Commission proposed standard VAT return

Algirdas Šemeta, the European commissioner in charge of taxation, has proposed a uniform VAT return, in a move to simplify EU law.

As part of the EU's end-of-term push to cut red-tape for businesses in the EU, the Commission said VAT returns were one of the problems reported most by companies, as they “battle with a complex medley of information requirements, procedures and deadlines.”

Starting in 2017, provided the proposal is adopted by member states, the VAT return submission will be identical in all EU countries. 

“Some Member States ask for monthly declarations, others ask for quarterly ones. The standard VAT return we have proposed today will eliminate this problem, by replacing the 28 diverse national systems with a simple and uniform EU approach”, Šemeta said on Wednesday (23 October).

The new return form will contain five mandatory information boxes: chargeable VAT, deductible VAT, net VAT amount (payable or receivable), total value of input transactions and total value of output transactions.

Member states will be allowed to add 21 optional boxes depending on the need of each national administration. The Commission also wants to harmonise the periodicity of the returns, the submission deadlines, the procedures to submit corrections and the format of electronic submission of returns.

Having one identical VAT return form will not only ease the burden on the national fiscal authorities, it also “reduces the loopholes that can be used for tax evasion purposes,” the Commission said.

The forms will have to be returned in the language of the country of return.

The EU executive calculated that the overall financial impact of the proposal would amount to €15 billion a year: the removal of obstacles to cross-border trade results would bring a benefit of €3 to 6 billion, while reducing administrative burdens would add another €9 billion in benefits.

The standardisation of VAT returns in the EU is a part of the Commission’s “Refit” programme, a new set of measures aimed at making EU law simpler in order to create a more business-friendly environment across the Union.

Eurocommerce, the platform for European commerce businesses, welcomed the Commission’s proposal as a “step in the right direction towards cutting red-tape for businesses, easing tax compliance and making tax administrations across Europe more efficient. Ideally, the EU should have one single VAT return form. However, with different VAT systems among Member States, this is currently an unrealistic prospect. VAT returns in all EU languages, as stated in the proposal, will already reduce the administrative burden on companies, especially SMEs, resulting in significant cost savings and efficiency of resources.

However, as the standard VAT return will become mandatory, EuroCommerce warns of significant indirect costs for companies. For example, they may have to adapt their IT infrastructure and forms to comply with the new standards. Also, verifying the integrity of the data through electronic signature should not cause additional administrative burdens by having to cope with different systems and standards in different Member States. EuroCommerce expects Member States to make the VAT declarations simple and easy to understand, especially for SMEs”.

VAT is the first source of income in European states, representing more than €700 billion each year in revenue. It is collected on trade in goods and services and in the sale of goods.

To facilitate trade between countries, companies benefit from VAT exemptions under certain conditions, when operating outside their borders.

But VAT fraud has tended to proliferate and is now believed to affect new sectors such as electronics, metals, CO2 allowances or cars, which is a source of concern for the European Commission.

  • 1st January 2017: the directive should enter into force after adoption by the member states and consultation with the European Parliament

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