Explanatory Memorandum to COM(2016)755 - Amendment of Regulation (EU) No 904/2010 on administrative cooperation and combating fraud in the field of VAT - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2016)755 - Amendment of Regulation (EU) No 904/2010 on administrative cooperation and combating fraud in the field of VAT. |
|---|---|
| source | COM(2016)755  |
| date | 01-12-2016 |
1. CONTEXT OF THE PROPOSAL
This proposal is part of the package of legislation on modernising VAT for cross-border B2C e-commerce. The context for the package as a whole is set out comprehensively in the explanatory memorandum for the proposal for a Council Directive amending Directive 2006/112/EC and Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and distance sales of goods - COM(2016) 757.
The proposal to amend Regulation (EU) No 904/2010 on administrative cooperation and combating fraud in the field of value added tax 1 is an important element of the package as it provides the basis for the underlying IT infrastructure and the necessary cooperation by Member States to ensure the success of the extension of the Mini One Stop Shop (MOSS) to services other than telecommunications, broadcasting and electronically supplied services and to distance sales of goods, both within the Community and from outside the Community. The overall package is estimated to increase VAT revenues for Member States by EUR 7 billion annually and reduce regulatory costs for business by EUR 2.3 billion annually.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The proposal is based on Article 113 of the Treaty on the Functioning of the European Union (TFEU). This article provides for the Council, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee, to adopt provisions for the harmonisation of Member States' rules in the area of indirect taxation.
• Subsidiarity (for non-exclusive competence)
The proposal is consistent with the principle of subsidiarity as the main problems which have been identified (distorting effects, high administrative burdens and compliance costs, etc.) are triggered by the rules of the existing Council Directive 2006/112/EC on the common system of value added tax 2 (the VAT Directive) and associated acts. Given that VAT is a tax harmonised at Community level, Member States cannot by themselves set different rules and therefore any initiative to modernise VAT for cross-border e-commerce requires a proposal by the Commission to amend the VAT Directive and associated acts. It is considered that the proposal will clearly offer value over and above what can be achieved at Member State level. In particular, in addition to the technical changes required to extend the scope of the MOSS, this proposal will reduce administrative burdens for taxable persons making use of the MOSS by providing for the principle that requests for records from tax administrations to the taxable persons and administrative enquiries should always be coordinated by the Member State of identification of the taxable person.
• Proportionality
The proposal is consistent with the principle of proportionality i.e. it does not go beyond what is necessary to meet the objectives of the TFEU in particular the smooth functioning of the single market. As to the subsidiarity test, it is not possible for Member States to address the problems and problem drivers without a proposal to amend the VAT Directive and associated acts. Two aspects of the proposal are very important in terms of proportionality. The first relates to the coordination by Member States in respect of administrative queries and audits of businesses within the MOSS system. This coordination can lead to a more effective and efficient compliance regime for both Member States and businesses. However, a Member State of consumption will not be prohibited from direct contact with businesses if the Member State of identification does not agree with the need for an audit. The second aspect relates to the introduction of an administrative fee whereby the Member State of identification will receive a fee of 5% of the amounts collected on behalf of other Member States to compensate for the investment needed to update the MOSS IT system following the extension of its scope, ongoing maintenance costs and the resources spent controlling businesses established in that Member State with a view to bolstering cooperation and improving compliance.
• Choice of the instrument
This proposal amends Council Regulation (EU) No 904/2010.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
This proposal is part of the package of legislation on modernising VAT for cross-border B2C e-commerce. The results of the ex-post evaluation, stakeholder consultation and the impact assessment are set out in detail in the explanatory memorandum for the proposal for a Council Directive amending Directive 2006/112/EC and Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and distance sales of goods - COM(2016) 757.
In the stakeholder consultation, business representatives were strongly in favour of the need for Member States to coordinate audits as, otherwise, a business could be faced with a scenario of receiving 28 separate audit requests. The lack of such a provision under the current legislation has led to uncertainty for businesses particularly in cases where they receive correspondence from other tax administrations. Further, most Member States have indicated that they are also in favour of this approach as it is a more efficient means of using audit resources. In terms of the impact assessment, the preferred option which included coordination of audits was estimated to lead to higher reductions in compliance costs for businesses compared to the alternatives.
4. BUDGETARY IMPLICATIONS
This proposal is part of the package of legislation on modernising VAT for cross-border B2C e-commerce. The budgetary implications for the proposal as a whole are set out in detail in the explanatory memorandum for the proposal for a Council Directive amending Directive 2006/112/EC and Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and distance sales of goods - COM(2016) 757.
This element of the package is estimated to have important positive budgetary implications. The coordination of audits together with the incentive of the administrative fee should result in risk based audits. A more efficient audit process which focuses on audit yield should lead to higher compliance rates compared to the alternative of an uncoordinated approach which can needlessly tie up resources. Inefficient use of scarce audit resources can also have secondary effects whereby other businesses outside the MOSS system are not properly audited and this can lead to lower compliance rates under VAT and other taxes and hence a negative budgetary impact.
5. OTHER ELEMENTS
• Detailed explanation of the specific provisions of the proposal
The provisions relating to the MOSS included in Council Regulation (EU) No 904/2010 need to be amended and completed following the proposed amendments to the VAT Directive. These provisions cover the rules and procedures for the exchange by electronic means between taxable persons and their tax administration as well as between Member States' tax administrations of VAT information concerning VAT identification, VAT returns and VAT payments within the MOSS.
Articles 1 i, 2(2), 17(1)(d) and 31 of the Regulation are amended so as to reflect the extension of the scope of the MOSS to services other than telecommunications, broadcasting and electronically supplied services (hereafter electronic services) and to distance sales of goods (Article 1, points 1 to 4 of the proposal).
The title of Section 2 of Chapter XI of the Regulation is amended so as to limit its application until 31 December 2020 (Article 1, point 5(a) of the proposal).
Article 1, point 5(b) of the proposal inserts a new Section 3 in Chapter XI of the Regulation. It contains the provisions applicable from 1 January 2021.
Subsection 2 of Section 3 (Articles 47b to 47g) contains the provisions relating to the exchange of information between Member States concerning the identification of taxable persons making use of the MOSS, VAT returns and VAT payments. They mirror the existing provisions of Section 2 of Chapter XI and extend them to services other than electronic services and to distance sales of goods.
Subsection 3 of Section 3 (Articles 47h to 47k) contains the provisions relating to control of transactions and taxable persons. Article 47h provides that the Member State of importation should verify the validity of the VAT identification number to be provided to the customs authorities upon importation of goods for which VAT is declared and paid using the MOSS. A valid VAT identification number is a condition for the application of the exemption upon importation of such goods. Articles 47i and 47j provide that requests for records by Member States to taxable persons and administrative inquiries should be coordinated by the Member State of identification, so as to avoid uncoordinated requests for records or administrative inquiries by several Member States of consumption. Similarly, Article 47k provides for the intervention of the Member State of identification for the notification of a tax assessment issued by a Member State of consumption following an administrative enquiry and for the collection of the amounts due from such an assessment.
Subsection 4 of Section 3 (Article 47l) provides for the payment of a fee of 5% to be paid by the Member States of consumption to the Member State of identification in order to compensate the latter Member State for the costs linked to the collection and control of VAT under the special schemes. Under the current MOSS, Member States are allowed to retain a certain percentage of the amounts of VAT which they collect and have to transfer to the Member States of consumption until end of 2018 3 . The proposal introduces a permanent mechanism, similar to established practice in the field of customs, allowing the Member State of identification to receive a fee of 5% of the amounts collected on behalf of other Member States to compensate for the investment needed to update the MOSS IT system following the extension of its scope, ongoing maintenance costs and the resources spent controlling business established in that Member State with a view to bolstering cooperation and improving compliance. Under the current system (Article 46(3) of the Regulation) these amounts are retained from each VAT payment in the MOSS from the Member States of identification to a Member State of consumption, which however caused a lot of complications, in particular in dealing with refunds to taxable persons. It is therefore proposed to calculate this fee annually and outside the MOSS based on the net amounts involved.
Subsection 5 of Section 3 (Article 47m) provides for the possibility for the Commission to automatically access information related to the MOSS stored in the Member States' electronic systems, with the exception of any personal data. This would allow the Commission to collect statistical information automatically (e.g. on the number of taxable persons registered in a special scheme) without having to question Member States. This is also necessary for evaluation purposes required under Better Regulation rules.
Subsection 6 of Section 3 (Article 47n) confers the implementing powers to the Commission needed to determine the data to be included in the information exchanges concerning identification, VAT returns, VAT payments, requests for records or administrative enquiries, etc., between taxable persons and Member States or between Member States as well as the technical means for the submission or transmission of this information. For clarity, these provisions are grouped in a single article instead of including them in every single provision concerned, as is the case in the current text of the Regulation.
Finally, Article 1, point 6 of the proposal amends point (1) of Annex I, aligning it with the proposed amendments to the VAT Directive regarding distance sales of goods (deletion of its Article 34).