7 December 2021, the EU Council received an agreement to update EU rules on VAT, the purpose of which was to ensure that member states are treated equally, with the bonus of allowing more flexibility to apply reduced and zero rates. There is also a ‘green’ initiative behind the rules, to phase out preferential treatments for environmentally harmful goods.

The EU Council also updated the list of goods and services for which reduced VAT rates are allowed (Annex 111 of the VAT Directive). The Council decided to limit the number of items to which reduced rates could be applied, recognising that these could accumulate.

01.04.22

  • Country updates
Publication of the new VAT Gap report (2021)

EU Member States have lost an estimated 134 billion euros in VAT revenues in 2019 according to the 2021 Report on the VAT Gap released by the European Commission. The VAT Gap did decrease between 2015-2019, but remains very significant. The report can be found here.

11.12.21

  • Country updates
EU Commission work program 2022

The EU has been working towards the modernisation of current VAT rules in the commission Work Programme 2022. This Programme highlighted the importance of taking the opportunity to use digital solutions as a means to achieve this. As part of their action plan, they have announced a legislative proposal for 2022, covering VAT obligations and e-invoicing.
Further details can be found on the report published on their website.

11.12.21

  • Mandate information
Study on ways to reduce the VAT Gap

The European Parliament has been looking into ways of reducing the VAT gap- and has published a study to this effect. There was a particular focus on cross-border VAT fraud, which amounts to a colossal 50 billion Euros per year. The total VAT gap in Europe is estimated to be 165 billion Euros.
There have been a few measures which are seen as generally promising in reducing the VAT gap, including:

  • Accelerating the adoption of EU mandatory electronic invoice ‘Generalised EU VAT number’; and
  • Accelerating the move towards a central electronic system

A binding EU-wide mandate for electronic invoicing is part of one of two proposed scenarios.

04.15.14

  • Other
European Union VAT Directive 55

The European Union (EU) VAT Directive 55 obliges all EU public authorities to receive invoices electronically, or at least to have a defined for how they will do so, by 27 November 2018.

04.15.14

  • Mandate information
European Union VAT Directive 55

The European Union (EU) VAT Directive 55 obliges all EU public authorities to receive invoices electronically, or at least to have a defined for how they will do so, by 27 November 2018.

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