Explanatory Memorandum to COM(2017)569 - Amending directive 2006/112/EC as regards harmonising and simplifying rules in the VAT system and introducing the definitive system for taxation of trade between Member States - Main contents
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| dossier | COM(2017)569 - Amending directive 2006/112/EC as regards harmonising and simplifying rules in the VAT system and introducing the definitive ... |
|---|---|
| source | COM(2017)569  |
| date | 04-10-2017 |
1. CONTEXTOFTHEPROPOSAL
• Reasons for and objectives of the proposal
Indirect taxes on consumption are at international level governed by the fundamental principle of taxation in the country of destination. In other words, taxes are charged in the country in which the goods and services are consumed.
Value-added tax (VAT) is Europe’s longest-standing consumption tax. In 1967, the commitment was made to establish a definitive VAT system operating within the European Community in the same way as it would within a single country1. The need to abolish the fiscal frontiers between Member States by the end of 1992 made it necessary to reconsider the way in which trade in goods was taxed in the European Community. The goal was that goods would be taxed in the country of origin, so that the same conditions that apply to domestic trade would also apply to intra-Community trade, perfectly reflecting the idea of a genuine internal market.
Since the political and technical conditions were not ripe for such a system, transitional VAT arrangements were adopted2. Those arrangements, as far as Business-to-Business (B2B) transactions on goods are concerned, split the cross-border movement of goods into two different transactions: an exempt supply in the Member State of departure of the goods and an intra-Community acquisition taxed in the Member State of destination. These rules were regarded as temporary and are not without drawbacks since allowing goods to be bought free of VAT increases the opportunity for fraud, while the inherent complexity of the system is not favourable to cross-border trade. However, these transitional arrangements are still in operation more than 20 years after their adoption.
After a broad public debate, launched with a consultation on the Green Paper on the future of VAT3 (Green Paper) on 6 December 2011, the Commission adopted the Communication On the future of VAT — Towards a simpler, more robust and efficient VAT system tailored to the single market4. That consultation confirmed that many businesses consider that the complexity, additional compliance costs and legal uncertainty of the VAT system often prevent them from engaging in cross-border activities and reaping the benefits of the single market. It also provided an opportunity to examine whether the commitment made in 1967 was still relevant.
Discussions with Member States showed that the objective of taxation in the Member State of origin was still politically unachievable and this was confirmed by the Council in May 20125.
First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member
States concerning turnover taxes; Second Council Directive 67/228/EEC of 11 April 1967 on the
harmonisation of legislation of Member States concerning turnover taxes — Structure and procedures
for application of the common system of value added tax.
added tax and amending Directive 77/388/EEC with a view to the abolition of fiscal frontiers (OJ L 376
of 31.12.1991, p.
1).
COM(2010) 695, Commission Staff Working Document, SEC(2010) 1455, 1.12.2010.
COM(2011) 851, 6.12.2011.
Council conclusions on the future of VAT - 3167th Economic and Financial affairs Council meeting,
www.consilium.europa.eu/uedocs/cms_data/docs">www.consilium.europa.eu/uedocs/cms_data/docs
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Also the European Parliament6 and the European Economic and Social Committee7 recognised the deadlock and favoured a new VAT system based on the principle of taxation at destination as a realistic solution.
After the adoption of the aforementioned Communication, the Commission entered into a broad-based and transparent dialogue with Member States and with stakeholders to examine in detail the different possible ways of implementing the destination principle. The main idea in this regard was that doing business across the European Union (hereinafter, 'Union' or 'EU') should be as simple and as secure as engaging in purely domestic activities. That dialogue took place in particular via the Group on the Future of VAT (GFV)8 and the VAT Expert Group (VEG)9.
Following this work, the Commission adopted on 7 April 2016 the Action Plan on VAT – Towards a single EU VAT area – Time to decide10 (VAT Action Plan). The Commission announced, inter alia, its intention to adopt a definitive VAT system for intra-Union crossborder trade based on the principle of taxation in the Member State of destination of the goods in order to create a robust single European VAT area. A legislative proposal for such a simpler and fraud-proof definitive VAT system for intra-Union trade was included in the Commission Work Programme for 201711.
In its conclusions of 25 May 201612, the Council took note of the points made by the Commission in its VAT Action Plan as regards the way forward towards a definitive VAT system and of its intention to present, as a first step, a legislative proposal in 2017 for the definitive VAT system for cross-border B2B trade. It also reiterated its view that the principle of “taxation in the Member State of origin of the supply of goods or services” should be replaced by the principle of “taxation in the Member State of destination”. The European Parliament also welcomed the Commission’s intention to propose a definitive VAT system by 2017 that is simple, fair, robust, efficient and less susceptible to fraud13.
10
11
European Parliament resolution of 13 October 2011 on the future of VAT (P7_TA(2011)0436) www.europarl.europa.eu/sides">www.europarl.europa.eu/sides
European Economic and Social Committee Opinion of 14 July 2011 on the ‘Green Paper on the future of VAT - Towards a simpler, more robust and efficient VAT system’ eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex:52011AE1168
The Group on the Future of VAT provides a forum for discussion with VAT delegates from the Member States' tax administrations on the Commission pre-legislative initiatives and for exchanges of opinions on the preparation of future VAT legislation.
The VAT Expert Group is composed of 40 members: individuals with the requisite expertise in the area of VAT and organisations representing in particular businesses, tax practitioners and academics. COM(2016) 148 final.
Commission Work Programme 2017: Delivering a Europe that protects, empowers and defends, COM(2016) 710 final
eur-lex.europa.eu/legal-content/EN/TXT:52016DC0710 See: www.consilium.europa.eu/en/press/press-releases">www.consilium.europa.eu/en/press/press-releases European Parliament resolution of 24 November 2016 on Towards a definitive VAT system and fighting VAT fraud (2016/2033(INI))
www.europarl.europa.eu/sides">www.europarl.europa.eu/sides
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8 November 201614
In its conclusions of 8 November 201614 the Council stated that, while the Commission is working on the definitive VAT system for intra-Union trade, improvements to the current VAT system should be made in the meantime. In this context, the Council requested amendments in four areas:
• VAT identification number: the Council invited the Commission to present a legislative proposal aimed at making the valid VA T identification number of the taxable person or non-taxable legal person acquiring the goods, allocated by a Member State other than that in which dispatch or transport of the goods began, an additional substantive condition for the application of the exemption in respect of an intra-Community supply of goods.
• Chain transactions: the Commission was invited by the Council to propose uniform criteria and appropriate legislative improvements which would lead to increased legal certainty and harmonised application of VA T rules when determining the VA T treatment of chain transactions, including triangular transactions.
• Call-off stock: the Council invited the Commission to propose modifications to the current VA T rules in order to allow simplification and uniform treatment for call-off stock arrangements in cross-border trade. To this effect, call-off stock refers to the situation where a vendor transfers goods to a warehouse at the disposal of a known acquirer in another Member State and that acquirer becomes the owner of the goods upon calling them off the warehouse.
• Proof of intra-Community supply: the Council invited the Commission to explore possibilities for a common framework of recommended criteria for the documentary evidence required to claim an exemption for intra-Community supplies.
In order to meet the request of the Council, amendments to the VA T Directive are proposed for the three first areas. The fourth area requires a modification of the VA T Implementing Regulation and is therefore subject to a separate proposal.
In addition the present proposal introduces the cornerstones of the definitive system for intra-Union B2B trade. A forthcoming proposal in 201 8 will then further provide detailed technical provisions for the actual implementation of these cornerstones. The first legislati ve step of the definitive VA T syste m announced in the VA T Action Plan therefore includes two sub-steps:
16
Council conclusions of 8 November 2016 on Improvements to the current EU VAT rules for crossborder transactions (No. 14257/16 FISC 190 ECOFIN 1023 of 9 November 2016) data.consilium.europa.eu/doc/document
Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, 11.12.2006, p.
1).
Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax (recast) (OJ L 77, 23.3.2011, p.
1).
The VAT Action Plan provided for two legislative steps in relation with the introduction of the definitive VAT system. See the last two paragraphs of point 4 of the VAT Action Plan for further details on the content of these legislative steps.
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one contained in the present proposal and made of the aforementioned cornerstones and another one that will take place in 201818.
• Consistency with existing policy provisions in the policy area
The introduction of a definitive system for intra-Union supplies of goods is one of the main parts of the VAT Action Plan. This proposal is a step towards replacing the transitional arrangements, applicable since 1 January 1993, by a definitive VAT system for intra-Union B2B trade under which domestic and cross-border transactions of goods will be treated in the same way19. Further, that definitive VAT system will create a robust single European VAT area which can support a deeper and fairer single market that helps to boost jobs, growth, investment and competitiveness.
• Consistency with other Union policies
The creation of a simple, modern and fraud-proof VAT system is one of the fiscal priorities set out by the Commission for 201720.
Combating missing trader VAT fraud is also one of the European Union’s priority crime areas, under the 2014-2017 EU Policy Cycle of Europol21.
Reducing administrative burden, particularly for SMEs, is also an important objective highlighted in the EU’s growth strategy22.
The proposed initiative and its objectives are consistent with the EU SME policy as set out by the Small Business Act (SBA)23, in particular principle VII on helping SMEs to benefit more
opportunities offered by the Single Market.
It is consistent with the Single market strategy (SMS)24 and the objectives of the Regulatory Fitness and Performance programme (REFIT).
23
24
A detailed description of the successive steps and sub-steps of the introduction of the definitive VAT system may be found in the Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee – On the follow-up to the Action Plan on VAT - Towards a single EU VAT area - Time to act (COM(2017) […].
Although currently not in the forefront of the work on the definitive VAT system, there might be a need to assess in the future certain customs procedures (e.g. CP 42) so as to ensure this principle is coherently applied in combination with import/export schemes.
Annual Growth Survey 2017; see: https://ec.europa.eu/info/publications/2017-european-semester-annual-growth-survey_en EMPACT priorities
Europe 2020 – A strategy for smart, sustainable and inclusive growth; see:
eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:2020:FIN:EN:PDF
Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - “Think Small First” – A “Small Business Act” for Europe (COM(2008) 394 final).
Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the regions – 'Upgrading the Single Market: more opportunities for people and business' (COM(2015) 550 final).
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2. LEGALBASIS, SUBSIDIARITYAND PROPORTIONALITY
• Legal basis
The Directive amends the VAT Directive on the basis of Article 113 of the Treaty on the Functioning of the European Union. 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)
According to the principle of subsidiarity, as set out in Article 5(3) of the Treaty on European Union, action at Union level may only be taken if the envisaged aims cannot be achieved sufficiently by the Member States alone and can therefore, by reason of the scale or effects of the proposed actions, be better achieved by the EU.
VAT rules for cross-border Union trade can, by their nature, not be decided by individual Member States since, inevitably, more than one Member State is involved. Moreover, VAT is a tax harmonised at Union level and therefore any initiative to introduce the definitive VAT system for cross-border supplies of goods requires a proposal by the Commission to amend the VAT Directive.
As regards the provisions to harmonise and simplify rules within the current VAT system contained in this proposal, they have unanimously been requested by the Member States which demonstrates that action at Union level is likely to be more effective as action at national level has proven not to be sufficiently successful.
• Proportionality
The proposal, as far as the introduction of the definitive system for intra-Union B2B trade is concerned, is consistent with the principle of proportionality i.e. it does not go beyond what is necessary to meet the objectives of the Treaties, in particular the smooth functioning of the single market. As with the subsidiarity test, it is not possible for Member States to address problems such as fraud or complexity without a proposal to amend the VAT Directive.
As regards the proposed improvements to the current system, they are targeted and limited to a restricted number of VAT rules which have proven difficult to apply in a systematic and uniform way and which have created problems for taxable persons.
• Choice of the instrument
A Directive is proposed in view of amending the VAT Directive.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER
Contents
- CONSULTATIONS
- First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member
- Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value
- Brussels, 15 May 2012 (see in particular point B 4)
- 12 13
- Commission Work Programme 2017: Delivering a Europe that protects, empowers and defends, COM(2016) 710 final
- from the
- 21 22
- 36 37
- Although at this stage not yet explicitly stipulated, the system could or should further be based on the abolition of the recapitulative statement (the so-called VIES listing), the
ANDIMPACTASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
A retrospective evaluation of elements of the Union VAT system was conducted by an external consultant in 2011 and its findings have been used as a starting point to the examination of the current VAT system25.
Stakeholder
consultations
On 6 May 2011, the European Commission organised a conference in Milan as part of the consultation process on the Green Paper. It brought together policy makers, experts, businesses and other stakeholders and the general public from all over Europe, and beyond26. The open public consultation on the Green Paper, resulting in around 1700 contributions, provided the Commission with a clear understanding of the problems and possible solutions.
Following publication of the Green Paper, the Commission set up two working groups for discussions at technical level: the GFV and the VEG. A total of 12 meetings of the GFV and 14 meetings of the VEG took place to discuss different issues related to the definitive VAT system for intra-Union B2B trade as well as the improvements to the current system. Mixed sub-groups consisting of both GFV and VEG members were constituted to discuss jointly certain specific topics. Also a Fiscalis27 seminar was organised in Vienna in 2015 which brought together members of both the GFV and the VEG. Another mixed sub-group was established in the framework of the EU VAT forum28, a discussion platform where businesses and VAT authorities meet to discuss how the implementation of the VAT legislation can be improved in practical terms.
Finally, a public consultation on the definitive system for intra-Union trade was organised from 20 December 2016 to 20 March 2017 resulting in 121 contributions29.The objective was to get the views of all stakeholders on the operation of the current transitional VAT arrangements, the possible short term improvements to these transitional arrangements, as requested by the Council, and the introduction of the definitive VAT system based on the principle of taxation at destination.
• Collection and use of expertise
Regarding the options for a definitive VAT system, the following studies have provided detailed analysis of the problems at stake and the possible ways forward:
28
29
Institute for Fiscal Studies (project leader), 2011, A retrospective evaluation of elements of the EU VAT system:
ec.europa.eu/taxation_customs/sites/taxation dies/report_evaluation_vat.pdf
More information on: https://ec.europa.eu/taxation_customs/business/vat/action-plan-vat/communication-future-vat/green-paper_en
Regulation (EU) No 1286/2013 of the European Parliament and of the Council of 11 December 2013 establishing an action programme to improve the operation of taxation systems in the European Union for the period 2014-2020 (Fiscalis 2020).
Commission Decision of 3 July 2012 setting up the EU VAT forum, 2012/C198/05, (OJ C 198/4 of 6.7.2012).
Summary of the results of the open public consultation: https://ec.europa.eu/taxation_customs/consultations-get-involved/tax-consultations_en
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27
- Study on applying the current principle for the place of supply of B2B services to B2B supplies of goods30;
- Economic study on charging VAT on intra-EU supplies of goods and services31;
- Implementing the ‘destination principle’ to intra-EU B2B supplies of goods32;
- Study and Reports on the VAT Gap in the EU-28 Member States33.
• Impact assessment
Reference is made to the separate impact assessment which has been carried out in relation to this proposal. The preferred option, chosen in that impact assessment, would reduce cross border VAT fraud by EUR 41 billion and compliance costs for businesses by EUR 1 billion.
The impact assessment for the proposal was considered by the Regulatory Scrutiny Board on 14 July 2017. The Board gave a positive opinion to the proposal with some recommendations, in particular on the link of the proposal to other elements of the VAT Action Plan, the need for a staged approach and the concept of certified taxable person, that have been taken on board. The opinion of the Board and the recommendations are mentioned in Annex 1 to the Staff Working Document for the impact assessment accompanying this proposal.
4. BUDGETARYIMPLICATIONS
The proposal will have no negative implications for the Union budget.
5. OTHERELEMENTS
• Detailed explanation of the specific provisions of the proposal Certified taxable person: Article 13a (new)
This provision introduces the concept of the certified taxable person.
As a rule, taxable persons are identified for VAT purposes via a VAT identification number. No distinction is currently made at the level of the attribution of such a number between reliable and less reliable taxable persons. The VAT rules, as far as identification is concerned, apply in the same way to both categories.
The concept of certified taxable person allows for an attestation that a particular business can globally be considered to be a reliable taxpayer. The concept is important because certain simplification rules, which could be fraud-sensitive, will apply only where a certified taxable person is involved in the relevant transaction.
32
33
PwC, 2012; see:
ec.europa.eu/taxation_customs/sites/taxation dies/place_supply_b2b.zip
CPB (project leader), 2013; see: https://circabc.europa.eu/sd/a/60e05641-2653-4ac3-aca2-3060896aa6e3/33-ANN%20-%20Final%20report%20-%20Study%20on%20charging%20VAT%20on%20intra-EU%20supplies%20of%20goods%20and%20services%5B1%5D.pdf EY, 2015; see:
https://ec.europa.eu/taxation_customs/sites/taxation/files/docs/body/ey_study_destination_principle.pdf CASE, 2016; see: https://ec.europa.eu/taxation_customs/sites/taxation/files/2016-09_vat-gap-report_final.pdf
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Further, the certified taxable person concept will be one of the essential elements of the first step of the definitive VAT system for intra-Union B2B trade. That definitive system will replace, by one taxable supply of goods located for VAT purposes in the Member State of destination (the so-called intra-Union supply of goods), the current transitional arrangements which entail an exempt supply of goods in the Member State of departure and a taxed intra-Community acquisition in the Member State of destination, for which the acquirer is the person liable to VAT. The certified taxable person concept will allow for a gradual implementation of the definitive VAT system because, in the first step of that system, reverse charge (i.e. liability to VAT of the acquirer and not of the supplier, which gives rise in practice to a similar situation to what exists today under the transitional arrangements) will apply where the acquirer, in case of intra-Union supplies, is a certified taxable person34 The justification is that no fraud should occur as a result of VAT not being charged on intra-Union supplies made for a certified taxable person, as the certified taxable person by definition is a reliable taxpayer.
The provision sets out the overall criteria on the basis of which the Member States will be able to certify taxable persons. Following the adoption of this proposal, a Council Implementing Regulation will have to be adopted, based on Article 397 of the VAT Directive, so as to arrange the practicalities of the certified taxable person status and to ensure that the procedure for granting and withdrawing the certified taxable person status is sufficiently harmonised and standardised throughout the Union so that a uniform application can be guaranteed. Also an amendment to the Administrative Cooperation Regulation35 is to be proposed in order to enable the certified taxable person status of taxable persons being integrated in the VIES (VAT information and exchange system) thus allowing both tax administrations and businesses to verify online the certified taxable person status of a particular business.
Since the certified taxable person status entails VAT reporting and payment obligations, non-taxable persons will not be eligible. For the same reason, the proposal excludes flat-rate farmers, exempt SMEs, other taxable persons exempt without the right to deduct and occasional taxable persons from the possibility of obtaining the certified taxable person status. However, any SME not applying the exemption scheme will be able to apply for the certified taxable person status under the same conditions as any other taxable person. It is therefore consistent with the EU SME policy as set by the Small Business Act (SBA)36.
Similarity exists between the criteria to be used for granting the certified taxable person status and those applied regarding the Authorised Economic Operator (AEO) as defined in the Union Customs Code (Article 39). Similar criteria, based on the AEO status, can also be found in the recent VAT proposal on e-commerce37.
35
As announced in the VAT Action Plan, in a future second legislative step of the definitive VAT system, taxation would cover all cross border supplies of goods and services (and therefore the supplier, and not the customer, would be liable for the VAT on all goods and services purchased from other Member States) so that all supplies of goods and services within the single market, either domestic or crossborder, will be treated the same way.
Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax (recast) (OJ L 268, 12.10.2010, p.
1). See footnote 23.
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 final of 1.12.2016; see the proposed Article 369m(1)(c) of Directive 2006/112/EC).
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Call-off stock: Articles 17a (new), 243(3) and 262 (amended)
Call-off stock is a scheme whereby a supplier transfers goods to a known acquirer without transferring the ownership of the goods yet. The acquirer has the right to take the goods from a stock of the supplier at his own discretion at which point a supply of goods takes place. In domestic relationships, the use of this model does not create specific problems but issues arise when supplier and acquirer are situated in different Member States.
Under the current VAT rules, a business transferring own goods to another Member State in order to constitute a stock for a customer is deemed to have made a VAT exempt supply of goods in the Member State of departure. The arrival of the goods gives rise to an intra-Community acquisition made by the business that transferred the goods which is subject to VAT in that other Member State. The business that has transferred the goods is obliged, as a rule, to be identified for VAT purposes in the Member State of arrival in order to be able to declare the intra-Community acquisition in its VAT return. When the goods are taken out of the stock and delivered to the acquirer a second supply occurs, the place of supply of which is the Member State in which the stock is situated.
In order to address the difficulties that this can cause in practice, certain Member States apply simplification measures regarding these transactions while others do not. These differences run against the uniform application of the VAT rules within the single market.
The proposed solution consists in considering the call-off stock arrangements as giving rise to a single supply in the Member State of departure and to an intra-Community acquisition in the Member State where the stock is situated insofar as the transaction is taking place between two certified taxable persons This will avoid that the supplier has to be identified in every Member State where he has placed goods under the call-off stock arrangements. However, to ensure an adequate follow-up of the goods by the tax administrations, the supplier as well as the acquirer will be required to keep a register of call-off stock goods to which these rules apply. Further, in the recapitulative statement of the supplier the identity of the acquirers to whom goods dispatched under call off stock arrangements will be supplied at a later stage must be mentioned.
VAT identification number and the exemption for certain intra-Community transactions: Article 138(1) (amended)
The VAT exemption for intra-Community supplies of goods laid down in Article 138(1) of the VAT Directive is at the centre of the current transitional arrangements. At the same time, this exemption is also at the root of the so-called carousel fraud. The VAT definitive system for intra-Union trade is intended to solve that problem but, in the meantime, interim solutions have been requested by the Member States. In particular they have requested including in the VAT Directive the requirement for a valid VAT identification number of the acquirer in a Member State other than that in which transport of the goods begins as a substantive condition in order for the supplier to be allowed to apply the exemption. This goes further than the current situation under which, according to the interpretation of the Court of Justice of the European Union38, the VAT identification number of the acquirer is simply a formal condition of the right to exempt an intra-Community supply. That currently leads to situations where,
38 Judgments of 6 September 2012, Mecsek-Gabona, C-273/11, ECLI:EU:C:2012:547; of 27 September
2012, VSTR, C-587/10, ECLI:EU:C:2012:592; of 20 October 2016, Plöckl, C-24/15,
ECLI:EU:C:2016:791 and of 9 February 2017, Euro-Tyre, C-21/16, ECLI:EU:C:2017:106.
when the condition has not been complied with, Member States are only able to impose fines or administrative sanctions, but not to refuse the exemption itself.
The current transitional arrangements are further based on the obligation for the supplier to submit a recapitulative statement (the so-called VIES listing which includes the VAT identification number of the acquirer). This is again a formal but not a substantive condition in relation to the exemption. This information is, via the VIES system, accessible for the tax authorities of the Member State of the acquirer which are thus informed of the arrival in its territory of goods that are normally subject to a taxed intra-Community acquisition. The acquirer has to declare this intra-Community acquisition in his VAT return and the tax authorities have the possibility to cross-check this declaration with data in the VIES system. The VIES listing has therefore been a crucial component of the VAT system since the abolition of the fiscal borders and the corresponding disappearance of the customs documentation.
Without correct information from the VIES system, the tax authorities of the Member States are not duly informed of the arrival of untaxed goods in their territory and have solely to rely on what their taxable persons declare. Nevertheless, if the listing is not filled in as regards a supply, this can give rise to penalties but not to the rejection of the exemption as such.
The new proposed Article 138(1) therefore includes changes as regards these two aspects. First, whereas currently reference is made to the acquirer as a taxable person or a non-taxable legal person acting as such, it is now stipulated, as a substantive condition for the application of the exemption, that the acquirer has to be identified for VAT purposes in a Member State other than that in which dispatch or transport of the goods begins. As it already happens today, the supplier will have to verify the status of his customer via the VIES system before applying the exemption. From that perspective, there is no practical difference for the supplier, but the consequences might be different as the non-identification of his customer can, on that basis, lead to a rejection of the exemption. Secondly, also the correct filing of the VIES listing becomes a substantive condition which can lead, where that condition is not met, to the rejection by the tax administration of an applied exemption.
Chain transactions: Article 138a (new)
Chain transactions, which are considered within the remit of this proposal, have to be understood as successive supplies of the same goods where the goods supplied are subject to a single intra-Community transport between two Member States. In this situation, according to the case-law of the Court of Justice39, the transport is to be attributed to one supply within the chain so as to determine to which of the transactions the exemption for intra-Community supplies should be applied in accordance with Article 138 of the VAT Directive. This provision stipulates, as a condition for the exemption, that the goods are dispatched or transported by or on behalf of the vendor or the person acquiring the goods from one Member State to another. In this context, Member States have asked for legislative improvements in order to increase legal certainty for operators in determining the supply within the chain of transactions to which the intra-Community transport must be ascribed (which will be the supply within the chain to which the exemption laid down in Article 138 will be applicable, provided all the other conditions for that exemption are met).
39 Judgment of 6 April 2006, Emag Handel, C-245/04, ECLI:EU:C:2006:232.
Where the transport has been made by or on behalf of one of the intermediate suppliers in the chain, rules are proposed whereby that transport will be ascribed (i) to the supply made for that intermediate supplier if he is, for VAT purposes, identified in a Member State other than the Member State of supply and has communicated the name of the Member State of arrival of the goods to his supplier; (ii) to the supply made by the intermediate supplier to the next operator in the chain, where any of the two conditions mentioned in (i) is not met. The rules, and the legal certainty they allow, apply only where the intermediate supplier and the taxable person who supplied the goods to him are both certified taxable persons No rule of this kind is needed where the transport is made on behalf of the first supplier in the chain (in which case the transport can only be ascribed to the first supply) or on behalf of the last taxable person in the chain (in which case the transport can only be ascribed to the supply made for that taxable person).
It is not excluded that, in case of involvement of a non-certified taxable person, the transport could be ascribed to the same supply. However, in that case the legal rules in Article 138a will not apply and thus it remains, in the same way as under the current conditions, for the taxable person concerned to demonstrate that the transport and the exemption are linked to that particular supply.
Definitive system for intra-Union trade: Articles 402 (amended), 403 and 404 (deleted)
The cornerstones of the definitive system for intra-Union trade are introduced and the lines along which the new system will operate are set out. As regards the choice of this particular system, a reference is made to the impact assessment accompanying this proposal.
As already explained in point 1 above, a forthcoming proposal in 2018 will then further provide detailed technical provisions for the actual implementation of these cornerstones. That forthcoming proposal will overhaul the whole VAT Directive and will replace or delete the current transitional articles. Further changes regarding the administrative cooperation rules and substantial IT developments will be needed in order to ensure the proper operation of the system.
In the proposed Article 402 of the Directive, it is now established that the VAT definitive system for intra-EU trade will be based on the principle of taxation in the Member State of destination of the supply of goods and services. In this context, a new concept in relation to goods - the so-called intra-Union supply – will be introduced in the above-mentioned detailed technical provisions. This new single taxable event is intended to replace the current system of an exempt supply in the Member State of departure and a taxed intra-Community acquisition in the Member State of destination as a second and separate taxable event. Under this new concept, the place of supply will be situated in the Member State of arrival of the goods.
Further, the supplier will be liable for the payment of the VAT on this intra-Union supply unless the acquirer is a certified taxable person, in which case the certified taxable person will account for the VAT in his VAT return. Where the person liable for VAT is not established in the Member State where the tax is due, he will be able to settle his declaration and payment obligations via a so-called One-Stop Shop system. Use of that system will also be possible for the deduction of input VAT.
Although at this stage not yet explicitly stipulated, the system could or should further be based on the abolition of the recapitulative statement (the so-called VIES listing), the
application of the overall invoicing rules of the Member State of the supplier, and the harmonisation of certain rules related to invoicing (such as the time of issuing of invoices), chargeable event and chargeability of VAT in relation to intra-Union supplies of goods.