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VAT: Commission proposes One-Stop-Shop and other measures to simplify VAT obligations

European Commission - IP/04/1331   29/10/2004

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IP/04/1331

Brussels, 29th October 2004

VAT: Commission proposes One-Stop-Shop and other measures to simplify VAT obligations

The European Commission has presented a proposal to simplify current Value Added Tax (VAT) compliance obligations to help cross-border traders who supply goods and services to other EU Member States. In particular the proposal would provide for a “one-stop-shop” system whereby a trader could fulfil all his VAT obligations for EU-wide activities in the Member State in which he is established. This system would allow traders to use a single VAT number for all supplies made throughout the EU and to make VAT declarations to a single electronic portal that would then be submitted automatically to the different Member States to which the trader supplies goods or services. The proposal also contains five other simplification measures. Studies including the Commission's European Tax Survey (see IP/04/1091) have demonstrated that VAT obligations are at present extremely burdensome and costly for cross-border activity. It takes into account opinions expressed during a public consultation held earlier this year (see IP/04/654).

"The European Council has identified the reduction of the administrative burden on business as an important element for fostering economic growth" said Frits Bolkestein, Commissioner for the Internal Market and Taxation. "This proposal is a valuable contribution towards that objective".

Simplification of VAT obligations related to cross border activities

The proposal contains six elements designed to facilitate VAT compliance requirements for traders that are not established in Member States into which they supply goods or services.

  • It would give a trader the option of using the VAT number by which he is identified in his own Member State for all supplies made to other Member States and of making VAT declarations to one single electronic portal. This information would then be submitted automatically to the different Member States where he supplies goods or services. The trader would pay the VAT directly to the Member State where the VAT is due. Non-EU traders would also have the option of using this scheme.
  • A similar "one-stop-shop" approach would be introduced for requesting refunds of VAT from other Member States. The electronic portal would ensure that the refund request was directed to the Member State where the expenses were incurred, which would refund directly to the applicant. The deadline for repayment of VAT would also be reduced from 6 months to 3 months and a Member State would, if it exceeded the deadline, be required to pay interest of 1% a month, calculated on the amount refunded.
  • The categories of expenses for which Member States may choose to apply restrictions to the right to deduct VAT would be harmonised.
  • The use of the reverse charge mechanism whereby a receiving trader rather than the supply trader would be responsible for paying the VAT would be extended.
  • The threshold under which traders, in particular SMEs, would be exempt from VAT could be set by Member States at a maximum of €100.000.
  • The arrangements concerning distance selling of goods subject to VAT would be simplified by introducing a global threshold, set at €150.000, calculated on all supplies to other Member States.

For the public consultation on the one-stop-shop project see
http://ec.europa.eu/taxation_customs/taxation/consultations/one_stop_en.htm

For the proposal for a Council Directive to simplify value added tax obligations see http://ec.europa.eu/taxation_customs/whatsnew.htm

See also MEMO/04/249


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